Preparing Your Property for Rental: Five Things to Know

You may decide to rent your home out while renting another property elsewhere if this can boost your income.  On the other hand, you may have bought an investment property, purely to rent out. Before you rush out and start advertising, there are important things you need to know and prepare for, such as what is contained in the lease agreement and how responsibilities are split. Even if you are renting the place out with the intention of selling the property for profit at a later stage, it is important that you do your homework. We will look at what you need to know below.

Primary Considerations - Restrictions

There are certain things you need to be aware of before putting your home up for rent. Firstly, what are the stipulations on your mortgage bond? There is often a restriction that you cannot rent out a property until you have lived in it for a year. If you bought a property purely to bring in an extra income, you will need to discuss this with the lender. Your mortgage also needs to be current.

Primary Considerations – Savings for Costs

Secondly, you need to have savings tucked away that you have immediate access to. Your property may not find a renter immediately. You still have to keep it maintained, pay the utility bills and cover your mortgage. You should aim to have three months’ worth of these costs available before you place an ad to rent out your property. Even if it does find a renter, you may come up against unexpected bills, such as maintenance you were unaware of, and have to fix. 

Primary Considerations – Should You Use a Property Management Company?

Thirdly, a property management company can take away much of the stress of renting your place. They will be able to vet prospective tenants more thoroughly than you can. This increases your chances of returning to an undamaged home with all the rental fees paid in full.

If you go it alone, insist that your tenants have renter’s insurance. You can ask for a pet deposit if the tenants have pets as many animals can wreak havoc on a property. Detail who is responsible for what aspects of yard maintenance and any utility items the tenants are responsible for. Get two signatures on the lease in case of a default. Include a clause in the agreement that allows you to do checks on the property, preferably every quarter. 

Determining the Rental Fees

Your rental property will not make a profit if you have not taken all costs into consideration. Crunch the numbers to make sure that you do indeed earn the income you are hoping for. If you still have a mortgage, how much is this payment monthly? What about utilities – should the tenant pay for services such as water and electricity or is this included in the gross amount? What are similar homes in your area being rented out for?

You can also follow the one percent rule. This requires taking the purchase price you paid for the property and subtracting any repairs. The remainder is the industry standard for this rule, i.e., the rent should equal one percent of the final amount you calculated.

Get the Property Shipshape Before Renting

The appearance of your property will help prospective tenants decide if it is worth the rental fees you are charging. A fresh coat of paint is a must to give a new look to the home. Make sure that the flooring is in a good state. Get rid of common pests like ants and mice. Use professional photographs when advertising the property. 

If you have followed these tips, you can look forward to a good return on your investment.