So, you’ve decided to turn your primary residence into a rental property. Great! Regardless of the reason for your decision, owning a rental property can bring in extra cash if you do it right. Before you move out and declare your home “up for rent,” be sure to follow the guidelines below. There’s some business you need to take care of first.
Do You Have a Mortgage? You May Need to Wait.
If you haven’t lived in the home for very long and you have a mortgage, you may need to wait before turning it into a rental property. The reason for this is because most lenders offer certain perks for people purchasing primary properties.
For example, you may not need to put as much down, and your interest rate may be lower than if you were purchasing a vacation home or an investment property. In most cases, you need to live in the residence for 12 months before you can turn it into a rental property to receive these perks.
Do You Qualify for Another Mortgage?
When moving out of your primary residence, you may want to buy another home. If you already have a mortgage on the first home, you may or may not qualify for another one. Be sure to get pre-approved for a second mortgage before making the decision to transform your home into a rental property.
Does Your HOA Have Restrictions on Renting Out Your Home?
If your neighborhood is governed by a homeowner’s association, check to make sure they don’t have any restrictions against renting out your property.
Change Your Homeowner’s Insurance
Insurance for a primary residence is different than insurance for a rental property. Once you’ve decided to make the switch, you need to contact your insurance company and change the policy from a homeowner occupied policy to a landlord policy right away.
Learn the Tax Laws that Apply to You as a Landlord
Tax laws are different for a rental property than they are for a primary residence. For example, the rent you take in each month is taxable. Also, you’ll be eligible for several tax breaks as a landlord, too. If you don’t know or don’t have time to learn, hire a tax professional to ensure you’re taking advantage of everything you have coming as a rental property owner.
Is your Home Ready to be a Rental?
Before putting the home up for rent, make sure it is ready to house tenants. Make repairs, add a fresh coat of neutral paint throughout the house, and maintain the yard so it makes a good impression. The more updated and maintained your rental property is, the better class of tenants you’re sure to attract.
Learning to be a Landlord
Once you’ve signed the lease with your first tenant, you’re a landlord. You can jump in with both feet and learn on the job but be prepared to make mistakes this way. You can do yourself a favor by turning to the internet to learn all you can about being a good landlord.
Congratulations! You’ve transformed your primary residence into a rental property!