Converting your primary residence to a rental property is one of the easiest ways to generate income. However, if this is your first time venturing into the real estate business, you need to have some idea of the rules to follow. These are the ones that apply when you want to rent out your home to buy another. This guide has everything you need to know about it.
Review your existing mortgage
Before converting your primary residence into a rental property, there are a few things to consider ensuring that it is a lucrative and sustainable real estate investment. The key to being successful in renting your first home would be to do your due diligence and be well-prepared. So here are some important tips that might help you on how to get your home rented and buy another.
It is possible for homeowners to rent a mortgaged house. However, be sure to check your loan agreement to see if you are allowed to convert your first home into a rental property. Sometimes mortgage lenders may ask you to wait awhile before you can rent the property. Some may not even allow rental. If your lender has clauses against rental properties, you will need to refinance your property with another mortgage lender who allows it.
Take into account the rental value of your house
The main purpose of renting out your home is to make a profit. Therefore, you should research the monthly rental rate you might charge as well as the costs of owning the rental property (mortgage payment, insurance, property taxes, utilities, etc.). You can then estimate the potential cash flow from your rental property. Don’t forget to factor in the vacancy rate in your neighborhood as well. This will let you know if renting your first home is a profitable decision. Finally, you can perform a rental property analysis at home in minutes using an internet rental property calculator.
Consider hiring a property manager
If your budget allows it, consider bringing in professional property management. As a novice property investor, a good property manager will be able to help you maximize your rental income and save you time. It will help with pricing, marketing, tenant selection, tenant communication, rent collection and other tasks.
However, if you do decide to manage it on your own, make sure you understand the local property laws and handle all the day-to-day tasks on your own. This might not work if you have a full time job. In addition, you will need to find time to maintain the real estate investment and take care of your tenant. If you don’t think you can devote all that time, you can always hire the services of a professional.
Once you confirm that you are authorized to convert your primary residence to a rental property and that you can afford a second mortgage, run the numbers. If your home is profitable, then you can begin the process of buying a second home.