What to Know About Renting Out Your Home
by Brittany Shideler
Renting properties can be rewarding, but as with any investment, there are risks. It’s critical to avoid property damage or neglect claims, as well as follow tax regulations and civic standards. Before renting out your home, consider taking these steps to protect your investment.
Know your city’s rental requirements before putting the property on the market. Typically, landlords must register and certify their property through the city, often referred to as a certificate of compliance. In addition to a general property inspection, the city may require other assessments by a third party, such as an HVAC inspection or lead hazard inspection. Contact your city’s Building Department for up-to-date requirements. Local governments may impose fines if the codes are not met.
Re-evaluate Homestead Property Tax Exemptions
Homestead tax exemptions in all states are only for primary residences. If you have a homestead tax exemption on the property, you will need to have it removed. Suppose you plan to keep the property as your primary residence and only rent it out for portions of the year. In that case, you may not have to remove this tax exemption. Contact your city or county’s appraiser for rules and relevant paperwork. The county could fine you for claiming a homestead tax exemption that does not meet the criteria.
Switch to a Landlord Insurance Policy
A landlord insurance policy, aka rental property insurance, provides liability coverage and covers damage to your property’s structural components or items used to service the property. These items could include a lawnmower, appliances, furnishings and more. Landlord policies do not cover tenants’ personal property, but they can obtain a renter’s insurance policy to protect their belongings. your insurance agent to ensure that your liability coverage is adequate and that all equipment needed to maintain the property is covered. Consider adding an umbrella policy for extra protection.
Using a Realtor
You can advertise the property independently, but employing a real estate agent has perks. A realtor has access to the best marketing resources. They have relationships with other agents, each with a book of clients looking for rentals. Realtors know how to make listings appear more appealing and are more likely to rent out the property for top dollar. Agents schedule viewings, conduct walkthroughs and handle all of the paperwork. They also run background checks, reference checks and credit reports. Commissions for realtors vary, but they commonly charge the equivalent of the first month’s rent or a percentage of the annual rent. If you choose to find tenants yourself, do not skip background checks or attempt to write the lease yourself. Employ a lawyer if you do not want a realtor’s assistance.
Keep Good Records
Track all of your income and expenses for the year. Most new landlords understand that includes rent money you collected, insurance costs, property taxes and mortgage interest. However, many forget about repairs, general maintenance costs, agent commissions, inspection costs and association fees. You can also claim mileage deductions for your travel to and from the property. Bring receipts for all of these things to your accountant to ensure compliance with all tax laws and maximize tax deductions.
Complete the Inventory Checklist
An inventory checklist is a list of property components and their condition. Before the tenant moves in, complete an inventory checklist outlining the home’s condition and take pictures of any existing damage. Photograph the entirety of each room to show the state before the tenants move in. Also, ask your tenants to complete the inventory checklist when they first move in. Keep each completed list and provide the tenant with a copy. Completing an inventory checklist can help mitigate potential disagreements on the property’s condition when the tenant moves out.
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