Almost 28% of all Americans name real estate as their preferred way to diversify their investment portfolio. That’s probably because it’s such a lucrative source of income.
You pour your money into a house that’s either move-in ready or needs a minor amount of work done. After that, it’s all a matter of finding the right tenants to rent out property to.
The problem is finding the right people. All it takes is one bad tenant to disrupt your cash flow.
We have a guide that will help you avoid such pitfalls. Check out this guide to learn the ins and outs of renting out a home and becoming a landlord.
Prepare Your Finances
Before you turn a home into a rental property, you’re going to need to get your finances in order. When it comes to investing in real estate, you’ve got to spend money to make money.
Most people don’t have enough cash on them to buy a house. You’ll have to take out a mortgage. There’s also the little matter of property taxes and insurance.
If the idea is to fix up a house and rent it out, it’s going to take money to make the necessary repairs.
Contact Your Insurance Company
When renting out a home, you’re going to need landlord insurance. It’s a bit more expensive than regular homeowner’s insurance, but without it, you’ll have to pay money out of pocket to make repairs if a tenant decides to destroy your property.
Most landlord policies also have basic liability coverage. It will protect you if a renter sues you for burning their hand on a stove or breaking their ankle over a hole in the yard.
Hire a Property Management Service
Being a landlord is a lot of work, and without relying on a property management company, it can get overwhelming and difficult to manage all alone. For instance, if a pipe bursts in your tenant’s home at 2 in the morning, it will be up to you to handle it. Beyond emergency repairs, there are numerous other tasks that might require constant attention. You need to collect rent from tenants, which can sometimes involve chasing down late payments or handling disputes. Even if you live right down the street from your tenants, all this work can be too much for some. That’s why it’s a good idea to hire property management services to take care of it. These professionals can take care of all your day-to-day tasks, from handling emergencies and collecting rent to managing tenant relations. You can go to reedyandcompany.com to learn more.
Decide on Your Rental Prices
Setting a rental rate can be difficult. You want to make a profit so you can handle the mortgage payments on the property and take care of your other bills. At the same time, if you set your prices too high, you’re not going to attract many tenants.
A good way to figure out a fair price is to look up the cost of other properties in your area. Renting Vs. selling a home. No matter what route you’re going down, this trick will work.
Attracting the best tenants is always going to be at the forefront of your mind. So make sure to look into ways that can help you with this journey. It might be a good idea to check out rental credit reporting agencies, for instance, as this will provide services that will help you manage your tenants and keep your money coming in.
How to Rent Out Property and Make a Profit
Becoming a landlord can be lucrative if you know how to rent out property. You can set a rental price that’s fair for both yourself and the tenant.
You should also cover all of your bases by getting insurance and consider hiring a property management service.
For tips that will help you prepare your finances to invest in real estate, visit the Money Management section of our blog.
Veeramachineni Lalitha
I am Finance Content Writer. I write Personal Finance, banking, investment, and insurance related content for top clients including Kotak Mahindra Bank, Edelweiss, ICICI BANK and IDFC FIRST Bank. My experience details : Linkedin