As I announced last week we found a house!
But what does buying a first home have to do with getting a property ready for rental?
Well this house has an awesome setup. Essentially there is three bedrooms upstairs and one downstairs. The downstairs bedroom is set up as a studio apartment. It has it’s own walkout and a 3/4 bath connected. Through the bathroom is the laundry/storage room.
We plan on using this 4th bedroom/studio as a rental. It has the potential to lower our mortgage payments to the point where they are less than our current rent. The separate walkout and kitchenette are the main features that made us decide to use it as a rental. If we had to share the same entrance and kitchen, we would almost certainly not consider renting.
The upstairs and basement is plenty of space for my wife and me, and since the bedroom is already set up for renting we figure we might as well take advantage.
To get the studio rental ready, there are a number of things we need to do:
- Replace the Fridge & Range
The refrigerator and range currently in the studio are probably twenty-plus years old. We plan on replacing both of them with new appliances with a budget of $1,000. We pan on getting an interest-free payment plan and using the rental income to pay off the costs of the new appliances.
- Replace the sink and toilet
The sink and toilet are both dark green…something I have never seen before (and would be okay not seeing in the future!). We plan on buying a sink that has storage underneath (unlike the current sink) since there is no bathroom closet.
- Clean
Kind of an obvious task in preparing a rental property. We plan on deep-cleaning the entire house, but the studio will receive special attention as we want it to be as clean as possible for potential renters.
- New Shower head
The shower was put in just a couple months ago, so they stuck the cheapest shower head possible in it. We’ll upgrade it.
- Replace Locks
We will need a separate key for the renter’s entrance. We also plan on allowing the renter to use a large closet in the laundry/storage area. We would provide them with their own key to this closet since it is a shared space.
- Write up a lease
This will probably be the most time-consuming of all the prep-work. We have never rented to anyone so it will need to spend some time researching leases and what clauses to include. I’m a detail-oriented person so I don’t think this should be a huge burden (plus I’m excited to learn about leases), but it will likely take quite a bit of time to write and rewrite.
- Decide what is included in the rent
We are considering including all utilities, use of the washer and dryer, internet, and cable into the price of the rent. If we are including all those amenities, plus a new range, refrigerator, and essentially a new bathroom, we think the studio will be attractive to many potential renters. There is the fact that it is still a studio instead of a one bedroom, and it is still in a basement, so pricing may be tricky.
Once everything is prepped, the only step remaining is finding a renter!
As you can see from my goals page, owning rental property is one of my long-term goals. While it seems there is a big difference between renting out an entire house vs. renting out part of your own home, this should give us some good experience in being landlords and whether we want to pursue a rental house down the road.
Have you ever wanted to or do you currently rent property? What did you have to do to get it prepared for renting?
____________
The picture at the top of the post is NOT a picture of the studio apartment in our basement! I would love if it was tho, looks like a nice place.
Photo by ~ggvic~.
Check out some of our favorite personal finance resources:
Are you getting the best credit card rewards? Check out the top cash back credit card offers (updated daily)
Make extra money: 15 ways to make money from your computer
Get the First Chapter Free!
Join our online community and get the first chapter of the book Student Loan Solution absolutely FREE!
Sounds like a great idea… You can certainly cut into the heavy costs of ownership by renting a bedroom out, and your place looks like it has the perfect setup.
I would love to see pics once you get it all fixed up! Be sure to take some “before” shots so that we can see the after.
jefferson seedebtrun
@seedebtrun seedebtrun I will definitely do before and after shots! That’s my favorite part. The upstairs before and after will be pretty interesting too. Original walls from 1973 (wood paneling) :0
This is great! You will be so much better off buying rental property while you are still young. Sure, you are planning on living in it now but maybe one day you can rent out the entire thing and buy another home for yourself.
By the way, I have a lease that I wrote myself after taking the things I liked and thought were important from different leases. I would be happy to email it to you so you can use it as a blueprint for yours! It has worked great with our rentals. Email me if you want it!
@Holly at ClubThrifty I would love to buy a second house some day and rent this one. I know someone who owns a house, her boyfriend owns a house, and they just bought a third one together. They are renting the other two. I would love to be in that position some day.
I just shot you an email, thanks for the offer!
When my house in Detroit didn’t sell we started renting it. My biggest regret was allowing the woman’s dogs. Definitely find a renter without a dog. You’ll thank yourself when you’re cleaning later.
@AverageJoeMoney Thanks for the tip. I was considering letting them have a dog, but you make me hesitate…I suppose it could easily become an issue (especially with a shared yard…I would probably end up cleaning all the dog crap…).
Owning at least one rental property is on our long term goals list. The plan is to rent our current house out when we need to upgrade when the kids are a bit bigger, 5 years max.
Was your offer accepted?
@Em23 It was! And that’s a great goal. I would like to do something similar down the road.
That’s very cool that you get to do this. I wish I had something like this but they don’t have a lot of houses like that in Florida.
@Money Life and More It was a unique setup. It looks like they had dug out the walkout at a later date. Not sure if they ever rented it tho since the shower was just recently put in.
I know nothing about Florida real estate, you should write a post about it ;)
I am a landlord of four homes. I went from zero to four in less than six months thanks to taking custodial control over my 401(k)/IRA funds. I help connect first time investors with property wholesalers who have turn-key properties available for immediate close with monthly cash on cash yields of anywhere from 10-24%. The numbers are amazing.
That being said–as a first time investor I am surprised at how much you learn through the experience of doing. All of my properties are out of state. I’ve only recently traveled to even see my homes. That’s how good the numbers are. However, when you see/touch/fee/examine the houses they do invoke emotion. At least, for me they did.
I have now joined my local RE investors club and other networks so that I can continue my real estate investing career. Because–once you decide to take control over your financial future you must TAKE CONTROL. It’s not necessarily hard work but it is a DIFFERENT kind of work than what happens when you mindless turn funds over to someone else to manage.
I congratulate you for knowing much more than I did at your age. Where I’m not old, I am not young. And being a fan of your blog I know I am not your “target demographic.” However, seeing what you are building here has made me a fan. Individuals regardless of their age need to challenge themselves on a regular basis in their financial lives. What was true for our grandparents and parents isn’t necessarily true for us today–as the financial world is changing at a rapid pace.
All of that being said–I am jumping into the dog conversation with a different point of view. My properties are Section 8 (low income families.) I do not allow Section 8. As the financial demographic of your home grows so too should your accommodations. If you have a home, in any sort of middle to upper-middle class area I absolutely believe you should allow dogs. This will INCREASE your rental market.
However, you should then INCREASE your deposit and/or terms. With credit being as difficult as it is to obtain you can rent for higher than average retail prices when you are giving someone what they can’t usually find elsewhere. So for every headache an animal causes, if paid appropriately you’ll be able to afford the frustration.
@SHFerg Wow, that’s an awesome story! It sounds like you are really moving forward in your journey of reaching your financial (or what I like to call…life) goals.
No worries of not being in my “target” demographic. I think everyone, regardless of age, has something to share and bring to the table. Everyone needs to take charge of their finances, but unfortunately most don’t spend much time focusing on it (except to stress over it!).
I like your thoughts on the dogs, I will take them into consideration. The main issue I see now is that we would have a shared yard for the dog(s). We plan on getting one soon after we move in, and if the renter gets one I’m sure they will let it out to go to the bathroom in the backyard. I will be the one that has to deal with cleaning up the crap (and stepping all over it when I mow). I don’t mind it if it’s my own dog, but something turns me off to it when I think about cleaning up all the time after another person’s dog. I probably would charge more tho I like the idea of having everything included in one neat little price tag…needless to say I have to think about this a while.
G
Great idea. We are about to embark on our first rental property as well. I just joined Yakezie, so we are fellow challengers. Good luck!
@Eyesonthedollar Awesome! Good luck to you as well. It should be a fun challenge.
I like your post on HSAs, I wrote a similar post a few weeks back.