As a property management company we would hope that you would use a professional to make sure you rent your house in a cost effective, efficient and legal way. Here are 5 things that all property owners should do prior to renting a property out. These are just the 5 of the easier items that need to be completed. We will go over more difficult items in future articles.
1.) Obtain Insurance
The majority of homeowners that reside at their property have a homeowner policy. When you decide to rent the property out it is converted to a Landlord Policy (Also referred to as a Rental Property Insurance or Landlord Insurance). We go over the different types of insurance policy in a separate article here. But it is important to remember that a Landlord Policy will not cover the tenants liability or possessions. Make sure you communicate to the tenant that they will need to purchase renters insurance for their own coverage.
2.) Speak with your accountant
You should speak to your accountant or tax professional about what affect renting your property may have on your tax liability. There are also different rules and laws in place for each state as well that a property owner should be aware of. For example in the State of California the Franchise Tax Board has a required withholding for all nonresident individuals and corporations. Also speak to your accountant regarding what receipts, invoices and other documents will need to be maintained to file taxes at the end of the year.
3.) Prepare Property Paperwork
Here are just a few documents that will make sure you reduce both your liability and reduce costs in maintaining your property.
· Floor Care Guides
· Contact Information for Homeowners Associations, Vendors and onsite maintenance staff.
· Utility Transfer Forms
4.) Vendor List – Do you have a landscaper, pool cleaner or other vendor that knows how to work on a specific piece of equipment or item that is unique to your property? If the answer is yes you will want to make sure you have both the contact information for the vendor but also a list that provide a breakdown of the materials that will be needed to maintain your property.
5.) Work List – Before beginning any work, make sure you list everything that needs to be repaired immediately, items that will need to be replaced within a year and items that will need to be budgeted for (e.g. Roofs). The more time you plan reduces the chances that you repair something that will eventually be replaced or could be damaged when major remodeling work is done. (ex. Faucets being replaced in a bathroom scheduled for a remodel)
Remember like all projects, renting benefits from systems and planning. The more planning that is done the less likely you will be in taking unneeded risks, liability and financial losses.