Your clients may ask for your opinion on renting out their home to tenants. You may know a lot more about renting than them, so it’s best that you share everything you know about the process before they decide on letting a stranger rent their home for a month or two. So here is the right information you should let your clients in on before they decide to list the home with you.
Why Should Your Clients Rent Their Home
There are lots of benefits to renting out a home. Your clients will not only be helping provide a home for a family or roommates who need a place to live, they will also be able to pay down their mortgage with the money made from rent. This will allow them to still own their home, pay their mortgage, and update the home as they see fit. When they want to retire, renting their home will have allowed them to pay off their mortgage with renter’s money. So this is a great option for homeowners if they can afford to live somewhere else while they rent out their home.
Home Renters Tax
States require a renter’s tax to homeowners who plan on renting their home out to tenants even for short periods of time. Your client needs to know this before they start renting out their home as an investment property. If they are uncomfortable with their home being considered a “small business,” then it is probably best that they do not rent their home out. If they are fine with being compliant, then instruct them on going to the IRS website to see what type of taxes their local state and city requires from them.
Being in Charge of the Property
Before renting out their home, your client needs to decide if they are going to be in charge of the property during the rental agreement with the tenant or if they’re going to hire a property manager. It is more cost efficient for your client to act as the property manager rather than hiring one. But, a property manager will act on their behalf to ensure the home is looked after and the rent is collected.
If they decide against hiring a property manager, they will have to collect monthly payments, manage the property, deal with any issues with the renters and/or property, and keep track of all the scheduling. This means work and effort from your client. It is not as if they are just going to collect another paycheck for as long as their tenant lives in their home.
In the event that they hire a property manager, they are going to have to pay a certain percentage of the monthly rent collected from the tenants to the property manager as their commission. This percentage can range from 20-40% of the rent, depending upon how much the property manager is in charge of and how much work they do.
Websites to Advertise With
There are lots of ways you can post a home for rent online. If your client is only planning to rent their home out for a month or two, you can suggest they use a site like Airbnb or HomeAway. These sites allow their users to designate the amount of time they would like to rent out their home; if they only want to rent their home out for a few months or even just one night.
There are other rental-listing sites that are more intended for long-term rentals. By posting with sites like Craigslist or Sublet, clients will be completely in charge of the entire rental agreement and contract between them and the tenant without having to pay high third-party fees.
Tenants to Choose
You should advise your client to meet lots of people who would like to rent their home. This way, they can choose the best candidate(s) or family to rent with. Bad tenants are one of the fastest ways to depreciate a home’s value. In fact, a bad tenant who is lackluster on paying their rent on time can cost lots of time and money wasted on eviction and missed rent payments.
The types of tenants your client should rent to should obviously be reliable, clean, trustworthy, and friendly people to avoid any headaches or later complications that may arise from untrustworthy or careless individuals, who may not respect your client’s home or property, which can lead to property damage and then the home’s value depreciating.
Once the tenants decide to move out of your client’s rental, or your client is going to move back into their home, they are going to need a turnover crew to help clean and update their home back to shape. The crew should consist of reliable contractors ranging from: house cleaners, landscapers, and pool cleaners. They must cost some money, but they will save your client the time and effort of having to clean and update their home entirely on their own before they decide to rent it again or move back in.
Renting a home is a big commitment to for your client to make. If they ask you for your help and guidance, be sure to tell them everything you know about the renting process. If you do, they will surely be grateful and definitely ask you to help them sell their home when it’s time.