If you are in the enviable position of owning a home as an investment property, renting that home to tenants could be a smart financial move for you – as long as you consider all of the costs involved. Here are some of the financial factors you should think about:
Recurring expenses: Unless you own the own home outright, you’ll have a mortgage payment, as well as homeowner’s and landlord insurance and maintenance costs. Depending on the neighborhood, you may also have homeowner’s association dues and assessments.
Tenant screening: To protect your assets, do a background check on any prospective renters, including eviction reports, credit history and a criminal background check. Costs vary. Note: You’ll need to get the prospective renter’s permission to run these reports.
Planning for unplanned maintenance: As your home ages, so will its interior, exterior, systems and appliances. Set aside money to cover repairs or replacement costs – planned and unplanned – and do repairs as soon as possible to prevent problems from getting out of hand and more costly.
Property manager fees: If you don’t have the time or inclination to manage your investment property yourself, a property manager can handle things for you. This is particularly useful if you live far away from the property being rented. Fees vary.