Learning to be a
Faced with a still-sluggish real estate market,
many homeowners are increasinly renting out
their homes for the first time
Tired of waiting for their houses to sell, a growing number of homeowners are posting For Rent signs. Although there is a strong demand for rentals— more than 10 million Americans will move into rented properties before 2015, according to some estimates—and the potential to benefit from tax
write-offs while tenants cover the mortgage, being a landlord requires more than
just collecting the rent checks.
Before handing over the keys to tenants, consider the financial implications.
CALCULATE THE COSTS
Use websites such as craigslist.org and realtor.com to research rental rates in the
area. After establishing how much to charge for rent, start crunching the numbers.
“You have to do an analysis of whether the rent will cover the cost of the mortgage, insurance and ongoing maintenance,” advises Janet Portman, attorney and
co-author of First-Time Landlord: Your Guide to Renting Out a Single-Family Home.
CALL IN THE PROS
A lot of work goes into managing all aspects of a rental property, from advertising
and screening tenants to creating leases and filing taxes. Although it’s possible to
take a do-it-yourself approach, hiring professionals helps ease the burden.
“[Managing rental properties] is complicated and requires education and experience to maximize the bottom line,” says tony A. Drost, president of the national
Association of Residential Property Managers.
A professional property manager will do everything from screening tenants and
enforcing the lease to sending out contractors to handle emergencies. According
to Drost, landlords should expect to pay a percentage of the monthly rent for their
services. consider hiring a lawyer to draft a lease and using a tax professional to
navigate iRs rules about tax write-offs for investment properties.
An insurance policy is the best way to protect your investment. Purchase
a landlord policy through your insurance company to protect against
liabilities and damages while renters are in the house. Like all insurance policies, the prices vary depending on coverage.
in most states, Portman notes, landlords also can require
their tenants to have renters insurance. “if there is a claim, it
will go against their insurance, not yours,” she explains.
KEEP GOOD RECORDS
owning an investment property comes with significant tax
benefits, according to Portman. keeping a detailed account of all
expenses, such as advertising, background checks, maintenance and
mileage, is essential to taking advantage of the write-offs.