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How Do I Prepare a House as a Rental Property

One of the best investments that people can make today is in real estate. It seems that housing prices continue to rise. But in order to pay for this investment, many people have chosen to rent out their homes in order to accumulate additional financial power. Renting a home can be a rewarding way to make semi-passive income.

That being said, renting out a home can be a difficult task without adequate preparation. A home that may be easy to live in might actually not be in great shape to rent. Landlords are responsible for maintenance and safety issues within the home. If things aren’t up to code, they could be facing a legal issue in the future.

Evaluating The House

There’s quite a few steps that need to be taken when determining if a house is ready to be rented. Each of the following steps is absolutely mandatory for a landlord to determine the fitness of the house they are intending to rent out.

  1. Repair - The first step is to determine what kind of shape the house is in physically. Even if it’s planned to be rented out furnished, it’s a good idea to empty the house of everything to do a proper inspection. Any issues that are found structurally or cosmetically need to be fixed before renting begins.
  2. Safety - In addition to physically evaluating the house, safety features need to be considered. If you are renting out a portion of your home, or separate portions to different people, you need to ensure that safety features are fully installed in each section. Additional smoke or carbon monoxide detectors are always a good idea. Fire Extinguishers are always a mandatory addition to any place that is rented.
  3. Cleanliness and Furnishing - Finally, clean the house up to its highest possible level. Do a deep clean and then take pictures of the house as a reference point. At this point, it’s time to move in furniture. Most rental properties tend to come with appliances, but not furniture. Some come fully furnished. If you’re planning for that option, ensure everything is ready to go.

Evaluating Legal Responsibilities

After a landlord has completed the steps of getting the house physically ready, a landlord needs to figure out exactly what their legal responsibilities are. If you have a mortgage on the property, you need to inform your lender of your plans. There are different terms on mortgages for rental properties. They may require proof that the rental will be creating more income than the cost of the mortgage, or have other terms that must be satisfied.

The next step for a potential landlord is speaking to their insurance company. Their home policy will no longer be valid with renters living in the house. Instead they will need to seek a landlord property insurance policy. These policies are designed for the landlord. In addition to paying off in case of fire, flood or disaster damage, these will also pay in case of gross tenant negligence.

Finally, the landlord should draw up a lease agreement that will meet all of their requirements. Oftentimes landlords wish to protect their property with a few additional clauses. This could be something like requiring the tenant to not own pets. It’s best to check the drawn up lease with an attorney to ensure that it is not violating any tenant law.

Evaluating Potential Tenants

Finally, you want to determine who you are going to allow to live there. This starts by determining exactly how much you are intended to make from renting the property. A high end neighborhood full of established and elderly families is likely not the best place to appeal to students. A good way to find the market value on your house is to talk to real estate agents in the area, and look for comparable houses being rented. That should give you a baseline.

After the terms are decided, it’s time to choose a tenant. Landlords should get written permission to run a credit check and criminal background check. Each application should be considered and the safest option is usually the best one.

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