For many people, taking a dive into the rental property business comes as an opportunity, usually when moving to a new home. Rather than selling the house or the condo, they turn it into a source of passive income. In the long run, it gives excellent returns, especially when the property has all the right qualities, accessible location, spacious area, and value-adding amenities. It can pay off your monthly mortgage payments in the new home, while leaving a few extra for savings.
While it may seem pretty simple, the process of turning a home into a rental property requires a lot of considerations. In this article, we’ll answer people’s most frequently asked questions about starting this real estate venture.
What Documents Do I Need to Prepare as a Landlord?
Before preparing the important documents, you should be familiar with another important document: the rules and regulations of the Homeowners’ Association (HOA). This especially applies if you’re looking at a condo rental. Some vertical communities have a say on turning your home into a rental property, usually requiring a permit before leasing it out.
As you revisit those policies, take note of the ones that you need to communicate with your tenants, say, the proper use of amenities within the community. This should form part of the most important document you’ll prepare: the lease agreement. Aside from the house rules, the agreement should be clear on the duration of the lease, terms of monthly rent, and the initial deposit. Similarly, it must state the reasons for eviction.
Aside from the HOA rules and lease agreement, you must also prepare for the tax registration of your rental business.
How Should I Price My Rental Property?
This is an important consideration as it primarily influences your profit later on. One of the best ways to price your property right is to check houses or condos similar to yours in the same location (in the same neighborhood, if possible). From there, you can adjust based on the level of furnishing you’re offering in the unit, whether it be semi-furnished or fully furnished, as well as the presence of different amenities in the community.
With the technology today, you don’t need to leave your home and ask around for rental fees in your area. A quick search on online real estate marketplaces can give you a snapshot of prices. Use the Lamudi platform to check how much local landlords are charging for their properties. Apply the tool’s search filters. Specify the property type, location, and number of bedrooms to get the best results.
If you already have a home you want to rent out, take advantage of Lamudi’s offer to post unlimited rental listings with a subscription as low as P799 per month, ongoing until October 31, 2021.
Do I Need to Renovate the Property?
This is entirely up to you. The bare minimum is to have a livable space, safe for future tenants. But if you have a spare budget, it’s indeed better to have a few upgrades to the property. Perhaps you can remodel the old kitchen, tear down the walls to open it up to the dining and living room. Open floor plan is an attractive feature, as it maximizes the living space and makes the home airy. If possible, allocate a space for a work-from-home area. This is another feature tenants look for, especially in the era of remote work.
If these big home projects are beyond the budget, you can go for simple cosmetic upgrades, which significantly boost the appeal of the property. Some examples include repainting the walls, replacing light fixtures, improving curb appeal, and adding storage spaces. Mention these upgrades in your rental listings and other marketing materials.
What Are the Costs Associated with the Rental Property Business?
From what’s mentioned above, we can summarize the expenses related to a rental property business:
- Tax registration
- Property improvements
- Marketing costs
- HOA dues (may depend on your agreement with the tenant)
As you run the business, you’re going to encounter expenses related to repairs and maintenance of the property.
How Do I Save Money When Buying Another Property?
When considering a new property as your primary residence, treat it as another future income property, whether or not you’ll proceed with a rental business. Regardless of your plans later, you want to make sure that the property you’re buying now will have great value in the future. Focus on excellent location, highly amenitized neighborhood, and smartly designed units. This will guarantee that your home will greatly appreciate in value over time.
The capital appreciation will be greater if you invest intelligently now, scouting for the best real estate deals in the market. Fortunately, you won’t have to look far. The ongoing Lamudi Online Housing Fair features the hottest promos and discounts on the most in-demand properties in the market right now.
Turning your former home into a rental property offers a lot of financial perks. But before you dive in, be familiar with the essentials of the business, from the documents to the pricing approach down to the costs. If you’re in the market looking for your next home or income property, visit the online housing fair to see the best options.
Photo via DepositPhotos