Homeowners insurance covers serious damage or destruction of your house, but what else is covered? Generally, clothing, furniture, appliances and most other contents of your home are covered if they
How To Turn A House Into A Revenue Stream
Dated: April 5 2021
Are you ready to move but don’t want to sell your home just yet? If the answer is yes, you may be curious as to how you can afford upkeep, taxes, and, if applicable, the mortgage. The answer is clear: lease the property. New Age Real Estate touches on a few key points on turning your home into a profitable rental.
Grab a Calculator
A calculator is your most valuable tool when deciding whether or not to turn your current home into a rental. You will need to determine several numbers. The first is how much you can reasonably expect to profit once your bills are paid. For example, if the going rental rate for your type of home in your region is $1,500 a month, determine what, if any, money is left over once you collect rent. This is your income and cash flow, and all small businesses need to understand this type of income statement from the beginning.
You will also need to evaluate the investment you’ll have to make before you can open your home up to tenants. If you need to replace the carpet, for example, HGTV estimates that you will spend up to $6 per square foot. On a 1,000-square-foot house, this could be a $6,000 investment. You may also be responsible for upgrades that make the property ADA compliant for tenants with disabilities.
A Business Decision
Turning your home into a rental is a business decision and should be treated as such. Because of this, like running any business, you’ll want to research the market. The coronavirus pandemic has not significantly hurt real estate in most parts of the country. However, a localized surge in cases might make it more difficult to lease. If you’ve chosen to partner with a property management company, they can help you determine the potential impact.
It also makes sense to treat your rental as a business entity by forming an LLC. This is an excellent decision if you plan to acquire other properties in the future, as it is a flexible business structure, meaning you are not boxed into having a certain management or operational methodology. When forming your LLC, make sure you are aware of the rules and restrictions as well as what protections are available for your personal assets moving forward.
Functional and Financially Sound
When you are ready, it’s time to think about how to make your property attractive to the highest-paying renters. According to Apartments.com, most people who lease look for amenities such as outdoor spaces and security. Your property should be well maintained with plenty of storage and, if possible, have a washer and dryer in place before putting the home up for lease.
If it’s in your budget, many renters also appreciate smart features, such as an app-enabled thermostat. Cleanliness is also important as is the ability to build credit, the latter of which requires that you report payments to the appropriate credit bureaus. Your rental should be functional for those who will live there but also designed so that you will profit in the short and long-term. The features you offer will vary depending on price point and location.
A rental home is much more than a monthly source of revenue. If you work it correctly, your first property can be the beginning of a profitable business that can easily segue into larger investments down the road. But remember, it takes work and planning, and the decisions you make now will impact your success as a real estate investor.
When you're ready to buy more property, contact New Age Real Estate to help you meet your real estate goals faster. You can reach us at 214.690.9058.
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Paul Denikin is passionate about sharing his experiences working on DIY projects to benefit people with special needs children.
Fifth generation Texan, originally from a small town North of Dallas, currently in Fort Worth, Texas. Serving all of DFW. My goal is to help you reach yours by providing exceptional service through h....
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