7 questions for would-be
the old homestead has served you well, and maybe you've awakened at 2 a.m. and
heard a real-estate guru's infomercial on how much money you can make by amassing
But before you become a landlord -- especially
the absentee variety -- make sure you can get the right answers to these seven
the numbers add up? Determine what fair-market rent is in the area through
for-rent ads or rental agencies. Then add up the home's fixed costs: mortgage,
taxes, insurance and any utility or property-maintenance expenses that the renter
won't be required to pay. Add in a buffer for a contingency fund. Will the difference
between the two sums make it worth your effort?
you know your state's landlord-tenant laws? Study landlord-tenant
rights and duties in your state. They vary. (Laws, information, links and forms
are available at sites such as mrlandlord.com,
you legally rent? In the case of condominiums, it's best to check with
the condo association or board to make sure you can lease out the place on the
up and up. Also, some zoning restrictions and neighborhood associations near universities
may limit conversion of single-family homes into rentals for college students.
Is your location desirable?
The most successful rent homes are generally near good schools and shopping centers,
but not too close to other rental properties.
are the tax consequences? Know them. In most cases, you can sell your house
up to three years after not occupying it and still pocket a capital-gains tax
exemption. You can also take depreciation when you're renting it to a tenant,
and even write off some travel expenses for site visits. Contact a financial expert
for the details.
Will you be returning?
Be clear about limitations or rent-credits for painting, wallpapering, draperies,
blinds and other physical changes. Be honest with the tenant if you plan to reoccupy
at a specific point. A surprise eviction may spur tenant retaliation.
minding the home front? Someone you trust (preferably yourself) must be
prepared to show the house, make periodic checks and minor repairs, give notice
when rent isn't paid and even appear in court if necessary.
McLinden is a freelance writer based in Texas.