Considering a Tenant to Help Cover Living Costs… What You Need to Know
Does it seem like each month is a financial struggle where you need to stretch every dollar as far as it can possibly go just to pay your monthly bills? Despite all your budgeting and cost-saving measures, it still may not be enough, and you may find yourself falling further and further behind each month. For homeowners, this can be especially scary, as you don’t want to miss a mortgage payment and risk defaulting on the mortgage. So, what can you do?
If it feels like you’ve cut as many costs as possible, outside of getting a better paying job, or even picking up a second job as supplemental income, there isn’t much you can do. Or is there? This is when it may be wise to consider bringing in a tenant who will share your living space, and in turn, share your monthly bills. It can mean the difference between being able to keep your home and staying afloat, or having to downsize.
Not sure a tenant is the right decision for you? Here’s what you need to know before you go ahead and make a decision.
Are You Ready to Share Your Space?
The first thing to think about is how ready you are to share your space. If your house is set up in a way that you can create a separate space for your tenant, with their own private entrance, then their presence will have a much smaller effect on your life. Now, if you are thinking about renting out a room in your house instead, wherein they share common space with you, then you need to think about how it’s going to affect your lifestyle.
What Do You Plan on Charging for Rent?
Rather than just pulling a random number out of the air and setting that as the rent, it’s also a good idea to do some comparison research. Look at comparable rental units in your neighborhood, paying close attention to the features/amenities and what the rent is. You certainly don’t want to over-price your unit, but at the same time there’s no need to be the rock bottom lowest price. Your rent should be set to the market standards in that moment.
Get the Property Ready for a Tenant
The next step is to make your home attractive to potential tenants. This means doing a really good cleanup of the unit itself, and the exterior. A little curb appeal can go a long way in attracting the type of tenant you’re looking for.
This clean-up should involve fixing any damaged areas of the home such as broken door or window locks, patching holes in drywall and painting them, making sure all smoke and carbon monoxide detectors are installed correctly and are working, your furnace and air conditioning unit are working, and that everything looks fresh. Looking fresh may include giving rooms a fresh coat of paint, replacing flooring, and updating hardware.
You don’t need to invest a ton of money in the clean-up, but you do want to be sure that everything looks like a clean blank slate so the tenant can picture themselves in the space.
Entry/Exit Way Needs to be Safe and Accessible
One of the main areas to focus on is creating a safe and accessible entry/exit for tenants. It doesn’t matter if you are sharing the same door or they have their own private entrance – it needs to be safe. This means clearing any obstacles, clearing away branches and foliage that may be in the way, making sure the pathway is wide and level, and of course that it is well-lit. You can install pathway lights, garden lights, and a light above the door to ensure they are fumbling in the dark.
What About Parking?
Parking is often something that tenants will ask about, so you need to address this in advance. Do you plan on offering your tenant parking? If so, how many spaces will they be allotted? On-site parking that is included in the rental cost is often a huge selling point and can help you get the unit rented that much faster.
Will You Offer Laundry Facilities?
Another factor to consider is laundry facilities. Again, this is something that can act as a huge selling feature for tenants. If they can do their laundry in their unit, or in a shared laundry space with you, then it is a convenience that will work to your advantage.
For homeowners that will be sharing laundry facilities it is a good idea to set up a schedule, where each person is given certain days and times of the week where they can do their laundry. This helps to eliminate waiting around for the machine, or having one person hog all the ideal washing hours.
Will You Allow for Pets? If So, Which Ones?
Pets are something that many renters have, and when they do they specifically look for pet-friendly properties. This is something you’ll want to decide on in advance. If you don’t have a problem with pets, you’ll need to be specific about which ones you welcome and how many. For example, saying that cats are welcome could result in a tenant with multiple cats to move in.
Market to a Particular Type of Tenant
Now, there’s also a good chance that your rental unit isn’t going to appeal to every type of tenant out there, so think about who your target tenant will be. Will it be a young single professional, a student, or a small family? Who would best suit your unit, the location, and the amenities of the unit?
Once you identify that target tenant, then you’ll be able to market/advertise the unit accordingly. It will help you to figure out where to place ads, and how to write them. Make sure your ad highlights all the top features that renters are looking for such as the number of bedrooms and bathrooms, how much living space there is, laundry facilities, parking, if it’s close to public transportation, what shopping and dining and nearby, and so forth.
Will You Need a Property Inspection?
In some states, it will also be required that you have a property inspection done before you can rent out the unit. This may be necessary for the first time you rent it out only, or you may need to do it on a recurring basis. Again, it depends on the state and town’s laws.
Be sure to research this well in advance so you don’t have to pump the brakes on the tenant search simply because your inspection hasn’t been completed yet.
Conduct a Public Records Search
It’s also a good idea to conduct a public records search of a potential tenant before you give the go ahead. People are often surprised at just how much is available to the public when it comes to information, and what this information can shine a light on.
For example, a search on publicrecordsreviews.com will allow you to find out a person’s address, legal records, felonies, misdemeanors, arrest records, and more. It’s a great way to do a background check on someone to ensure that the information they have provided with you with is legitimate, and they aren’t hiding anything that may make you reconsider them as a tenant.
Let’s face it, if you are sharing your living space with someone, you want to have an idea of who they are before they move in.
Understand Tenant Rights
Because you will be acting as a landlord, you will also need to familiarize yourself with tenant rights. Be aware of what you will be responsible for, what your job as a landlord is, and what federal laws protect the civil rights of tenants is imperative. By educating yourself on tenant rights, you will in fact be protecting yourself from any potential violations that could get you sued.
First and Last Month’s Rent, Plus a Security Deposit
When the time comes to sign a rental agreement with your new tenant, you will also need to collect the first and last month’s rent as well as a security deposit. This is all normal, so it shouldn’t be a shock to your tenant.
The security deposit is meant to pay for any damage that is caused by the tenant or if they miss the rent. This deposit is refundable, so if they move out and there is no damage, that money is refunded to the tenant. While it isn’t written in the law that you must collect a security deposit, it does make good sense to do so.
As for how much you should collect, this will depend on the state you live in. Each one sets its own maximum amount. In general, it is anywhere from one to three months’ worth of rent.
A Tenant Could be the Answer to Your Financial Stress
If you’re a homeowner who loves your home, doesn’t want to move out, but is having a really hard time paying all the bills, a tenant could be the answer to your financial stress. In the right situation, it can be the smartest move you make.
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