Relocating is fun and exciting. You’re able to meet new friends, possibly be closer to old friends and family, and start a new life. But a lot of people offload their current home or sell their current home at a discount to prepare for their move.
If you have the finances, you may want to rent out your home when moving out of state.
Why Being a Landlord is a Smart Choice
A lot of people are ready to pack all of their belongings and history into a moving truck. When you hire a long distance moving company, it doesn’t mean that you have to put your past behind you.
Perhaps you’ll want to move back to the area in the future. You’ll have the option when you already own a home.
If you lived in the location for a long time, you’ll have connections that you can use to help manage your rental, too. When you rent, the general rule of thumb is to rent when the property can earn 1% of its value per year.
This means that a $200,000 home would generate $2,000 in rental income and must generate a revenue of 6% per year based on the home’s value, or $12,000 per year in net revenue. You have the potential to make $1,000 per month off of your rental.
You will need to put money aside for maintenance and pay the mortgage, but renting can provide an income-generating asset that can be sold for a lump sum payment in the future.
Maximizing profits will require a different approach for a long-distance owner and can be done in a few key ways:
1. Hire a Managing Company
If you don’t plan on being able to commute back and forth to the rental, you should hire a management company to deal with all of the rental logistics. These companies will allow you to be a hands-off owner and will correct any issues that arise.
You need to treat the rental like a business, and every business needs a manager to run smoothly.
2. Yearly Price Research and Updates
You want to make sure that you’re making as much money as possible off of your rental. Prices continue to go up and down in certain markets, and you’ll want to assess your rental’s price at least each year.
The goal is to be able to adjust the price of the rental as needed.
Of course, you won’t be able to change the price once a rental agreement is in place, but you will be able to adjust the price and maximize your income when it comes time to renew these leases.
3. Screen Tenants
You should be requesting a security deposit, and it’s important to enforce any late fees in the agreement within reason. But you can also screen tenants, or hire someone to screen tenants on your behalf.
The screening process will be able to:
- Verify income
- Verify credit reports
You can charge an application fee to cover these costs, too. When you screen tenants, you’ll have fewer late payments or non-payments, and you’ll also have fewer vacancies and issues along the way.