How to Transform Your Home Into an Income-Generating Rental Property

It is advantageous to transform the house to another form of property, a rental one that can generate massive income. Thanks to Airbnb, VRBO, and many other offers, and since the demand for long-term rentals is constantly growing, it is very easy to rent a part or the whole of the property. But the process does not end here; it does not take putting a ‘For Rent’ sign at the doorstep only. This means that a lot of consideration has to be given to the process and there is the need for the adherence to legal formalities. Let’s engage in a step by step guide on how to go through the process of converting one’s home into a rental unit. 

Assess the Market and Demand

It is however important before you start the process of converting your home that you consider the market, in your locality. Sample the rental demand of your neighborhood. Are visitors flocking your city or are there people that need residential accommodation, for instance, employees who need to rent houses temporarily? Some of the sources of data about rental rates as well as occupancy levels include airbnb-zillow.

Key Questions to Ask:

• Typical rent for a home like yours? 
• Is there a market for people, who are in search of short term holidays accommodation? 
• Who is souring for long term renting facilities?
• Is your location preferable by tourists, business people or students?

Knowledge of market needs will assist a person to conclude on the kind of rental; either short term or long term rental that made the most profit.

Decide on the Type of Rental: 

Short-Term vs. Long-Term

The decision whether to opt for short term or long term rental also depends on the property and one’s lifestyle.

1. Short-Term Rentals:

Airbnb works perfectly well in short-term bookings which can significantly be more lucrative given that they come with a higher turnover due to the short durations that people will be using the property. In case you are residing in the tourist area or in proximity to events, this is very rewarding.

Pros:

• Higher TI per night.
• Right of use of the property in between the guests.
• Possible to serve tourists, advertisers and guests of conferences/meetings and other events.

Cons:

• Has to be supervised frequently, cleaned and restocked on a more often basis
• Some possible negative impacts: Increased levels of wear and tear of the property.
• It can be rather unstable, which means that there are months with plenty of customers and months with few customers equaling less income.

2. Long-Term Rentals:

In the long-term rentals, you allow your house to be occupied by the tenant for six months and more. This type offers predictable and regular cash flow from the property but is slightly rigid in case of the owner’s desire to occupy the property.

Pros:

• Steady reliable income with less turnover.
• Less management pressures (PPs do not require the surfaces to be cleaned all the time).
• A real benefit that makes living in a rented house more attractive is that tenants are supposed to be in charge of utilities and annexes’ minor repairs.

Cons:

• Less income than short-term accommodations.
• More restrictions to being able to utilize the property for your personal use.
• Possible legal implications in the event you require the tenant to be evicted. 

Make Necessary Upgrades and Repairs:

From temporary visitors, to customers who take a lease, all the customers of your property will ensure that the building maintains a certain standard. In order to attract high-end clients who are willing to pay the high-end rent it becomes necessary to do some improvements and repair works.

Focus Areas:

Kitchen and Bathroom Updates: 

These are some of the areas that may contribute a lot in enhancing the appeal of your home. Appliances and kitchen utensils, bright frescos, new furniture for the cabinets and up to date countertops in the kitchen will add a luxurious look to the kitchen area. For the bathrooms one might imagine new tiles, having a new rainfall shower head or updating the vanity for some better storage and new fashionable lighting. Extra items including high quality towels and soaps help in enhancing the quality of a short-term rental accommodation.

Curb Appeal: 

This is the case since the first impression will create the foundation on which a relationship between the involved parties will be built. Ensure you keep your exterior of the house well maintained. This may include mowing the lawns, repainting or new front doors among other things.

Safety Features: 

Some of the common safety features that should be put in place include having smoke detectors, carbon monoxide alarms, fire extinguishers, and having locks on doors and windows. For short term accommodation, the use of touch keypad is recommended in order to ease the lock access to the guests.

Furnishing and Decor: 

In particular, if you let a house, apartment, or room to guests, for example, through the AirBnB service, the furnishing quality should be optimal for guests’ comfort, and it is better to choose both comfortable and robust furniture. Consider here the need to ensure that the environment being offered to customers is cheerful, relaxing and attractive to the potential consumers.

Comply with Legal Requirements:

Since you are renting out your home there are some essential legalities of doing so that you must be aware of. This involves aspects such as the zoning laws in operation, permits required, taxes for the business, and the homeowner association rules.

Things to Check:

Local Zoning Laws: 

Most locations have some sort of regulation on short term rentals while others need one to acquire a permit to do so. Ensure that your property is in the right category of zonal classification for the type of rental you are offered.

Taxes: 

Rental income is considered as income and is subject to taxation, therefore one has the responsibility of keeping books of accounts for rentals received and expenses paid. However, some cities allow owners and managers of short-term rentals to collect hotel or lodging taxes, usually for a limited time. In this case it is advisable that an individual should seek the services of a tax consultant in order to make sure that he or she is within the confines of the law as regarding taxation.

Insurance: 

HO3 policy may not cover rental activities and this is why it may be referred to as ordinary homeowners insurance. It is recommended to consult your insurance company to find out whether you require extra insurance – landlord insurance for non-primary residences and short-term rental insurance for such platforms as Airbnb.

Lease Agreements: 

For the long term rental business, you need to come up with a good and standard lease agreement that covers the terms and conditions of the house, rent payment dates, security deposits, pet, smoking, and maintenance policies among others.

 Maximize Your Income with Smart Pricing

This is one of the most crucial aspects for profitability since it affects the main income of your business. For short-term accommodation you can use the smart pricing strategy (as it is used by Airbnb) – the prices are changing dynamically depending on demands, seasons and local events. With long-term rentals, one has to study other similar properties in the market and come up with the right market price that will ensure profitability while at the same time being reasonable.

Tips for Pricing:

Research Competitors: 

Check what other properties of such type are asking in the given area. If you are targeting short-term lettings, focus on the daily rate and whether or not there is a change during particular times of the year.

Adjust for Seasonality: 

For instance if you have flagged your house as a short term rental be prepared to change rates during special events like- Christmas festive season, thanksgiving, and other events celebrated within the location of your house.

Offer Discounts for Longer Stays: 

Another strategy, quite widespread in the context of the services of short-term apartments’ renting, is the giving of the weekend or the weekly or monthly discounts.

Professional Management vs. Self-Management

Some of the most crucial things that you will decide as you invest in a property include whether to manage the property on your own or seek the services of a property management company.

• Self-Management:

It may be more cost effective if you like to be involved and be in touch with the tenants because you will not have to pay a management company fee. However, expect to receive calls at any points in the night involving plumbing problems, marketing the property, managing booking and other repair works.

• Property Management Services:

For those who do not have the time to perform most of the tasks involved or do not wish to personally conduct these tasks, there are property management companies that one can hire for screening the tenants and taking care of the necessary repairs among other tasks. This is especially popular with those rentals that are long-term, although there are some professional property management companies that also deal with the short-term leases.

Pros of Hiring a Property Manager:

• More heads off activities for you.
• Experience in determining the right rental rate and methods of advertisement.
• Quicker turn-around times of the tenants and repair.
• Other activities such as handling legal problems like- Eviction.

Cons:

• Property management companies usually take 8-12% of your rent income.
• You may have little influence over the type of tenant residing in your property and the management of the property.

Marketing Your Property:

Advertising is another factor with marketplaces for short-term rentals including Airbnb and VRBO offering a list of your property and guest interface. The quality of the pictures, the quality of the description and the reviews from the past renters are definitive to sell the house. To find long-term renters listing your house for rent on Zillow or Craigslist is a good idea or you could hire a property management company. Always remember to mention some extra features like a recently installed new kitchen, large bathroom or any other luxurious touch or addition that you have made.

Conclusion:

It is possible to make use of the above mentioned steps to start renting your home and turn it into a money making machine. Whether you want to have short-term or shorthold tenancy agreements, meticulous planning and, if necessary, property’s renovation will help you achieve constant sales revenue in a relatively short period of time.

Read: How to Make Passive Income in Real Estate