how to turn your home into a rental
There are several great reasons to become a landlord - gain equity, get tax benefits, use it as retirement, and be your own boss. Whatever your reason, turning your Northern Virginia home into a rental can be a prosperous move.
This article will guide you through the necessary steps of turning your home into a rental.
Landlord Licensing in Northern Virginia
The state of Virginia does not require special licensing to become a landlord. Virginia considers rental property as a business, requiring landlords only to have a basic business license. However, Virginia has two regulations landlords must follow.
The Virginia Uniform Statewide Building Code
The Virginia Uniform Statewide Building Code contains all building regulations and rules that a Virginia building must comply with.
The Virginia Residential Landlord and Tenant Act
The Virginia Residential Landlord and Tenant Act apply only to landlords renting out more than two units. The Act documents the rights and obligations of tenants and landlords.
Local cities and counties have their own statutes and requirements. Each county has a form on its local website. Before you begin turning your home into a rental, check your city and county specifications.
Although renting your property has many benefits, you must protect yourself and your family from liability. Anything can happen, and in the event it does you are the responsible party. A tenant’s friend may visit and slip on an icy porch or take a trip down the stairs, or a rejected tenant may sue for discrimination. Since you are ultimately responsible for everything that goes on in and with your property, you want to protect your assets.
To protect yourself as a landlord, you have two choices - purchase an umbrella policy through your insurance or create an LLC. If you are only renting out one property, one of these is sufficient. However, if you plan on more than one rental property, make sure you speak to a real estate attorney who may advise you to create an LLC and purchase an umbrella policy.
Purchasing landlord insurance is essential. Having a rental unit insured protects you in case of a natural disaster, burglary, vandalism, structural damage, maintenance equipment, helps with legal fees, and provides a certain amount of liability and medical coverage.
Landlord insurance can also protect you against loss of rent when your property may be uninhabitable due to damage. Landlord insurance will help cover any lost rent while the home is being repaired. Consumer Advocate offers a ranking of the top landlord insurances in Northern Virginia.
Determine What You Will Charge
Once you are fully protected, it is time to determine what you will charge tenants. But, how exactly do you come up with a number?
The first thing you want to do is market research. Real estate market research helps you understand what similar rentals are going for in the current market. Rent.com and Zillow are two great resources.
You also want to consider your costs after determining how much it will cost to maintain the home. Be sure you factor in profit for yourself and consider your mortgage costs if you have one.
A general rule of thumb is landlords can charge between 0.8% to 1.0% of the property’s value for rent. So, if your home is worth $350,000, you can charge between $3,000 to $3,500 in monthly rent. And under Virginia landlord-tenant laws, a tenant can only be charged up to the equivalent of two months’ rent for their security deposit.
Set Down Clear Rules
Once you have decided what you will charge for rent, it is time to write up a lease. In the lease, you want to set down clear, concise rules. If you don’t, you can quickly be taken advantage of or find yourself in court with a disgruntled tenant.
Set a limit on how many people are allowed to occupy your property. An easy way to do this is to limit each bedroom to two people. Therefore, if you have a three-bedroom home, the occupancy should be no more than six people.
Determine who will be responsible for the yard upkeep. If it is the tenant’s responsibility, lay out the expectations, such as mowing the lawn once a week.
Decide if you will allow pets. If so, consider if you want to allow all breeds of dogs. Many landlords do not allow more aggressive breeds in their homes. Keep in mind, dogs and cats are not the only pets people have - birds, reptiles, even teacup pigs are common pets.
Making Your Northern Virginia Home a Rental
Turning your home into a rental can serve as a valuable asset and security for your future. Decide if you want to hire a property manager or if you will fill that role. Property managers can ease many burdens landlords carry. Create a tenant application form, and find your first tenant!
Consulting with a real estate agent to make sure you have all your ducks in a row is a great idea.
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