Whether you already own a second home that you just don’t use as much as you thought you would, or you’re thinking about purchasing a second home as a rental property, there are a number of important issues to consider before hanging out your landlord shingle.
Consider Your Budget
Yes, rental property does bring in extra income, but owning and maintaining property is expensive, and it’s important to take a realistic look at whether you’re financially ready. Look at all the costs. In addition to the mortgage, you will encounter regular monthly expenses such as landscaping and surprise repairs. You’ll also have insurance premiums and property taxes to cover. Take a look at rental listings in the area and make sure that you can charge enough to cover all these expenses—and also consider the fact that unless you’re in an area with a shortage of rental properties, you might have periods of time where the house is empty.
Consider If You’re Cut Out to be a Landlord
Looking after a rental property takes time—sometimes just a little, for making sure the lawn gets mowed and the finances are taken care of, and sometimes a lot, like when a flood soaks everything you have stored in the basement. Do some research to find out how much time the average property owner spends with their landlord hat on. Also remember that you will basically be on call 24/7—if a storm damages the roof and it starts leaking at midnight, your tenants probably won’t wait until morning to tell you. If the landlord role doesn’t suit you, or if you don’t live nearby, you can still own rental property, you’ll just have to factor in the cost of paying a management company to look after it for you.
Consider Your Rights
Becoming a landlord means running the risk of the rare nightmare tenant who refuses to pay rent, or moves out leaving thousands of dollars of property damage behind them. Long before you come across such a situation, check with the local housing authority, the American Apartment Owners Association (AAOA), or a local property attorney, to investigate your rights and make sure you have your tenants sign the best possible agreement to protect your investment.
Consider Your Tenants
In some areas at the right time of year, a “for rent” sign out in the yard will find you a quality tenant in two weeks, but most landlords will find it necessary to post an ad in online classifieds, or send out feelers through social media. No matter how you find your tenants, though, make sure you check their credit and call references, to avoid the aforementioned nightmare tenants. You may also want to use a screening service like the AAOA to rule out potentials with criminal records and prior evictions.
Consider Your Security and the Security of your Tenants
Make sure to talk to your insurance agent to find out if your homeowner’s insurance covers your rental property, or if you need to expand your coverage or obtain landlord insurance. You might want to discuss renter’s insurance with your future tenants as well, to make sure everyone is protected.
For more information on insuring your second home, please call us today at, (706) 991-9832 or email, firstname.lastname@example.org. We also offer an Instant Quote form that takes under five minutes.