Services like Airbnb have provided a new revenue opportunity for homeowners. A growing number of people are turning properties into short-term rental homes, counting on the income to pay the mortgage and other expenses. Whether you own a second home or plan to rent out a room in your primary residence, you may be able to turn a profit.
But converting your dwelling into a goldmine isn’t as easy as listing it online. The reality is that you’re taking a risk. Here are several questions to consider before renting out your home:
Are you ready to be a landlord?
If you do decide to rent out your home through an online service, you will need to be prepared for the vagaries of life as a landlord, from the 2 a.m. phone call about a stopped-up toilet to the mess that renters leave behind. Renting a room in the home you currently occupy? You’ll likely need to give up space that you’re used to having to yourself.
Is your time worth it?
Listings on a home rental website can get competitive, especially if you live in a popular area. If you want to stand out, you’ll need to not only manage your listing, but offer quick responses to questions from interested renters. Your time is valuable; make sure you’re getting paid for it.
What happens if your home doesn’t rent right away?
If you plan to turn your home into a rental, you will need to have a contingency plan in place. What happens if your home doesn’t rent for weeks or even months? How will you pay the mortgage and other expenses? The answers to these questions should factor into your decision.
Do you need landlord insurance?
Your existing homeowners’ insurance may not be enough to fully protect you from damage and liability, so you will want to contact your insurance agent for more information. This extra insurance coverage can be expensive, and it is important to do your homework and build those costs into the rent you plan to charge.
Are you prepared for unexpected expenses?
Getting your home—or even a room—ready for a tenant is likely to involve some extra expenses. You’ll want to know who you’re renting to, so be sure to factor in the cost of background and credit checks. Chances are you will need to paint, make some repairs, or replace some appliances in order to get the price you want. And unless you plan on doing it yourself, you may need to pay someone to remove the trash, mow the lawn or shovel snow. It’s also a good idea to have a cash cushion available in case you have an extended vacancy.
Source: Balance Financial Fitness
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