How to Transform a Property Into a Lucrative Long-Term Rental
Article courtesy of Ted James of tedknowsmoney.com.
Renting out a property instead of selling it offers numerous benefits. You can collect profits over an extended period, and you will be able to claim expenses related to the property’s upkeep on your taxes. Owning a rental property in an HOA can possibly have more benefits as certain maintenance and repairs are the responsibility of the association and may be handled by a management company like AR Management Company.
Before you take the leap, beware that the uncertainty of the housing market due to COVID-19 requires extra considerations when setting up long-term rentals. Read on to find out what to consider.
Determine a reasonable rental rate in light of COVID-19
Figure out what to charge based on current rental prices, which may have dropped in light of the pandemic. If your price is too high, your property may be passed over. If you’re looking to boost your rental property’s appeal and value, there are steps you can take. For example, you can ask more for a furnished house or apartment. You can also add features like new appliances and upgrade the kitchen and bathroom to boost value. If you sell the home after COVID has subsided, these additions will also allow you to demand a higher price.
Research local landlord-tenant and tax legislation
Landlord-tenant laws vary between states, and you’ll want to figure out your state’s laws regarding rental property taxes. So there’s a bit of homework involved here. However, establishing a legal entity like a Limited Liability Company to manage your rental assets can provide tax benefits and help protect your personal assets. This is even more important in light of COVID-19, which can create financial uncertainty. An online business formation can quickly help you get your LLC up and running.
Learn how to write a long-term lease agreement with COVID in mind
Another reason to familiarize yourself with your state’s laws on long-term rentals is so that you can write a properly formatted, legally binding lease agreement. There are free templates online that can help guide the process. Nonetheless, it’s best to have a real estate professional or property lawyer review the paperwork before it’s signed to make sure you haven’t missed anything. For example, what if your tenants lose their jobs due to COVID-19 and can’t pay rent? Your contract needs to make provisions for such scenarios.
Decide how to manage the property
According to Forbes, in long-term rental agreements, the renters take care of basic maintenance like minor repairs and yard work. However, in case of larger issues, like a burst pipe, your tenants will likely contact you. Dealing with this kind of unexpected issue can be a huge headache. By owning a home in an HOA however, you may avoid or lessen the effects of some of these headaches.
Setting up the perfect long-term property rental takes some effort, especially when you’re trying to do it in the midst of a pandemic. However, it will be worth it. Put in the time and money to get your rental organized now, and you will be able to rely on it for passive income in the future.