Updated August 2016
When you moved into your townhome, you probably loved everything about it — the high ceilings, the spacious kitchen and most of all, the neighborhood. Once you added your personal touches, you may have thought, “I’m finally home.” But if you’re looking to have a family sometime soon, your small space in a bustling part of town might not feel like a good fit anymore.
Maybe you’re thinking about putting your townhome on the market while you look for a new home, or maybe you’ve decided to rent it out and hopefully generate some income from the property. Before you put out the “For Rent” sign, here are five things you may want to consider:
1. Learn How to Be a Landlord
When deciding whether to rent out your townhome, you may want to make sure that you have the time to be a landlord. Though you may generate some extra income by renting out your townhome, you’re also going to have some extra work. You may want to speak with other property owners to get a feel for the time commitment. Dealing with tenants and making sure your property is well maintained can be a daily occurrence, so be sure you’re ready for this level of responsibility.
For example, you may have gotten used to the high-pitched noise that comes from your garbage disposal. But your tenant may ask for it to be fixed, so you’ll need to be able to quickly address the repair in a timely manner. It might take a little while to adjust to being on call 24/7, but you may feel like the sacrifice is worth it in the end, says Zillow.
2. Budget for Two
Once you become a landlord, you might start eating out a little less or staying in a little more because you’re the proud homeowner of not one, but two homes! If you’re concerned that owning two properties might put you in the red, add together all the costs of your rental unit, including your mortgage, repairs and other monthly maintenance costs. Remember, you’ll also need to factor in the taxes and insurance premiums, too. You’ll want to make sure your tenant pays rent that’s at least equal to that total amount, says Landlordology.
It may also be a good idea to check the rental listings in your neighborhood to get a better idea on a fair price to charge for a similar townhome in your area.
3. Do Your Tenant Research
In some cities, listing your townhome on an online classified board may provide you with a wide array of potential tenants. It may also have its pitfalls, as you never know who’s going to respond to your listing. Instead, you may be able to use a wide variety of digital marketing tactics, like creating a website or using social media, to help find reliable renters. For some extra protection, you may want to work with a screening service, like the American Apartment Owners Association (AAOA), that may help you scrub out potential tenants with poor credit, a prior eviction or criminal records, says Trulia.
4. Know Your Rights
You may have heard horrifying stories about landlords losing thousands of dollars because of tenants who stopped paying rent, so you may want to speak with a property attorney to learn about the basic rights that tenants and landlords have in your state, says Realtor.com. These laws vary across the country, so you should check with the AAOA, your local housing authority or a property attorney in your area to help make sure you know your rights and sign the right agreement with your tenants.
5. Protect Yourself and Your Renters
No matter where you live, discussing renters insurance with your future tenants before they move in can be an important step to help prepare for the unexpected. You may also want to talk to your insurance agent to see if homeowners insurance provides coverage for your rental unit or if you may need to consider additional coverage like landlord insurance.
Though it may be the right choice for you, being a landlord isn’t for everyone. Before taking the leap to owning two properties, make sure to weigh your options and figure out what’s best for your lifestyle, your wallet and your future.