Transforming Your Home into a Rental Property: 10 Essential Costs to Prepare For
If you’re planning on turning your primary residence into a rental property, there are several costs you need to consider. From increased home insurance to legal fees and property management costs, there are many expenses that may not have been on your radar. Don’t get caught off guard by unexpected costs – read on to learn more about what you can expect when you switch to being a landlord. It’s time to start budgeting for the financial realities of renting out your home.
Home Insurance
Your home insurance costs will likely increase when you turn your primary residence into a rental property. This is because you will need additional coverage for things like loss of rent and liability for tenants. Be sure to shop around for the best rates and make sure you have the coverage you need.
Maintenance and Repairs
As a landlord, you are responsible for maintaining the property and making any necessary repairs. This includes everything from fixing a leaking faucet to replacing the roof. Be prepared for unexpected repairs and budget accordingly.
Legal Fees
You may need to hire an attorney to help you draft a lease agreement and handle any legal issues that may arise.
Marketing and Advertising
You will need to advertise your rental property to attract tenants. This may involve placing ads in local newspapers or online and paying for signs and other marketing materials.
Taxes
When you turn your primary residence into a rental property, you may no longer be eligible for a homestead exemption on your property taxes. This means that your property taxes may increase.
Property Management Fees
If you hire a property management company to handle the day-to-day tasks of being a landlord, you will need to budget for their fees. These can vary greatly but expect to pay anywhere from 8-12% of the monthly rent for their services.
Tenant Screening Fees
It is important to carefully screen potential tenants to ensure they are reliable and take good care of your property. This may involve paying for background checks and credit reports.
Cleaning and Staging
Before you begin showing your rental property to potential tenants, you may need some cleaning and staging to make it more appealing. This may involve hiring a professional cleaning company or purchasing new furnishings.
Tenant Move-in and Move-out Costs
When tenants move in or out of your rental property, you may need to pay for things like cleaning, painting, and repairs. Be sure to include these costs in your budget.
Vacancy Costs
It is inevitable that there will be times when your rental property is vacant. Be sure to budget for these periods and have a plan in place to minimize the financial impact.
Conclusion
By keeping these costs in mind and budgeting accordingly, you can be better prepared for the financial responsibilities of being a landlord. Remember to consult a financial advisor or attorney for additional guidance on managing the financial aspects of renting out your primary residence.
Turning your primary residence into a rental can dig deep into your wallet. Leaf Management is here to help finance the costs of turning your primary residence into a rental property. They can provide guidance on budgeting for the various expenses you may encounter as a landlord and help you find the most cost-effective solutions. We work with landlords to develop a financing plan that meets their specific needs and goals. Don’t hesitate to contact us.