Homeowners who refinanced their mortgages with a 3% rate are now becoming accidental landlords. Get the full scoop in this article!
Homeowners who refinanced their mortgages this year to take advantage of ultra-low interest rates are becoming "accidental landlords," with some opting to rent out their homes rather than sell them. In this article, we'll explore why they're taking this route, the costs associated with it, and what advice you should consider if you're considering doing the same.
Understand the Risks and Responsibilities of Becoming a Landlord
Becoming a landlord involves more responsibility and potential risk than simply owning your own home. It's important to do your due diligence before renting out your property, as becoming a landlord comes with financial, legal, and emotional responsibilities. Before renting out your property, you should familiarize yourself with local rental laws, calculate the costs associated with being a landlord (such as maintenance fees), and make sure you have adequate insurance coverage.
Consider Leasing vs. Selling
If you refinanced your mortgage with a 3% rate and find yourself becoming an accidental landlord, you'll want to consider all of the costs associated with leasing. This includes monthly rent, tenant placement fees, repairs, ongoing maintenance costs, legal fees, and insurance. Additionally, depending on local tax laws you may also incur capital gains taxes when leasing instead of selling. Consider all of these potential costs before making any decisions about renting out your property.
Research Rental Rates for Your Market to Determine Potential Returns
Before renting out your property, you'll want to research rental rates in your area to determine potential returns. Look at recent rental listings to identify comparable properties and assess what they are going for on a monthly basis. Additionally, check with local real estate agents to get an understanding of typical rent prices in your market. With this information, you can make a better decision about whether or not it is financially feasible to become a landlord.
Decide How Much Tenant Screening Process You'll Take on
After you’ve decided to become an accidental landlord, it’s important to establish a tenant screening process. Screening tenants helps to maintain property value and keep rental payments consistent. As a landlord, you can implement various methods for screening potential tenants—from background checks, credit reports and employment verification to references. Taking these steps will help you find the right tenants and ensure that they can commit to their lease obligations.
Strategize the Marketing and Advertising of Your Rental Unit
Before investing in or renting out your home, you need to strategize the marketing and advertising of your rental unit. By creating an effective advertising plan that combines online and offline marketing tactics, you can effectively attract more potential tenants to view the property. Consider promoting your rental on listings websites such as Zillow and Craigslist, as well as using direct mail campaigns to advertise locally.