When Pattie Sheehan and her four siblings inherited a house from their mother, it seemed like they had just received a windfall, but the inheritance was a bigger headache than boon. After sitting on the market for nine months, the house finally sold for less than asking process, and the siblings’ relationship suffered as they argued through the process.
According to CNN Money, this is not an uncommon occurrence, but those who are savvy can avoid this scenario. Instead of selling your inherited property in a tough market, you can keep the home and convert it to a rental property with the following three simple steps:
Before making any changes to the property, educate yourself on landlord-tenant law in your area. Many cities offer classes and handbooks to new landlords. To see if your community does, call the local HUD (Housing and Urban Development) office, the county action center, or your city’s neighborhood services department. These departments also offer free mediation services that can be useful if any issues arise between you and your tenants.
Landlord-tenant laws vary from state to state and city to city but, according to the department of Neighborhood Services in Fort Collins, Colo., some of the issues you learn about when taking one of these classes include security deposits, the definition of normal wear and tear, leaky roofs, how to respond to mold, and more. Without the right education, you might make small mistakes like not hardwiring your fire alarm, and those little mistakes can lead to huge liability issues.
Create a Landlord Toolbox
To make your landlord experience successful, you need a tool box — not just the tools that you will use to adjust leaky faucets and repair holes in the sheetrock, but virtual tools that make your job easier. CNN Money recommends using property management software like Quicken, RentRight, or IDEAS property clerk. The AAOA (American Apartment Owners Association) is also an incredible resource and offers background checks, credit checks, and other essential services. By tracking your expenses carefully, you will be able to tell how lucrative your property really is, and by doing thorough background checks on your tenants, you will be able to safeguard and boost your potential profits.
Decide between Vacation Rentals, Executive Rentals, or Family Homes
If your property is in a great spot, you should consider forgoing the idea of renting it long-term. Instead, consider converting your property into a holiday getaway. Your guests will pay more per night for a holiday rental than they would a regular home and, according to HomeAway.com, the average vacation rental owner makes $26,000 per year in rental income.
If your property is not in a travel destination, you can still squeeze extra cash out of it by making it into an executive rental. This sort of rental appeals to business executives who have just relocated to town and are still looking for a permanent home or business executives who are just spending a month or two in town. By attracting this type of renter, you can charge about 150 percent of the average rent in your area.
If you opt to make your property into a vacation rental or an executive rental, you will have to invest some money upfront furnishing and decorating the home. However, depending on the condition in which you inherited the property, you may have had to face these expenses anyway.
Luke Horton is a property manager from Arkansas.