When my husband and I first bought our townhome, I loved everything about it—the high ceilings, the spacious kitchen and most of all, the neighborhood. Once we updated some of the paint colors, I thought, “I’m finally home.” But when we began talking about starting a family, it became clear that our little place in a bustling part of town wasn’t going to be a good fit much longer.
Given the local housing market, we knew we’d probably need to sell our place for a lot less than we purchased it for—leaving little for a down payment on a new home. After considering our options, we decided to rent our place out. But before we could show the place to potential tenants, we had a ton of things to think about. If you’re thinking about renting out your current place while you get settled in another, consider some steps that helped us through the process:
1. Learn How to be a Landlord
When deciding whether to rent out our home, we first made sure that we had time to be landlords. Though you may save money by renting out your home, you probably aren’t going to save time. We spoke with other property owners to go over the basic time commitment and learned it was more than a monthly responsibility. Dealing with tenants, making sure our property was well maintained and collecting rent payments made our townhouse a nearly daily concern.
When we lived there, we got used to the high-pitched noise that came from the garbage disposal. But, when our tenants complained about this same issue, we had to drop everything and call a plumber to take care if it. This took a little while to get used to, but in order to save money in the long run, we felt this sacrifice was worth it.
2. Budget for Two
Once we became landlords, we went out to eat a little less and stayed in a little more because we were the proud homeowners of not one, but two homes! If you’re concerned that owning two properties might put you in the red, add together all the costs of your rental unit, including your mortgage, assessments, repairs and other monthly maintenance costs. If your tenants pay rent that’s higher than this total cost, you should ideally be covered.
In our case, the rental market was up, meaning we could ask for a little more and still offer our townhouse at a fair price. But before deciding on a final number, we checked rental listings for a ton of similar townhomes to compare those amounts with what we planned to charge.
3. Do Your Tenant Research
In some cities, listing your condo on Craigslist or another online classified board can provide you with a wide array of potential renters. It also has its pitfalls, as you never know who’s going to respond to your listing. Where we live, using Craigslist is fairly common and can connect landlords with tons of legitimate renters.
Find out the best places to advertise your rental so you are more likely to end up with reliable tenants. For extra protection, you can contact a variety of screening services, such as the American Apartment Owners Association (AAOA), that will weed out potential tenants with poor credit – and often for a reasonable fee.
4. Be Aware of Potential Renter Problems
We’d heard horrifying stories about landlords losing thousands of dollars because of tenants who stopped paying rent, so we spoke with a friend of ours who’s a property lawyer. He talked to us about the basic rights that tenants and landlords have in our state. These laws vary across the country, so you should check with the AAOA, your local housing authority or a property lawyer in your area to make sure you know your rights and sign the proper rental agreements.
In addition, renter’s insurance is super important for covering emergencies, no matter what state you’re in. For their protection, we had each of our tenants provide proof that they’d purchased rental insurance before moving in.
Though it was the right choice for us, being a landlord is not for everyone. Before taking the leap to owning two homes, make sure to weigh your options and figure out what’s best for your lifestyle, your wallet and your future.