Updated Sept 22,2017
So, you have a home and you’re wondering if you should rent it out for the first time. Don’t worry; you’re not alone. Many Americans every year are making that same leap and renting out their first home. And like most Americans, you may feel anxious about plunging into the role of a landlord. A great way to lessen your worries is to visualize the pros and cons of your situation and to examine the benefits and downfalls objectively. Here is a list of pros and cons of renting out your first home.
Pros of renting out your first home
1. More money
The prospect of additional income is arguably the biggest draw for most first-time landlords. Many times the income that you generate from rent covers mortgage, property tax, and even insurance. And with companies that embrace sharing communities, you can rent out your home while you travel — and fund your travels with that rental income. So even if you don’t want to become a full-time landlord, you can still do it part-time.
But remember that even if you’re just renting out your home for the weekend, you’re considered a landlord. And as a landlord, there are some legal documents that every landlord needs to ensure that you stay protected.
2. Wait and sell later for a better price
If you’re looking to sell but the market is just not very favorable for sellers at that moment, you should consider renting out your home in the meantime. Instead of selling underprice, you can wait it out and sell later for a better price. If you find the right tenants to occupy your home, you’ll have a steady income coming in while allowing you to watch the housing market closely and sell at the right time, instead of hastily settling for less.
3. Be your own boss
Many people quickly realize how lucrative renting out your home can be and for some, they find that being a landlord can become a full-fledged business. Whether you decide to make it your lucrative hobby or a full-time job, incorporating can help your landlord business. After incorporating, you receive limited liability protection and may even be eligible for some tax breaks. Plus, who doesn’t want to be their own boss?
Cons of renting out your first home
1. Legal paperwork
As a responsible landlord, you understand that there are certain legal documents that every landlord needs. It can get confusing, but Rocket Lawyer has a Landlord help center to help you address your concerns and lessen your anxiety about the whole process. There’s a list of essential documents you need along with answers to commonly asked questions and relevant articles about being a landlord.
The idea of gathering, signing, and processing legal paperwork sounds daunting but once you get rid of the mystery surrounding legal documents, you’ll soon realize that they’re simply a piece of record that is put in place to protect you and your business.
2. The risk of potential damages
Even if you’re not living in your first home anymore, you still don’t want to risk your home from receiving any potential damages. However, there are ways to remedy that problem. For instance, you can request a security deposit. That money is seen as cash collateral, and if anything should get damaged during your tenant’s’ occupation of your home, then you can deduct it from the security deposit. Be sure to document this transaction with a security deposit receipt.
3. Dealing with tenants
There’s the human aspect of being a landlord. One way to make sure that your relationship with your tenants is a good one is to find the right tenants. Once you do, make sure you solidify your relationship by documenting all of the important details. Putting your lease agreement in writing makes sure that you and your tenants are on the same page, lessening the chances of conflict later on.