Making the Most of an Unexpected Investment
With mortgage rates hovering near 6-7% and home affordability at record lows, many homeowners who can't sell are renting instead, becoming what the industry calls "accidental landlords." This trend is occurring in many Southeast cities, where the rental inventory is increasing.
The odds are that if you own a rental property, you acquired it deliberately as an investment after careful planning and research. However, many owners of income properties did not choose to be landlords. Instead, these "accidental landlords" could end up with two homes after getting married or inherit a house from a family member and decide to take advantage of a hot rental market. In some cases, a house may have little or no equity. Renting it out while the property appreciates may be an option and can help prevent foreclosure.
Becoming an Accidental Landlord
Suppose you've become an accidental landlord; congratulations! Income property can be a highly profitable  investment that offers long-term and immediate returns. But it's important to remember that regardless of how you ended up with your income property, it's vital that you manage your investment to ensure that it generates the best returns possible.
A Guide for Accidental Landlords
Seek Professional Help
I am not talking about seeing a psychiatrist (your friends may suggest this). But suppose you are about to become an accidental landlord. In that case, you must understand the process, including how to screen prospective tenants, prepare a lease, and understand tenants' rights about repairs, collections, and evictions. While this may seem overwhelming at first, professional help is available. For example, a Realtor experienced in procuring tenants, coupled with a competent property manager and real estate attorney, can minimize the stress of renting out your property, which is essential if you are out of town or plan to relocate.
Talk to Your Accountant
A property's rent often will not cover the total monthly overhead of owning the asset. Still, this negative cash flow may give you a valuable tax deduction. Also, as the value of your home rises (along with the rent), cash flow can go from negative to positive. Be sure to talk to your accountant about the benefits of owning an income-producing property.
Update Your Insurance Policy
When you become a landlord, one of the first things you should do is update your insurance. Rental insurance differs significantly from homeowner's insurance, so you must inform your insurance carrier that the property has become a rental.
Tenant Screening
Screening is crucial for procuring a tenant. Tenant screening can be outsourced and should include credit, eviction, criminal background checks, nationwide eviction, sex offender, and criminal reports. The tenant typically pays for a screening report as part of the application process.
Run the Numbers
Do your research and determine the fair market rent for your property. Then, calculate your expenses, including maintenance, taxes, utilities (if applicable), vacancies, insurance, and property management fees.
Assemble Your Team
A team of professionals can help minimize problems along the way. Partner with our skilled listing agents in Stuart, Florida, to fill your vacant rental, manage the process, and maximize your rental property's exposure. This will help you attract more potential tenants and achieve your rental goals.
