Life goes on. Despite the difficult economy, Americans are changing jobs, relocating, or moving to homes that better suit their current needs. For some Indianapolis homeowners faced with the prospect of a mandatory move and real estate that just won’t sell, becoming a landlord becomes the only option. Not the preferred option, in most cases, but an option nonetheless.
If you’re planning to rent out your home, consider the following tips and advice.
Be Realistic
Just because your mortgage payment is X amount, doesn’t mean you’ll cover all that in rent. A local Realtor can give you a good idea of how much your home should rent for by providing you with a list of comparable rentals in your area. Or, you can research newspaper advertisements and online resources yourself. If you want to find a tenant, your rent must be competitive with what's on the market.
Be Selective
It makes sense to be cautious when you’re talking about letting a stranger take possession of the biggest financial investment you’ll probably ever make in your life.
Require that potential tenants fill out an application form with basic information including: name, employer, salary, previous landlords and references. You'll also need Social Security numbers and signed authorization to check credit reports and criminal history.
If you can hire an online agency to provide background checks (make sure it’s accredited by the Better Business Bureau), or you can conduct your own background checks. A background check should include scrutiny of the following:
Credit reports. You can conduct your own research through one of the credit reporting agencies — Equifax, Experian or TransUnion — as long as you follow the guidelines of the Fair Credit Reporting Act.
Criminal history. Search state and local records online or find an agency to do it for you.
References. Contact employers and talk to previous landlords.
Be Thorough
This isn’t the time for misunderstandings or forgotten details. A written lease is necessary so that each party understands their rights and obligations. A good lease complies with the fair housing, rental, tenant and insurance laws of your region. Laws differ depending on your state, county and city, so be sure you know what yours are. You might consider employing the services of a local lawyer just to be sure you don’t miss anything.
A lease should address the following:
Lease term—a month-to-month lease offers more flexibility if you are selling, while an annual lease provides more stability if you are holding on to the property.
Security deposit—usually one month's rent or more
Rental due date and late penalties
Responsibility for repairs
Responsibility for routine upkeep and maintenance
List of people occupying the home
Rules of behavior—noise levels, neighborly conduct, smoking, etc.
Pet policies and related deposits
Responsibility for homeowner association dues
Association rules that the tenant must follow
Showing instructions, if you plan to put your home on the market while it's being rented
Eviction terms—failure to pay the rent or damaging the property, for instance
Be Protective
As a landlord, you'll need rental home insurance. This policy covers your home's structure, legal costs, medical expenses and loss of rental income, if repairs are needed. Since you are not responsible for the tenant's belongings, you should encourage tenants to buy renters insurance.
Be a Delegator
Sure, you can save yourself some money by managing your rental property yourself, but is it really worth it? The services of a property manager include collecting the rent, charging late fees, handling repairs, and dealing with early vacancies and evictions. Think of the headaches you’ll avoid—especially if you’re living out of state!
If you hire a property manager, find a licensed professional. To locate a manager in your area, go to the National Association of Residential Property Managers website and type in your ZIP code. You can also check with your real estate agent to see if they offer property management.
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