How to Convert Your Home to a Rental Property?
You have finally decided to convert your primary residence into a rental property?
Perhaps you want to move out or need some money; there are lots of reasons that may make you consider renting your home out to tenants.
However, it is not possible for you to only move and make your residence a rental property.
You need to put some things in place first. Don’t worry; all the information you need is here.
Delay your move if you have a mortgage on the home
If you have a mortgage on your home, it is crucial for you to stay in the house for a minimum of 12 months before it can be converted into a rental.
That is because there are certain benefits attached to purchasing a primary residence that does not apply to investment property.
When compared to an investment property or a vacation residence, you enjoy a lower interest rate as well as a lesser down payment if a mortgage loan is obtained for your primary home.
If you get a mortgage loan for your primary home, but you used it for purchasing a rental property, you are guilty of mortgage fraud.
The credit may be called in by the lender with the possibility of foreclosure.
Understand the loan rules by contacting your lender or checking the paperwork of your loan.
All in all, ensure you reside in the home for the required time before reaching any online letting agent to get tenants for you.
Determine if you can access another mortgage
Moving from your current home might mean that you need to purchase another home.
Therefore, before turning your home into a rental property, find out from your lender whether you are qualified for another mortgage or not.
Although there is no certainty, you should only take actions about your primary home when you are sure you will get another mortgage.
Contact your homeowners’ association
If a homeowners’ association (HOA) governs your neighbourhood, get in touch with them to know if there are limitations on turning your home to rentals.
Although there are no restrictions with some HOAs, some have limits on the specific number or percentage of rental homes that can be in the neighbourhood while others do not allow rentals at all.
Make changes to your homeowners’ insurance policy
When turning your primary home into rentals, the biggest problem you may have is the classification of insurance.
Generally, the systems meant for primary residences are different from those for rentals.
If your primary home is turned into a rental property without changing the homeowners’ insurance policy, you likely go.
Understand tax changes
Unfortunately, the money you are going to make from your rentals is taxable income.
Hence, you need to understand that your tax rate may be changed.
However, the good thing is that you can get certain deductions on your rentals such as:
- HOA fees
- Utilities (provided you are in charge)
- Landlords’ insurance policy
- Home repairs
- Mortgage interest
- Property taxes
Let your tax advisor get the details of any homestead exemption that is available for your home.
Since this exemption is only meant for your home, your advisor should help you inquire from your local municipality what must be done when turning your primary residence to a rental property.
Prepare your property
Consider the condition of your property to know whether there is a need for repairs, improvements or upgrades.
Invest in the home before getting in touch with any property management company to manage your property for you.
Ensure that the house is in good conditions and everything is well-maintained.
Also, understand what it takes to be a landlord.
Regardless of if you are hiring online or other property managers for your rentals or not, you should understand how to be a good landlord.
Get the necessary resources and learn.
Are you thinking about converting your home to a rental but need help?
Get in touch with Reneza today and speak with professionals who can ensure the success of your investment in rentals.