If you’d like to make some additional income and you need to relocate, you may want to rent your single-family home. Instead of selling your house, you can use the opportunity to make some money off your investment. Consider the advantages of renting out your primary residence and what you’ll need to do to comply with local codes.
Benefits of Renting Out Your Primary Residence
Making your home into a rental property can be a rewarding experience for the following reasons:
- It gives you a reliable source of passive income: Renting out your primary residence allows you to make some additional money and strengthen your investment portfolio without having to do much work. Consider how much money you spend on your mortgage each month. If you’ve paid off your mortgage or you’re moving into another home, you can charge a similar monthly amount to potential tenants.
- Save time on relocating: You might want to rent your primary residence if you want to move into a new area. By renting your home, you can save the time that you would’ve spent waiting for your house to sell.
- Move out of your home temporarily: You may need to relocate for a few months to take care of a sick relative or pursue a work project out of town. When you rent out your property, your tenant can temporarily watch over your property as you provide them with a place to live. While your tenant pays rent, you can continue to pay your mortgage with the supplemental income and know that your home is still in excellent condition.
- Conveniently downsize: If you live alone, you may not need your spacious house. Instead of selling it, you can rent or buy a smaller property while making additional income on your primary residence.
- Wait for the housing market to improve: If your property’s value has dropped, you might want to rent your property and make some extra money until the housing market recovers. When you wait to sell your property after moving until its value has increased, you can profit from the sale of your house.
What to Consider Before You Convert Your Home Into a Rental Property
Before you make your home into an income property, you’ll need to take care of the following items:
- Evaluate your existing mortgage: If you recently moved into your home, you might not be able to rent it yet. Your mortgage company might require you to stay in your residence for at least a year before you consider moving. Otherwise, you’d be committing mortgage fraud, and the lender could put your house into foreclosure. Consult your mortgage company about your loan’s policies and stay in your home while you can until you’ve met the requirements for your mortgage.
- Consider HOA requirements: If your home is in a neighborhood with a homeowners association (HOA), you’ll have to determine whether you can rent it out. Some HOAs don’t have rental restrictions, while others only allow specific properties within the community to become rental. Contact your local HOA department to discover what you’ll need to do to rent out your primary residence legally.
- Review your financial situation: Before you rent your home, you’ll need to consider your relocation plan. If you still owe money on your primary residence, you might not be able to afford to take out a second mortgage. Your lender should be able to inform you about whether they take your rental income into account when they decide if you can afford your new mortgage.
- Upgrade your property as needed: If you want to make your home into a rental property, you’ll need to treat it like a business. Compare your rental property to others like it in your local area. Updating the exterior paint or replacing worn-out fixtures makes your home more appealing to potential tenants.
- Understand what it means to be a landlord: Converting your primary residence into a rental property will make you money, but you’ll also have more responsibilities than you did as a homeowner. You have to abide by the Fair Housing Act and become familiar with your local and state landlord-tenant regulations. Consider whether you’d want to take on the burden of renting your property yourself or hire a professional property manager to help you.
New Obligations and Responsibilities
Instead of renting your property by yourself, you can trust a property management company to help you handle the following obligations you now have.
When you rent out your property in an HOA community, your tenants will also have to follow the guidelines. You’ll have to enforce the rules and make sure you stay informed about all your neighborhood’s regulations so you can continue to rent out your property legally. It helps to consult a professional property management group that’s familiar with the local area. A reputable local company understands your community’s laws and guidelines so they can help you remember and comply with them.
When you first rent out your property, you’ll need to consult a CPA or tax professional who can teach you about the new policies you’ll have to follow as a landlord instead of a homeowner. As a landlord, you’re also eligible for the following tax deductions:
- Utilities, if you pay them
- Mortgage interest on your rental property
- HOA fees
- Property taxes
- Landlord insurance policy
- Repairs you pay for on the house
Talk to a professional in the tax industry about how much tax you’ll have to pay on your rental income. You may also want to ask your tax advisor about the homestead exemption you might have on your current home. If you work with a local property management company, they’ll keep track of the tax documents and income data you’ll need to file taxes.
If you make your home a rental space, you’ll need to upgrade your traditional homeowners insurance policy. A landlord insurance policy protects your house from financial loss and specific responsibilities that only pertain to landlords, such as legal fees and liability charges. You must change your homeowners insurance policy before you start renting, or your provider could deny a claim you make for your rental property. A local property management company can help you keep track of your insurance information and documentation.
Confirm that you can afford to keep both residences before signing any lease agreements with your potential tenant. If you realize you can’t afford to buy a second house, you may end up without a living situation. After your tenant moves in, you’ll need to keep track of all the money you make on rent and spend on maintenance and operation costs. A property management company can collect rent and provide periodic financial statements to review, so you know how much profit you’ve made.
Contact Elevated Management Group for Help Renting Out Your Primary Residence
If you’re renting a property for the first time, you might need some assistance navigating all the details. As a professional property management company, Elevated Management Group can help you oversee your rental property. We’ll find and screen potential tenants, collect rent and maintain your property for you. For more information about the services we offer to care for rental properties in the Albuquerque area, reach out to us online or call 505-257-6090.