As the old adage goes, there’s only one thing we can’t make more of: property. If you own a second house, consider the benefits of renting the space. It will give you a consistent revenue stream, as well as building your property wealth, even in a pandemic.
Do you have a vacation home or second property you want to turn into income? At RCI+Topsail we know a lot about tourism in North Carolina. Here is some great advice we’ve collected over the years from people who successfully rent out their vacation homes.
The pandemic has wreaked havoc in so many ways, but not least of which on the housing market. In efforts to keep everyone safe, homebuying is less personal than ever before from virtual tours to drive-up title services. Many are skeptical of buying homes under such conditions, so converting your property into a rental may be much more beneficial in the long run for both you and the community.
The fine print
When you decide to turn your house into a rental property, there are a few steps you should be sure to take. The first step is to examine your insurance policy and consider changes. Most homeowners insurance policies do not cover rental properties, so look into landlord insurance, which combines liability and property coverage. Most cities will also require an inspection to ensure the home is up to safety standards. If there are issues found in the home, you may be responsible for repairing them before you can approve your first tenant. This is also a good time to make any other changes to update the home. Just remember that what you spend has to be recouped with the rent, so before you remodel the entire kitchen, consider changing the dated hardware and putting up a fresh coat of paint first.
Protect your assets
Renting out a property you own can open you to liabilities. One of the best ways to protect yourself is to set up an LLC (limited liability corporation) for your rental business, which will give you tax advantages and additional flexibility. Filing for a North Carolina LLC is easier than ever; to avoid costly lawyer fees, file yourself or use a formation service like ZenBusiness. The regulations and costs are different for each state, so be sure to research what you will need for your specific situation.
Do the math
Once the property is deemed safe and your paperwork is in order, it’s time to calculate what the rental will cost. Looking at the mortgage, insurance, taxes, maintenance, updates, and any other costs, determine how much owning this property will cost you in a year; divide this total by twelve months and you have the baseline you will need to charge in order to break even. Look into other rentals in the area; charging significantly higher rates will dissuade some potential tenants, while pricing your rental too low will reduce your profits. Avoiding these mistakes can make sure your rental is a popular success.
Spread the word
Once you’re legal to rent the property, it’s time to find tenants. Long-term rentals are a better guarantee than short-term or vacation rentals, especially as seen during the COVID pandemic.
Instead, search for longer-term renters with leases starting at a year. Consider posting on top property search sites or local social media groups for virtual searchers, and decide how you want to handle property walkthroughs — digitally or in person, or a case by case basis. Making a plan will keep the process smooth and help you get the biggest return for your investment.
Long-term rentals contribute to the local community, so remember to explore what other resources the community offers. Great local resources like RCI+Topsail can enrich your understanding of your area; by exploring and advertising local favorites like restaurants, you add appeal to your location and widen the net of those who would be interested in your home. With a little planning and paperwork, your long-term rental can be a lucrative success.