Real estate prices are at all-time highs, and in many markets, renting a home is higher than the cost of buying a home. As such, many current homeowners are considering turning their primary residence into a rental property. If you are thinking about converting your primary residence to a rental property, you may have many questions, including what steps you should follow. Ready along to learn some of the key steps that should be followed as you look to convert your existing home into a rental property.
Learn the Pros and Cons of Renting Out Your Home
Anytime you are looking to convert your primary residence into a rental property, the first thing you need to do is to research the pros and cons of renting out your home. Renting out your home can be a great investment, but it can also be a lot of hard work. Additionally, not everyone who rents out their home receives a return on their investment immediately, and renters can unfortunately trash a home. Learning the pros and cons associated with renting out a home can help you determine if it is something you should consider and if it is right for you.
Research How Much Your Home Can Rent Out For
If you have decided that it may be right for you to rent out your home, the next thing that you need to do is to research how much rentals in your area are going for. You want to find out approximately how much you can get if your rent your home out. This is key to ensuring that the math makes sense for you, and that you can make money renting out your home, instead of losing money. Rental markets vary, so you may want to consider working with a property management company or a real estate agent to learn how much you can realistically rent your home out for.
Determine If You Need to Refinance Your Mortgage
Once you have decided that it makes sense for you to rent your home out, you need to review the terms of your current mortgage. Some mortgages require you to live in your home for a period of time before you can turn it into a rental, while others require you to get different mortgages for rental property vs primary residence. In some cases, you can expect your mortgage to be slightly higher, with higher interest rates, for a home you plan on renting out versus a home you plan on living in. If you need to refinance your home, you must do this before you fully convert your home to a rental property.
Make Changes That Renters In Your Area Look For
The next step to converting your primary residence to a rental property is to make changes that renters in your area look for. For example, if your carpets are old and worn, you may want to purchase new carpets for your home. Or, you may want to patch the holes in your wall and repaint the walls to get the home ready for a renter. There are also upgrades you may be able to make to your home to increase the rental potential. Consider making these increases to maximize the rental revenue you can get for an investment property.
Change Your Home Insurance Policy
Lastly, take the time to change your home insurance policy. If you currently reside in your home, you will need to change the home insurance policy to a different type of policy. The policy for homeowners varies based on whether homeowners reside in the home, whether it is being used as a long-term rental property or whether it is being used as a short-term rental property. Your insurance agent can work with you to determine the best type of home insurance for your property based on how it is being used.
Converting your primary residence to a rental property can be a profitable endeavor for many people. If you are looking to learn more about investing in real estate, including turning a primary residence into a rental property and if it is right for you, you should turn to a professional for help. Chandler David Smith is a real estate expert who also invests in real estate and helps people with their real estate investments. Reach out to him today to learn more about real estate investing and if it is right for you.