Are you thinking about renting out your home and becoming a landlord in the Baltimore market? If so, I have 12 tips to share with you to help you prepare.
Although there are similarities between selling your home and renting it out, the differences are significant as you'll find out below.
Most of our landlord clients are 1st time landlords and, as such, they need confirmation that renting out their home is the best decision for them. These tips will help support your decision and make you aware of the responsibilities associated with being a landlord in the Baltimore Metro Area.
Prepare to Become a First-Time Landlord With These 12 Tips
1. Your home is no longer your home; it's an investment property where tenants live
Renting out your home is a business transaction, where your home becomes an investment property occupied by tenants. If you are emotionally attached to your home and know you will get easily upset when your property manager calls you about repairs or other issues, then renting it out will be very tough for you.
The first decision you face is to objectively ask yourself the following questions: "Why do I want to rent out my home?" "Can I separate myself emotionally from the home and view it instead as an investment property?" There is no right or wrong answer; there is just what feels right to you, so please be honest with yourself.
2. Find a great property manager
Unless you are prepared to spend considerable time and aggravation managing your rental property, you need a great property manager who can help you with the entire rental process - preparing your home for market, compliance issues, lease negations, day to day management, etc. - as well as check prospective tenant references,
Google property managers in your area, check their reviews, read their blogs and really find out if you match the philosophies of the property managers you are considering. Don't go for the "cheapest guy in town." Instead, go for the best. A poor property manager may charge a lower fee, but be very expensive to you in the long run due to poor repair decisions, vacancies, non-existent customer service and more.
The property management industry is not regulated, so beware of the fine print in any agreements you sign. Whatever you do, do not turn over a power of attorney to the property management company. When you do, you sign away your rights. Sadly, many first time landlords do.
3. Get educated about the local Baltimore Metro Area rental market and pricing
Work with your Realtor/property manager, and get educated on the local rental market and pricing. Be realistic. The rental market has shifted dramatically.
Yes, there are a lot of tenants looking to rent a home but there's also an abundance of individual landlords looking to rent out their home and an abundance of apartments that have been built lately. Check the supply and demand in your area for today, not yesterday. Markets are moving and you need to be realistic since the alternative, vacancy, is so expensive.
4. Check on your home mortgage loan(s)
Check on your mortgage loan and find out if you are permitted to rent out your home.
Know your monthly mortgage payment and make sure you are current. Your Realtor/property manager cannot ethically rent out a home where the landlord is behind on mortgage payments. The tenant is looking for a peaceful tenancy and it would be unethical to put a tenant in a home due for foreclosure or short sale. Be honest with your Realtor; this is really important.
5. Check in with your HOA/condo management company
Find out from your Home Owner Association and/or condominium management company if there are any restrictions on renting out your home. Does your lease need to be approved by your community management company? What criteria are used and what is the turn around time?
Order an updated copy of your rules and restrictions and let your Realtor/property manager know what restrictions exist so they can communicate correctly about them to prospective tenants.
6. Check in with your home insurance company about renting out your home
When you become a first time landlord, you will need to change your home owner insurance policy to a landlord policy and add liability protection. This only costs a few dollars per month and it is so worth it. Kristin Karukas, our office manager extraordinaire, can chat with you more about this.Meet Chesapeake Property Management Team Member, Kristin Karukas
7. Discuss becoming a landlord with your tax advisor
Becoming a landlord for the first time carries some financial benefits. Check in with your tax advisor so you can understand which tax deductions you can take advantage and how much deprecation you are eligible for. By knowing your numbers, you can move forward with more "peace of mind."Rental Property Tax Deductions & Depreciation For First Time Landlords
8. Clean up your home so it shows well as an investment property
Just as you would if you were selling your house, you need to declutter, neutralize, stage and empty out your investment property. Schedule all of those repairs that you have been putting off and use licensed and insured contractors. You want to stage your home for rent just as you would for sale. It is competitive out there and you want the most qualified renters possible - make your home stand out among the competition.How a Staging Consultation Can Help Your Rental Property Stand Out
9. Pull out your original home purchase paperwork
Do you have lead paint paperwork in your files? A copy of your floor plan, layout, etc.? Your Realtor/property manager will need to look through what you have available so they can fill in the gaps.
10. Schedule rental inspections, lead paint inspections and get into compliance
Did you know that you need a rental license in Baltimore County and Howard County?
Did you know that all homes built in 1978 or earlier must be registered with MDE?
You will need to schedule inspections and get into compliance. Don't even think of taking shortcuts here. You want to do everything right the first time so that both you and your tenant are protected.
11. Strategize your move and remain in contact with your property manager
Do you know where you are going to live once you've rented out your home? Have you filled out all of your property manager's paperwork so that you are not scrambling and stressed at the last minute?
Rentals usually move faster than sales so you really need to know your "big picture" and be prepared to move quickly. Work closely with your Realtor/property manager and make sure you are on the same page. Stay in contact! Don't leave town without letting them know! They will need access to you because often lease turnaround times are very tight. A good property manager will have you sign remotely and easily. So, it's ok if you are out of town; it's not ok if you are out of touch.
12. Relax as much as possible:
Yeah, right, this is a tough one.
Relax knowing that you have chosen the right property management company that knows what it's doing. With timelines on leases so tight, you may feel as if you are in a race against time.
Best, then, to divide and conquer. Focus on packing, your move and (often) your new job/relationship and let your property management company handle the marketing and management of your home.
With these 12 tips covered, you can truly relax knowing that your home is in good hands with your great property manager and that you have done all your preparation ahead of time.
Let me know if you have questions about these tips and how they've helped you better prepare to become a first time landlord.