What to know about renting out a home
Managing a home, whether to rent for the long or short term, is a thriving section of the real estate market. According to the National Multi Housing Council in 2008, there were approximately 37,469,000 renter occupied housing units which held roughly 88,558,000 residents; that’s 32% of all occupied units in the United States. Moreover, of those millions of renter-occupied units, nearly 12,011,000 or 32% are single family homes.1 Managing a rental home, or “residential property” is a popular way to take advantage of the real estate market whether as a primary or secondary income.
Home property management is easily as much responsibility as a full time job. It is therefore important to be organized, thorough, and seek professional services when merited. Here is a basic outline of the necessary steps to renting and managing a home.
Upon deciding to rent a residential property, first check with local and state zoning laws to ensure it is legal to rent. Next, be sure the house is in good working condition: all appliances are updated, all construction is sound, and that the house is clean and presentable. As the house is being prepared to rent, take a look at all operating costs; set up a budget of all the costs associated with the property like the mortgage, utilities, maintenance, and estimated repairs. Once all costs have been added up, research the rental market in the area in which the property sits. It is essential to know both what current market rents are (so that the property is competitive with other nearby rental properties), and that they cover the operating costs of the property. After a rental amount has been decided, it is time to put the property on the market.
In order to generate interest in the property, it is necessary to market the property to prospective tenants and give tours of the location. For interested prospective tenants, issue a written application which asks the applicants to give basic information as well as credit and employment references. A background check to research credit and employment history is a standard stipulation of most rental agreements. Upon selecting a tenant, a rental agreement is signed by all parties which outlines the terms of the agreement including tenant (s), rental amount, deposit, term of lease, and the policies and rules of using the rented space. After a property has been rented, it is the responsibility of the landlord to collect rent, ensure the property is well maintained, and promptly perform or schedule any necessary repairs. Additional home rental management duties include ensuring the property has all forms of insurance, tax documents, and paperwork needed, and the property complies with all state and federal regulations.
Often, when managing the property becomes too complicated or time consuming, it is necessary to hire a property manager or management company. These professional managers generally charge about 10% of the monthly rent2 but handle all administrative, financial and legal duties regarding the rental of the property. Indeed, unless renting residential properties is your primary occupation, a professional property manager is often the best solution to renting out a home.
Home management for rental properties is a lucrative part of the real estate industry. Whether as a source of additional income or a career utilizing a real estate portfolio, home management is a flourishing business in today’s market.
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