Property Management Blog

How to Convert your Home into a Rental Property

Pinnacle Property Management - Monday, January 17, 2022

converting home into rental

Being a landlord can be incredibly rewarding. Not only will you be able to diversify your investment portfolio, but you’ll also have another stream of income. 

However, converting your home into a rental property does require knowledge of certain things. That’s because renting out a home isn’t as simple as just finding a tenant and collecting rent checks every end of the month. 

To successfully rent out your home, the following is everything you’ll need to do. 

1. Get the Right Insurance Policy

A homeowner’s insurance policy won’t offer sufficient protection when you choose to rent out your property. What you’ll need is a landlord’s insurance policy. 

When you rent out your home, there is heightened risk of property damage and a host of other issues. After all, no matter how good a tenant may be, no one is going to take care of your property as good as you would.

Generally, a landlord’s insurance policy will not only cover everything in a homeowner’s policy, but it will also protect your rental income, as well. 

Shop around for the best offers, and make sure to ask as many questions to insurance agents as possible. 

2. Ensure your Property is Rent-Ready 

High quality tenants are picky when it comes to renting out a home. They only seek homes that are appealing. So, if your property looks like it has seen better days, make sure to revitalize it before renting it out. 

rent-ready property interior

If you don’t have a rent-ready home, you’ll be risking long vacancies. That means you won’t be receiving rental income!

While upgrading your premises will cost you some money, the long-term returns can be worthwhile. What’s more, they don’t have to be expensive. Upgrades like sprucing up the look of your lawn, repainting tired-looking walls, and changing fixtures in the bathroom and kitchen can offer surprising results.

3. Charge Tenants the Right Rent 

Of course, as an investor, your primary goal is to maximize your rental income. However, the last thing you want is to overcharge your tenants in your quest to make more from your investment. 

Overcharging will only drive away prospective tenants from your property. Remember, savvy tenants will always do their research prior to renting a home. 

Underpricing your rental will also yield less-than-desirable results as you’ll be leaving money on the table. 

So, what rent amount should you charge for your rental? Well, there are multiple ways to go about it. But generally speaking, the right rent should adhere to the 1% Rule. The rule states that the right rent should be at least 1% of the value of a home. 

For example, if your home is valued at $200,000, then you should probably rent it out for at least $2,000 a month. 

Alternatively, hire an experienced property management company to do a comparative market analysis. 

rent price for rental

4. Come up with a Lease Agreement 

This is a must-have when it comes to renting out your home. You’ll want tenants to adhere to a certain set of rules. A detailed one will help avoid common misunderstandings between you and your tenant. 

When drafting the lease, you’ll want to cover the following:

  • Rent-details – the dollar amount, when it becomes late, how and where it’s to be paid, and any late fees. 
  • Security deposit details – the dollar amount, and its purpose. Make sure to adhere to the state limit. In California, the security deposit amount depends on whether a unit is furnished or not. 
  • Responsibility on repairs – who will be responsible for what when it comes to repairs and maintenance. 
  • Landlord entry – let your tenant know of the reasons you may want to enter their property and what notice period they should expect. 

Once you’re done with the drafting process, make sure to have a professional go over it. This can be an attorney or a qualified property manager. 

5. Understand your Legal Obligations 

There are many rental laws that govern the relationship between a landlord and a tenant. And, as a landlord, you have a responsibility to ensure you abide by them in every interaction with your tenant. 

One such law is the Fair Housing Act. It requires landlords to treat their tenants with respect and fairness based on certain protected classes. In California, protected classes include race, color, disability, religion, national origin, and citizenship status. 

Another law is the Habitability law. Landlords are required to provide tenants with a safe and livable rental property. For example, one with hot water, and smoke and carbon monoxide detectors. 

If you fail to do so, your tenant may be able to withhold rent or report you to a relevant government agency for action. 

There are many other laws landlords must abide by when renting out a home. 

lease agreement

6. Start Marketing your Property

Your final step when converting your home into a rental is to begin marketing your property.

Create a good rental ad and syndicate it to as many rental listing sites as possible. Also, don’t forget to post For Rent signs and use community bulletin boards for maximum exposure. 

Bottom Line

There you have it – those are our tips on how to convert your home into a rental property. If you’re just starting out, hiring an experienced property management company may be your best option.

Get in touch with Pinnacle Property Management to learn more! 

Pinnacle Property Management
CA DRE # 01905815
22700 Crenshaw Blvd.
Torrance, CA 90505
Ph: (310) 530-0606
Fax: (310) 626-9786

We are open from 8:30am to 5:00pm M-F.

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