How to Convert Your Home into a Rental Property
If you’re looking at buying a new property, that doesn’t necessarily mean you need to sell your old one. Renting out a home can provide a great improvement to your overall income.
For one, there is the potential to earn a passive income. Second, renting out your property can help you build wealth through rising property prices. So, after a couple of years, you may be able to sell it for a considerable amount of money.
Renting out property also qualifies you for numerous tax deductions. From travel expenses to repairs, and professional fees, and lower your tax expenses.
But converting your home into a rental property does mean taking on the responsibilities of a landlord, and being a landlord is a challenging job with many different responsibilities.
With this in mind, in today’s blog we, at Alltrade Property Management, will walk you through 7 tips on how to successfully convert your home into a rental property.
Understand a Landlord's Responsibilities
Being a landlord can be a challenge, especially if you lack experience in property management. Among other things, it entails filling vacancies, collecting rent, dealing with maintenance issues, inspections, and responding to tenant complaints. Plus, you’ll also have to keep up with changes in both state and local landlord-tenant laws.
Take out Insurance
There is an element of risk to renting out a home. This is why you will need more than the normal protection a homeowner’s insurance policy provides. Specifically, you’ll need landlord’s insurance.
A landlord’s insurance policy typically covers financial damage caused by the following events:
- Loss of rent
- Natural disasters, such as lightning, fire, or hail
- Legal fees arising from disputes
- Structural damage
- Damage to maintenance equipment that you own
- Minor accidents or injuries that occur on your premises
You may also speak to an insurance agent about adding any extra coverage you may need, depending on your location. For example, flooding, earthquakes, tornadoes, wildfires, or tropical storms.
Hire an Inspection Service
Before renting out your property, you’ll also want to hire a home inspector to check your property. At the very minimum, landlords are required to rent out properties that meet the basic habitability standards of health and safety.
Under Kentucky Stat. §383.595, the following are some of the things that are required of landlords:
- Ensure the property has both cold and hot running water.
- Provide a working HVAC system.
- Ensure sanitation facilities are in good working condition.
- Ensure the electrical wiring, plumbing, and lighting is working as they should.
You must also ensure these facilities are well-maintained throughout the tenancy by promptly responding to tenants’ maintenance requests.
Get Your Property Rent Ready
Once you have ensured it’s meeting all habitability codes, the next thing to become rent-ready is to make it more appealing. There is a myriad of improvements you can make to your property depending on its present condition.
The following are some tips to help you get started.
- Give the walls a fresh coat of paint.
- Upgrade the kitchen and bathroom.
- Spruce up the landscape.
- Replace old, inefficient appliances with new and energy-saving ones.
- Give the home a thorough clean.
Having an attractive rental property can help you rent out your property quickly and to the best tenant.
Familiarize Yourself with Property Tax
All rental income is taxable as per the Internal Revenue Service. So, during every tax season, you’ll need to file the IRS Schedule E, Supplemental Income and Loss if you own an investment or rental property.
But aside from this, landlords in Kentucky are eligible for a myriad of tax deductions. Some of the expenses that are eligible for a tax deduction for landlords include:
- Transport costs
- Office expenses
- Professional services
- Training expenses
- Employees compensation
- The financial cost of collecting rent
- Interest expenses
By taking advantage of these deductions, you can significantly lower your tax bill, and keep more of your income.
Determine the Right Rental Value
Before you can start marketing your property, you must determine the right rental price for the property. This is of utmost importance as it can make or break your efforts to successfully rent out your property.
If you’re just starting out, consider hiring expert help. A property manager can help you compute the best rental rate for your property. This will ensure your property is not only competitive but that you’re able to maximize your rental income.
Hire a Property Management Company
A property management company can assist you in filling any gaps you may have in your skillset. After all, being a landlord involves much more than just collecting rent. You need to maintain the property, adhere to every law, market the property and then screen any prospects.
If you are worried about any of these, it’s a good idea to contact a property management company like ourselves at Alltrade. We can help you resolve any issue to do with your property and certainly improve your bottom line through exceptional services.
Renting out your property can be financially rewarding. But being a landlord requires that you keep up with all the responsibilities outlined under Kentucky landlord-tenant laws as well as those in the lease agreement.
Alltrade Property Management is a professional property management company serving Louisville and the surrounding areas. We can help you successfully convert your home into a rental property.