How to Transform Your Home into a Profitable Rental
While the real estate market is quickly rebounding in the wake of the coronavirus lockdown, many homeowners are still hesitant to list their homes for sale. At the same time, buyers are reluctant to make a major purchase during a recession. Before deciding whether or not to sell your home, be sure to research your local housing market. Bay Area Housing Trends is an excellent place to start your search for local real estate information!
If you decide that now is not the right time to sell, but you still want to move somewhere new, consider renting out your home instead. Here’s a quick guide to help you prepare your home for the rental market and find your first tenants.
Secure Funding for Repairs
Investing in a few repairs and upgrades can help you earn more income from your rental property. You’ll be able to charge higher rent, reduce vacancies, and avoid costly maintenance emergencies. But where do you get the money to fund these improvements projects?
If you want to do some remodeling around your home, consider covering the costs with cash-out refinancing. Cash-out refinancing involves taking out a larger loan than your existing mortgage, using it to pay off your mortgage, and keeping the difference in cash. Homeowners often use this cash to fund their home renovations. This is also a great opportunity to lock in a record-low interest rate! You can learn more about cash-out-refinancing in this guide from PennyMac.
Make a Few Upgrades
Once you have your renovation budget, it’s time to get to work! Stick to low-cost upgrades that will make a significant difference in the overall appeal of your rental. Repaint the kitchen cabinets, tear out old carpet and install hard flooring, and swap outdated hardware and light fixtures for modern options.
To avoid over-improving your rental, BiggerPockets recommends researching your neighborhood so you know exactly what competing rentals are offering to tenants. You may decide to invest in some standout amenities that will attract the attention of your prospective tenants. This can be a great way to make your property more appealing in an area with a high cost of living!
Enhance Your Curb Appeal
When you’re making upgrades to your home, don’t forget to pay attention to curb appeal. The exterior of your home is the first thing that tenants will see when they come across your listing online or visit for a tour. Ensure it makes a great first impression! While your curb appeal should be attractive, keep the landscaping fairly minimal. Your tenants may be scared off by landscaping that requires a lot of maintenance and upkeep.
Set Your Rental Rates
When it comes to setting rental rates, there is no cut and dry formula that you can follow. Landlords typically charge between 0.8% and 1.1% of the home’s value, but there are several other factors you will need to consider before deciding on your number. For example, you will have to consider what other landlords are charging for rent in your area so that you don’t go too low or too high beyond what’s expected for your neighborhood. With the Bay Area having such a high cost of living, you’ll need to account for this too as you set your price.
Find Great Tenants
Finally, it’s time to start looking for tenants! Finding great tenants can take some time, so try not to rush the process or sign a lease with the very first people who show interest in your home. Dealing with problem tenants is a headache that no landlord wants to endure! Make sure you interview your tenants and conduct background checks, so you have a better idea of their ability to pay rent and maintain your unit. When you find those perfect tenants, do whatever you can to keep them happy!
If you’re not ready to sell your home, renting it out is an excellent way to cover your mortgage until you get a chance to sell. All it takes is some good research and a few upgrades, and you’ll be able to welcome your first tenants in no time. In the end, you may decide to keep your home as a rental for the long run!
