Turning your home into an investment property can be a fantastic way to start making extra income. But, the transformation should be treated as a financial decision rather than an emotional one.

Emotional decisions tend to be reactive. They are fast, reflexive, and don’t always have our long-term well-being in mind. Sure, it’s understandable that people develop strong connections with their houses. It is their home after all.

The dining room has been the setting for many a great dinner parties. You’ve spent many hours on the backyard patio. Your kids grew up in the house; you can still see the pencil marks made on the door frame marking their growth. Perhaps, you may even have grew up in the house, and it’s been in the family for over half a century.

However, when considering turning your former home into an investment property, your decisions should be based on the financial benefits. By hanging onto a “love affair” with your home, you are subconsciously sabotaging your chances for success.

That’s why in this article, we share 5 tips on how to transition from a home you loved to one that is strictly for business. It is easy to rent our a house, just read on.

 

Tip #1: Neutralize the home.

Neutralizing your home has two main benefits. One, it can help make the home ‘show ready’. And two, it will help depersonalize you home. It’ll seem more like a house and less like a home, allowing your guests to feel more comfortable.

That bright blue child’s room or red dining room might have pleased you, but your guest might not feel the same way. These personal touches are what people on HGTV refer to as “putting your stamp on something.”

So, essentially, your goal should be to get rid of your “stamp”. Here are some tips on how depersonalize your rental property:

  • Paint in neutral colors. Neutral colors give off an open-minded and simplistic attitude. They create few distractions. They appeal to a greater mass of people and go with all furniture styles and colors.
  • Clean your rental property. A clean home conveys a pride of ownership and assumed maintenance.
  • Get rid of all your furnishings and personal belongings. Pack away “theme based” or ornate pieces of accessories, artwork, and furniture and replace them with nice and stylish objects.
  • Repair all the quirky home decor you have grown used to: dated light fixtures, stuck drawers, leaky faucets).

neural_home_decor

 

Tip #2: Get additional landlord insurance.

Your homeowner’s insurance won’t be enough now that you are transforming your former home into an investment property. Anytime you have someone staying in your property, you assume some degree of responsibility to their safety.

What if there is a gas leak that causes an explosion? What if a tree falls on the home injuring your tenant? Or, what if a natural disaster occurs, destroying the home rendering it uninhabitable?

Landlord liability coverage may help protect you from financial loss arising due to property damage from severe weather, break-in, fire, and more.

In addition, you should also consider making a renter’s insurance mandatory for tenants. It’ll benefit you just as much as your tenant.

 

Tip #3: Determine how much rent to charge.

You’ll want to set a rent price that attracts tenants and will lead to profits. There are a number of things you’ll need to think about when you’re trying to determine how much rent to charge.

You could start by considering what landlords are charging for similar rentals in your area. This is what real estate agents refer to as comparative market analysis. Websites like Craigslist or Trulia can also prove useful in this regard.

Another way to determine how much rent to charge is by figuring out your former home’s value. You could use a website like Zillow to help you in this regard. However, for a more accurate assessment, a home appraiser is the best option.

The rent amount should be a percentage of the value of your home. Normally, rents fall between 0.8 percent and 1.1 percent of the value of the home. For a house valued at $250,000, for example, a landlord could ask a rent of between $2000 and $2,750 every month.

Also, bear in mind that some states have rental laws that limit how much landlords can ask for rent and security deposits. Places like Washington D.C, California, Maryland and New York, for instance, have rent control laws in place.

determine_rent_price

 

Tip #4: Advertise your house for rent.

Once you are emotionally detached and the home is show-ready, advertise it. Gone are the days of simply placing a sign outside a home when you are trying to rent a home. Today, the internet is a critical part of our daily lives and you need to use this to your advantage.

Prospective tenants are looking for dynamic content that gives them more than just a number of baths and bedrooms. They are looking for interactive media, real-time mapping, 3D walk-throughs, social integration, rental reviews, and videos.

Rental listing sites provide the best way to maximize exposure for your rental property. Remember, the goal is to get your listing in front of as many potential renters as possible.

Examples of rental listing sites include Realtor, Rentalhouses, Hotpads.com, Zillow, and Craigslist.

 

Tip #5: Prepare questions to ask prospective tenants.

Once you begin getting some interest from prospective renters, it’s time set up the showing. Prepare a set of questions to ask them. These will help you screen for good tenants from the bad, immediately. The following are some good examples of questions to ask your prospective tenants.

  • Why are you moving? Look for legitimate reasons for moving, such as wanting more room and space or changing jobs.
  • How many people will be living with you? Generally, the fewer the better. It means less wear and tear. As a guide, look for a maximum of two people per bedroom.
  • What is your monthly income? Look for a tenant making at least two and a half times their monthly rent. The last thing you want is having to evict a tenant for nonpayment of rent.
  • Will you agree to a credit and background check? If they hesitate to answer, it’s likely they have something to hide or don’t want to commit. Continue looking.

questions_ask_tenant

 

Becoming a landlord is a big step. Your world, like becoming a parent, is about to change; decision making, obligation and duty of maintenance are all matters to consider. Get it right and it can be fulfilling and financially rewarding. Get it wrong and it can become frustrating and stressful.