To Rent or Not to Rent? How to Make Sure You’re Making the Right Decision
On the surface, renting out part of your home can seem like the perfect answer to your financial concerns. But, having a tenant in part of your home isn’t always sunshine and apple pie. There are benefits and disadvantages of being a landlord in your own home, so before you make the decision to take on a tenant (or several tenants for a vacation rental), it is important to understand the pros and cons to the fullest.
With that in mind, here are the pros and cons of dedicating part of your home as a vacation rental.
The Pros of Turning Part of Your Home Into a Vacation Rental
When you turn part of your home into a rental, you will first have to do a certain amount of renovations to provide a full living space to your tenants. This can mean adding a bathroom or kitchen to the space, or finishing a basement. The benefit of doing this is that the renovations will increase your home’s resale value.
Another benefit, and the most obvious one, is that a vacation rental will provide you with a second income that you can use to help cut your mortgage payment, or pay your home off earlier. This can be especially beneficial if the space you’re turning into a rental is a part of the home that you rarely use. By renting that area out, you’re using all the available space in your home, so you’re getting the most value out of your property.
The Cons of Turning Part of Your Home Into a Vacation Rental
The most important thing you need to think about when renting part of your home is who you will be renting to. A vacation rental is typically rented out on a weekly basis, so over the vacation season, you could welcome several people into your home.
During this time, you may find yourself dealing with anything from tenants who don’t want to pay, to tenants who cause damage to your home. Taking the time to learn the Landlord and Tenant Act in your state will help you keep these interactions to a minimum, but they still can happen.
Another downside is that the renovations you’ll have to make won’t necessarily be cheap. You will have to put a lot of money upfront before you can start making a profit from your rental. So, you will have to look at it as an investment before it can become a benefit.
While the renovations may increase your home’s resale value, you will be reducing your home’s appeal to some buyers because it has a rental suite attached. You will have to find the right buyer who appreciates having a turnkey rental apartment that they can use to help reduce their own overhead.
How to Get the Most Benefits From Renting Part of Your Home
To enjoy the most benefits out of your rental apartment, there are six things you should do before you start; these include:
- Know your local municipal laws and take the steps to ensure you adhere to them.
- Have enough money put aside in a savings account to cover repairs, bills, and any tenant issues that might arise.
- Have a written set of rules and regulations and get the document signed by the renter beforehand to help ensure liabilities for both you and your tenants are understood.
- Have a flexible mortgage that allows you to pay off your loan earlier and to avoid penalties if you miss a monthly payment.
- Hire a real estate lawyer to help ensure you meet the legalities of being a landlord and for assistance with other rental-related legal matters.
- Check in on your tenants regularly to ensure that they’re satisfied and to check on the state of your property and ensure that the space is being accommodated properly. The most common landlord/renter problem is broken leases.
Renting out part of your home can prove to be well worth the effort, but everything needs to be done properly to have the best chance at success. Just don’t expect the move to pay off quickly. You will have to recoup a lot of money before your vacation rental turns profitable. But, the good thing is if you do everything right, that day will come.