For many people, renting their home is a good way to secure a steady source of income. Some homeowners also rent their homes on a temporary basis, as they wait for the most opportune time to sell their property. If the property has been purchased by taking a home loan, the rent can be used to pay the monthly home loan EMIs. The good thing about rental income is that it remains largely stable in the short-term and continues to offer increased returns in the long-term. Rental income is not only safe like a bank fixed deposit but is also more profitable since the property price continues to appreciate.
However, renting your home may not be as easy as it sounds. It may not require a great deal of intelligence, but you certainly have to take care of a few things. When renting your home, you should be guided by a two-pronged strategy; first, to maximize rental yield and second, to run things smoothly so that you can avoid getting stressed or worried. As part of that strategy, here are some of the most important things to consider before renting your house.
#1 Furnished or unfurnished:
A furnished house will command a higher rental, as compared to an unfurnished house. It can make your house attractive to certain tenants. You will also be able to secure a bigger amount as security deposit. However, it may require additional investments and there may be worries about the misuse of things that you put in your furnished house. You need to do a little bit of math to decide which option will be best – furnished or un-furnished.
#2 Tenancy laws:
There are quite a few scams going around these days, so study the tenancy laws carefully before renting your home. In some states, tenancy laws are designed to favor the tenants. This can be misused by unscrupulous people to take control of your house. You can consult a lawyer, who will be able to guide you about the right things to do from a legal perspective.
#3 What about home rental companies?
If you don’t have time or just don’t want to manage the various processes of renting your home, you can think about listing your property with a home rental company or aggregator. These firms work in a professional manner and they will take good care of your property. Everything from finding the right tenant, doing the paperwork to furnishing your house, collecting rent and completing tenant exit formalities will be managed by the home rental company. However, home rental companies will charge you for their services, so you have to decide if you are okay with it.
#4 Spruce up your house:
If you want the best possible rent for your house, you need to spruce it up before you start showing it to potential tenants. Get a fresh coat of paint on the walls, clean up the lighting fixtures, install a new bath and kitchen fittings, check and fix the plumbing and make everything look sparkling clean. If it’s a furnished house, make sure everything looks new and is in a proper working condition.
#5 Set the right price:
Study the prevailing home rental rates in your area and calculate a rental rate for your house. It can be slightly higher or lower than the market rates, depending on the exact area, society, amenities, proximity to offices, etc. When renting your home for the first time, you can wait for a few weeks to see the response from potential tenants. After interacting with a few prospects, you will get an idea about the right rental price for your house.
#6 Buy Insurance for your house:
When you insure your home in which you live, the insurance is called a homeowners’ policy. However, when you rent your house, it will be covered under a different policy known as rental home insurance. This insurance policy can provide you financial security and complete peace of mind, as it will cover structural damages, legal expenses and even the loss of rental income.
#7 Choose the right tenant:
You may have read in newspapers about certain homeowners who are fighting court cases for 10-20 years to get their tenants evicted from their property. Something like this can happen to you as well if you end up choosing the wrong tenant. Homeowners usually prefer the salaried class people who are married and have children. This does not eliminate the risks, but it does help to reduce it.
#8 Rental agreement:
You need to get a proper rental agreement to ensure that your property does not get stuck in legal tangles. Most homeowners prefer the Leave and License Agreement since it gives the tenant the right to live in the house for only 11 months. The agreement needs to be renewed if the tenant wants to stay further in the house. The Leave & License Agreement provides adequate protection to homeowners against third-party claims on the property.
#9 Police verification:
With all types of criminals and terrorists out there, it’s better to conduct police verification before signing the rental agreement. If your tenant is caught in unlawful activities, you will have to bear the consequences. Police verification will act as insurance for any potential illegal actions of your tenant.
#10 Hire a broker:
If you want to avoid the hassles of renting your property, you can hire a broker to do the job for you. If you choose the right broker, they will be able to secure the best rental for your house. The broker will also carry out all the related tasks such as documentation, rent agreement, tenant verification, etc. The broker may charge a month’s or two month’s rent as commission, but sometimes it may be worth it.
Renting your home can be a financially rewarding and hassle-free experience if you follow the above instructions. If you are new to renting, it would be wise to do some research about the applicable tenancy laws in your city or state. You can also seek advice and guidance from your friends and colleagues who may have prior experience in renting their homes. Renting your home is quite like starting your own business, so you need to approach with caution and display professionalism in all related dealings and interactions.