With Colorado Springs real estate values on the rise, your home is no doubt a valuable long-term investment. But what happens if you must relocate for a job, family changes, health issues, or other reasons, and you’re not ready to sell? Perhaps you previously listed your home on the market but were disappointed with the offers you received.
The bottom line is you don’t want your home sitting empty, possibly exposing it to vandalism, weather damage, or other detrimental exposures.
Converting your current home to a rental property is an ideal solution to this dilemma. It ensures you continue to realize increases in your home’s equity while earning a passive monthly rental income. Additionally, the home remains occupied and taken care of in your absence.
Converting Your Home Into a Rental Property
Before you just hand over the keys to any tenant, there are several preparations that need to be completed to convert your home into a rental property.
1. Verify that your lender approves renting.
Check the Occupancy Clause in your mortgage agreement to make sure you are permitted to rent your home. For example, VA loans require homeowners to be the primary residents at all times. Other mortgage lenders may have other rules regarding renting your home.
2. Obtain landlord insurance.
Your current homeowners insurance may not cover your home against damages from renters. Landlord insurance has more benefits such as increased liability coverage, legal fee coverage if you are sued, and loss of rental income if your tenant deserts you. Liability insurance is especially important should you need to cover your tenant’s medical bills for slip and fall accidents.
3. Spruce up the place.
Potential renters will be turned off to a property with malfunctioning appliances, dirty walls, floors, or carpeting, and broken fixtures.
- Repair or replace malfunctioning appliances.
- Touch up or repaint walls where needed,
- Replace outdated or broken light fixtures.
- Professionally clean carpet and tile floors.
4. Have the home professionally inspected.
While you can repair and clean up issues you are aware of, a home inspector can uncover hidden problems. These can include electrical, plumbing, and structural issues. Make sure to repair the defects that are potential safety hazards to prospective tenants.
5. Determine how much rent to charge.
The right rental amount is essential to attracting tenants. If it’s too high, it will be a turnoff for prospective tenants. Conversely, if the amount is too low, you won’t meet your expenses. There are plenty of resources online to help you determine an appropriate rent amount for your home. Check sites such as Zillow, Trulia, or Rent.com to get an idea of what similar properties in your area are renting for. A local real estate professional can also provide you with the average rental rates for similar properties in your neighborhood.
6. Establish rules in your lease agreement.
When drawing up your rental lease, make sure to include what tenants can and can’t do. These rules should address the following conditions:
- All adults living in the home should be named on the lease..
- Allowable pets including sizes, types, breeds, etc. Keep in mind that your liability insurance may not permit specific breeds on the property.
- Owner entry rights. Many states require 24 hours notice to tenants before owners are allowed to enter the property.
- Cleanliness. You certainly do not want your tenants causing health hazards with overflowing garbage containers or numerous large piles of items everywhere.
7. Consider hiring a property manager.
Many rental property owners find out the hard way that being a full-time landlord is very difficult and time-consuming. You are at the tenant’s beck and call for every issue from clogged plumbing to broken air conditioning. The solution is hiring an experienced and professional property manager to look after your home and respond to your tenant’s issues 24/7. Property managers can also protect you from legal issues, conduct tenant screening, and collect rent. Additionally, they will ensure your property is efficiently maintained in your absence.
If you’re planning to rent out your home in the Colorado Springs area, give us a call at 719-471-RENT (7368) for a free rental property management assessment and rental analysis.