There are many reasons why homeowners choose to get into the rental market. Many choose to rent out their homes while waiting for the market to improve. Some homeowners want to generate rental income from a second home or vacation property. Still others find themselves with multiple properties in hand after large life events, such as marriage, relocation, or inheritance.

Regardless of the reasons for getting into the business of renting properties, it’s important to get started on the right foot. That involves asking yourself some hard questions, doing your research, calling in the experts, and even putting in some elbow grease to get your property ready for the rental market. Here’s a quick guide to what’s involved.

Mull it over
Owning a rental property is much more than just collecting payments every month. As a landlord, you are legally responsible for providing a safe, livable home for your tenants, as well as maintaining the property with timely repairs. Consider that owning and maintaining rental properties is running a business. Ensure that you have the time, resources, skills, and patience for the often-unpredictable nature of the industry.

Do your research
Take a long, hard look at your rental unit and write a list of its attributes, including square footage, neighborhood, number of bedrooms and bathrooms, amenities, and yard size. Then, search for comparable units online to get a good idea for how much you’ll be able to charge.

Number crunching
Once you know how much you’ll be able to charge for your rental property, consider additional costs, such as the increased price of homeowners’ insurance, the cost of maintenance and repairs, unanticipated damage by occupants, carrying costs between tenants, and advertising, to name a few.

To outsource, or not to outsource?
If you are interested in renting your property, but don’t want to fulfill the role of landlord, consider hiring a property management company. In exchange for a monthly fee, property managers will find and screen tenants, serve as the main point of contact for occupants, manage repairs, collect rent payments, and tackle other duties.

Consult a lawyer and accountant
Rental income must be reported on your taxes, but some expenses may be tax deductible. Consult a qualified accountant to explore the potential financial gains and losses that come with renting property.

Additionally, consult a real estate attorney in your local area. While you may be able to find sample rental contracts online, a lawyer who is familiar with laws and regulations in your local area will make sure that the lease agreement your tenants will sign is legal, appropriate, and protects you in case of unexpected events.

Prepare the property
Lastly, get the property itself ready for listing. This can mean tasks as minor as removing your personal belongings, or more substantial improvements like upgrading appliances and painting. If you’re utilizing a property management company, ask them for tips on how to get your property rental ready.

With good preparation, consultations from experts, and an honest look at the finances involved, homeowners can find renting property to be a beneficial way to increase income, delay selling a home until the market improves, or cover costs associated with owning multiple properties.

Before you start looking at homes, you should figure out what you can afford by getting pre-approved for a mortgage. Doing some calculations of your own may give you a rough number but with so many factors involved it’s always best to get in touch with a Mortgage Specialist like myself.

Keep in mind that being “pre-qualified” and “pre-approved” are two very different things despite the terms becoming interchangeable over time. Pre-qualifying for a mortgage involves a quick review of your finances to estimate an approximate amount of a mortgage that you may be able to qualify for. On the other hand being pre-approved means actually applying for a mortgage with the approval subject to the home qualifying as well.

Real estate agents and sellers alike often prefer to work with buyers who have already been pre-approved for a mortgage because it saves everyone a lot of time knowing that you can afford the asking price. In multiple offer situations most sellers will also accept an offer from a pre-approved buyer before considering anyone else.

In order to get pre-approved we will need to:

1. Gather Financial Information

Provide as much financial information as you can including recent pay stubs, previous tax returns, proof of assets and liabilities along with any debts you may have. The more information I have the easier it will be to get you pre-approved.

1. Calculate Your Total Debt Service (TDS)

Your Total Debt Service is an accurate measure of your ability to pay your mortgage by taking into account monthly obligations like car or credit card payments and housing costs. A TDS of 40% or below would be ideal. If you happen to be higher debt consolidation might give you some relief.

1. Perform a Credit Check

To perform a credit check I’ll need your social insurance number along with your spouse’s or any co-signer.

It’s always a good idea to request a credit report beforehand in case there are discrepancies. That way you have time to address problems before the process even begins. You are entitled to a free credit report more than once a year so long as it’s requested in writing and you choose to receive the printed copy by mail.

Once we’ve gone over your financial information, marital status etc. you will need to sign some disclosures. At that point your mortgage application will be reviewed, signed and submitted through the underwriting process. When approved Affinity Credit Union will issue a pre-approval letter which outlines the terms of the mortgage approval.

Congratulations! Now that you’re pre-approved for your mortgage you can begin looking for your new home!