In today's real estate market, more home owners are becoming landlords. Home owners can often not obtain the desired home price if they want to sell. Some home owners accommodate tenants in their home because they do not need to sell in order to buy another home. There are home owners who use the property…
In today's real estate market, more home owners are becoming landlords. Home owners can often not obtain the desired home price if they want to sell. Some home owners accommodate tenants in their home because they do not need to sell in order to buy another home. There are home owners who use the property as an investment, while others are forced to rent out a home. It is possible that the home owner is transferred by the employer to another city and will therefore accommodate tenants.
FINDING A TENANT FOR A HOUSE FOR RENT BY OWNER
If you are a prospective landlord, there are things you should know about the tenant before renting out a house. Keep in mind that a tenant is a stranger who is going to move into your property.
• Follow up on personal references provided by the potential tenant;
• Ask for a reference or contact details from the former landlord. The previous landlord can give you a good indication if the tenant made regular payments and if any problems occurred during the tenant's renting period;
• Request a police report;
• Obtain proof of past and present employers;
• Evaluate present income and monthly debt obligations. Make sure the tenant can afford the rent;
• Screen the potential tenant's credit score;
• Make sure that you are informed about the number of occupants. This is subjected to the Fair Housing Amendments Act of 1988;
• If the tenant is keeping pets, make sure you know what kind of pets and how many;
• You do find destructive incentives. Trust your instincts. If a tenant's vehicle is trashed, it can be an indication of how the tenant will maintain your rental house.
Property managers can be of great assistance with background investigation, and they know the laws surrounding data searches. For example, you may know that collecting background information on someone requires signed consent, but did you know the law mandates that you shred the data afterwards to prevent identity theft?
A HOUSE FOR RENT BY OWNER IS A BUSINESS
Go in prepared. A house for rent by owner is a business, and you have to manage it like any other business. Determine the rent and know how much to charge for rent. Charge too little and you lose money, and if you exceed the standard rate, your house remains vacant. Keep in mind that as soon as you start collecting rent you are considered as such by:
• Internal Revenue Service: rent is a business income and must be reported. All income must be reported to the Internal Revenue Service. If you do not complain, you can be ordered to pay penalties;
• The Insurance companies: Turning your home into a business is not necessarily covered under your homeowner's insurance;
• Authorities: There are rules and regulations to protect renters from unsafe living conditions and discriminatory practices.
THE PROS AND CONS OF A HOUSE FOR RENT BY OWNER
Renting is a process that will help you bring in a cash flow to make the mortgage payment. Here are some of the advantages of renting out your property:
• Current income: It reflects to the income that you have after you paid all related expenses and the mortgage.
• Appreciation: The value of the property increases over the years.
• Leverage: You can purchase a home with a home loan and by putting down only a percentage of the total value.
• Tax advantages: If there is no income after all expenses are paid, you will not be liable for tax.
Disadvantages of a house for rent by owner:
• Liability: The property you are renting out has to meet all government codes. With the increase of lawsuits, you have to ensure you meet all standards and rules.
• Unexpected expenses: To fix a roof, faulty wiring or bad foundations can be expensive. If you can not afford to pay for the repairs, you can be left without a tenant and be forced to sell your house at a reduced price.
• Bad tenants: It is possible that you will have to make use of a collection agency to collect overdue rent.
• Vacancy: A vacant rental means no money coming in.
FINANCIAL BENEFITS OF A HOUSE FOR RENT BY OWNER
The housing market shows little signs of recovery, forcing homeowners to rent out their homes, rather than to sell. The most obvious benefit of renting your home is that of extra income. The rent can help to pay for property taxes, utilities, repairs and maintenance.
• Your tenants may fall in love with your property. Maybe they can not buy your home now, but renting your property can give them the opportunity to fix their credit profile. Your tenants can consider a rent to own process. This will allow the tenants to take ownership before they officially own it.
• The demand for rentals is extremely high due to people losing their homes through processes such as short sales and foreclosures. All these former home owners need homes and are unable to obtain mortgages.
The market for rental properties is increasing tremendously. The vacancy rate for rents decreased, and job growth is positive. Rental rates increased. Now is the perfect time to cash in on a house for rent by owner.