Converting Your Home Into a Rental Property
Contributed by Ted James
We’ve all felt the impact of the COVID-19 pandemic, and even as some aspects of life start getting back to normal, other changes will last a bit longer. The real estate market hasn’t slowed as much as many people feared. However, home buyers and sellers are understandably nervous, which has led some people to think twice about moving. If you’re feeling this anxiety but you still want or need to move soon, you may want to consider converting your home into a long-term rental property as an alternative to selling.
Know Your Market
Before deciding whether to go this route, start by researching recent real estate trends in your area. Don’t worry — you don’t have to be a real estate expert to do this! Running a simple search online will show you the average home price in your market, along with the length of time it takes on average for homes to sell (in Austin, Texas homes typically stayed on the market for approximately 10 days). This information is valuable because it gives you an idea of whether the timing is right for selling your property.
Look Into Legal Issues
Once you’ve gotten a feel for the market, look into the legal and financial implications of converting a property into a rental. Some areas have zoning laws regarding rentals, so you’ll want to ensure your property will be in compliance. You should also look into your homeowner’s insurance and whether you’ll need to make changes to your policy.
Another factor to consider is how owning a rental property impacts your taxes. As Million Acres explains, rental income is taxed as ordinary income, so the percentage you owe is based on the tax bracket you’re in. However, you are also eligible for rental property tax dedications, which means that you may show little to no income from your rental property.
Make Repairs and Upgrades
If you’ve thought about selling your home, you’ve probably also thought about repairs or other home improvement projects that you would need to do first. Converting your home into a rental property isn’t all that different in this respect. Not only do you need to make sure everything is in working order, but it’s also worth making upgrades that will help you find and keep good tenants.
To make your home more appealing to renters, you may choose to hire an interior designer to turn your home into a unique space. The expert designers at Etch Design Group can create personalized designs that improve the function, form, and feel of your home.
Also, make sure you put some forethought into which projects to prioritize. As Real Wealth Network explains, landlords need to be aware of safety issues regarding COVID-19, especially when you need to go into someone’s home to make repairs. You can’t anticipate every problem that could possibly come up, but you can prevent excess maintenance calls by addressing known issues now before tenants move in.
Landlords also need to be aware of any potential pitfalls around the property. For example, if there are older trees in the yard, you may need to get these inspected by an arborist to make sure they’re not at risk of falling on your home. If there are any trees that can endanger your home and occupants, you’ll have to hire a tree removal service to remove trees and branches (typically costs between $400 and $2,000). The general rule is that trees that are within 10 feet of your home should be uprooted as they could cause major damage.
The last thing to consider is how you’ll find and screen tenants, along with how you plan on handling maintenance and tenant communications. You always want to screen tenants, and now that we’re in a time of economic uncertainty, it’s especially important to verify income and employment. Another thing to think about is how you will show the property safely, such as using video conferences as an alternative to in-person showings.
Just as we do with everyday tasks, you’ll need to be mindful of how the pandemic impacts this process. Look into services that can be done remotely, and maintain social distancing as much as possible. The real estate market will bounce back, but with safety concerns and current market trends, becoming a rental property owner may just be the best move for now.
To learn more about what the expert Austin interior designers at Etch Design Group can do for your home, schedule a consultation by calling (512) 568-3224!