The first thing you need is to decide whether you should rent or sell your property. In order to do that, you have to take a closer look at some factors that may come into play depending on your choice.
Here are several questions that arise on this topic:
1. What are the pros and cons of renting out my property?
2. Am I allowed to rent my condo or townhome?
3. Should I hire a property manager?
4. Do I need a business license to be a landlord (non-transient tenants)?
5. How do I get my property ready for renting?
Let's talk about the first of these 5 questions. What are the pros and cons of renting out your property?
The pros and cons of renting out your property are the following:
- You're trying to time the market. One advantage of renting out your property is that you still get to earn while the market is not in your favor (for example if the demand is low or more people are moving out of your location). This helps you avoid selling your property for a very low price and producing less to no profit at all.
- Tax deductions for business expenses related to the rental use of the home - Tax laws allow certain expenses related to operating a rental to be deducted as business expenses. Some landlords see a tax benefit from being able to deduct these business expenses.
- Positive cash flow from rental income. Renting out your property can mean long-term, sustainable income. This is especially true if the rental income of your property is higher than its expenses.
- Wear and tear vs. damage. Wear and tear are unavoidable - even if you have good tenants living in your property. Signs of wear and tear include loose wallpaper and fading of paint. On the other hand, tenants may intentionally or carelessly damage your property.
- Problem tenants. Landlords encounter some tenants who refuse to pay their rent. There are also tenants who disrupt their neighbors or violate your rules. In such situations, you may arrive at a point where you'll ask the tenant/s to leave.
- Vacancy. The location of your property can affect your vacancy rate. You will need to look into existing rent prices so you can price yours accordingly or learn to effectively market your property.
To get answers to the remaining questions, current Landlord Prep students should log-in to the module entitled Between Tenants - Things to Do Before Renting (Before you Rent).
Not a member yet? Join the Landlord Prep: Video E-Course and How-To Tutorials so you can access this section and get the complete DIY landlording course. This will help you stay knowledgeable and confident as a landlord.