Libbys on the Loose:2 Humans. 2 Great Danes. 1 RV.: How to: Rent your home

Thursday, May 14, 2015

How to: Rent your home

Have you thought about how you're going to afford to live on the road?  There are many factors that must be taken into account if you wish to be a non-retired full-time RVer (or retired).  If the resources are not available to you through employment, savings. or other means, you may have to seek out other sources of income in order to help pay for your everyday needs.  One way that this can be accomplished is by renting your home, if you own one.  Whether it's short term rentals so that you can get away for weeks at a time, or longer term so that you can travel unrestrained for longer periods - months or even years.

Renting your home is a decision that should not
be taken lightly. It's not just your house, it's your home.  All of your valuables, memories, and personal touches lie within the walls of your home.  If you are already at the point where you are trying to decide whether or not it's the right thing for you (renting your home), the assumption is that you aren't willing (or don't want) to sell your home, but also that you don't earn enough income to live on the road and pay for your home at the same time.  Most people are not in the position to pay for their home, work from the road, and live on the road all at the same time.  If you are one of those lucky people, we envy you!  We, however, fall into the latter category along with the majority.  We do not earn enough money from our primary employment to be able to pay for our RV, our home and its expenses, and traveling via RV and its expenses - so we had to think a little outside the box.

Our first thought was to simply sell our home.  Fortunately, we are in a great equity position and the market has been a seller's market for the past year or so and continues to grow strong.  While this was the fastest and easiest solution, it wasn't what we wanted to do - we still love our house and didn't want to give it up.  It's a great home in a great location - and plenty of people want to live (or vacation) where it is.  It was really the perfect storm for renting though we didn't know that at all when we looked at its purchase.  But with renting comes risk and we were concerned about the protection of our assets.  What if someone broke something? What if someone stole something? These were valid questions, and still are even after having done many rentals.  Any new undertaking usually involves some sort of risk, but providing you do your research and due diligence, the risk becomes more a calculated risk.  The more information that you can arm yourself with, the better the odds are that you will not have any major issues.

"I can't believe you're renting your house!" It's an exclamation we hear time and time again.  We agree that it's not a normal thing to do - renting your primary residence.  This is especially odd when you are still living in the home part-time.  "Why would you want to rent your house to strangers?!" you ask.  We say "Why not?!"  All of your personal items and valuables can either be stored on offsite storage, or to a room/closet, etc, that you designate.  As far as the cleanliness, etc, of other people,  I bet if I were to ask someone if they would ever sleep on a mattress that was used,  the most heard answer I would get is "No way!"  Ever stayed in a hotel?  I'm pretty sure they don't sterilize the mattresses after every guest stay.  Granted, they do wash the sheets, pillowcases, etc, but not the pillows or mattresses.  Before you discount the idea of renting your home completely, think about more than just "having someone else in my home".

Ask yourself why you can't (or won't) and what your reasons are.  Do you not feel comfortable having "strangers" in your home? This is not unusual. The question that you should ask is "Is it more important for me/us to realize our dreams, or to rent our home?"   Often, we hear that "I don't want someone sleeping in my bed" or "sitting on my couch".  Again, any time you stay in a hotel room, fly in a plane, or sit down in a restaurant, someone was there before you.  Many steps can be taken (we will go through many of them) to lessen the probability of bad things happening with renters.

Zoning restrictions
Don't get tied up in zoning/property issues!
Just about anyone can rent their home (if you can't, there's something really wrong with the municipality where you live!).  The question is: how long can you rent and how often will you be able to rent it?
  1. Daily
  2. Weekly
  3. Monthly
  4. Annual or long term
Unfortunately, in many cases, it won't be your choice to make the determination of how long you can rent your home.   Factors beyond your control (unless you considered renting when you purchased your home and already know that you are in an area that is zoned for any length rental) will more than likely determine your ability to rent.   cities have zoning (especially for single family residential home areas) which prohibits short-term or "transient" housing.  You will usually find this in towns that have tourism, but also maintain a local, family-focused vacation area.  The reason for this is due to the fact, like many other businesses, that homeowners are not responsible with whom they allow to rent their home.  If you do decide to rent your home, please ensure that you are not doing it just for the money as this will lead you to nowhere good.  Your house, its location/neighborhood, your possessions within it (furniture, etc), and your neighbors/friends, should be held to the utmost importance.  Without all of these things working together, you would not be able to rent your home anyway!

Market Research -  Is your home in an area that people want to live or visit often?  Are you in a tourist destination?  If so, you can pretty much guarantee that there are people that would want to rent it.  If you're not, this doesn't mean that you can't or won't be able to rent, it just means that you may not be able to rent it out for the length/s that you desire or make as much as you'd like, but at the end of the day, if you can get it to pay for itself, you're not only eliminating an expense, you're getting someone else to contribute to paying the equity in your home.  This is advantageous for many reasons!   But, just because your home is in an area that people go, it doesn't necessarily meant that you'll be able to list it and all the sudden you get it rented.

A few things to consider first:
  1. Use, or to start your marketing efforts if you are gearing more towards vacation rentals.  If you are looking for more long term, we suggest listing with a property manager or agent that can assist you.  Since we focus more on vacation rentals,  personally, we prefer VRBO and Homeaway because they offer a yearly membership program wherein a flat rate is paid (with advertising included) that precludes you from having to pay a commission with each booking.  This is especially helpful if your home is able to fetch higher pricing by having a vacation rental rather than long term rental.
  2. How often (and how much) can you get for your home?  How many months out of the year would you need to rent it to break even?  Do you need to rent for a certain number of days, weeks or months in order to do the things you want?  These things are all important factors in deciding if, and for how much, you can rent your home.Are other homes in your area renting?   
  3. How many bookings do they have?  How long are the rentals?  How far in advance are people booking.  Look at their past reviews.  Do they show multiple reviews for past months?  This is a good indication that their property rents well.  Our rental home in Florida - people reserve a year or more in advance, especially during spring break and holidays.  Would someone want to rent your home?  Make a list of things that you like to do when you vacation.  Is your home conducive to these things?
  4. This is a hard question for a lot of people to answer. Of course, your home is probably what you like and what you want.  Question is, do other people?  This is determined a lot by location, but it also has to do with whether or not your home is in rent-able condition, is appealing to renters, and has the amenities that renters seek out when looking for a home - especially in a vacation property. 
Insurance - Depending on the type of rentals that you plan to do (daily, weekly, monthly, annual), you will need to ensure that you contact your homeowners insurance and inform them of your intention to rent your property. Depending on the rental length, area, age and condition of home, insurance rates may increase by a small or substantial amount.  In addition, depending on the age of your home, the insurance company may ask that improvements to electrical, plumbing, structural, etc, be completed prior to writing a policy for rental use.  In addition, you'll want to ensure that you have adequate liability coverage in the event of a "slip and fall" type accident.  This is generally covered by your homeowners rental policy, but you will want to make sure that you both understand the policy and what it covers as well as having an updated copy of the policy on hand.

Tax exemptions - If your home resides in a state that offers tax breaks or incentives such as "homesteading" as Florida offers, you will want to ensure that there are no issues or tax implications to renting your home that may cause you legal troubles.  You may have to give up certain discounts in order to comply with city, county, or state laws.  don't cut corners.  It will end up costing way more in the long term by trying to "skate around" the laws to save a few dollars than by getting in compliance (and remaining in compliance) with all tax law.
The biggest thing here is

Pictures and Descriptions - Think about when you are planning to take a vacation. The most successful way to get your home rented is to have the ability to make a person "feel" as if they are able to experience your home rather than just look at pictures. Pictures are a great way to show the features of your home, but no matter how good the pictures,  they are only as good as their respective descriptions. We've seen so many listings that simply have pics without descriptions. Not only do the descriptions help with SEO, it allows for looking at the pictures and knowing exactly what is being photographed.  For instance, we had a picture of a dolphin swimming in the canal behind our house. We didn't have a caption saying what it was or pointing out that it was a dolphin's fin in the water. Those looking at our ad just assumed it was a picture showing off the new dock!  A picture is only worth a thousand words if the person looking it at knows what you're trying to say.  Captions work.

Video - For a fully-immersed experience, a well-filmed and edited video is tough to beat.  To be able to do a virtual tour of your home, you can give potential renters a true feeling of what it's like to be in your home!  One of the pieces of feedback that we often receive from renters is the fact that we have so much nature and wildlife right outside of our back door (our house is near a wildlife sanctuary). Because we are so used to seeing all of these things on a daily basis, we have a tendency to take them for granted.  By doing this, we are potentially losing out on great renters!  Our third renter was a botanist from a well-known school in Maryland.  He pointed out that we have some of the most diverse ecosystems in the area which is a great habitat for hundreds of types of fish, marine mammals (dolphins and manatees), birds, and many, many other species of wildlife.  Since we've started adding video of these unique

Setting rates -  This part is always going to be tricky and there isn't a formula or any right or wrong way to do it - it's going to be a matter of trial and error.  The easiest way to compare rates is by looking at what other people in the same area are advertising their homes' rental prices.  Other factors will also affect this such as location, season, number of other rental homes in the area, and proximity to attractions.  Another way to figure out your rates is by using  Zillow allows you to look at your home by inputting your street address.  From there, you will gain great information about your home and your area.  Zillow also gives you a monthly rental estimate based on your home's area, square footage, and several other factors.   This will give you a rough idea of what you could rent your home for on a monthly basis.  Typically, in a good vacation rental area, this number is a good indicator of a good weekly amount during peak seasons.  If you are not in a vacation area, chances are that you will be renting on monthly terms, so this will be most the most helpful tool in that case.

Marketing and Advertising - There are as many different ways to market and advertise your home for rental as there are if you were going to sell it.,,, and just to name a few, are all great listing areas for rentals of 6 months or longer.  Anything shorter than that, we recommend using the services in the Market Research section of this post.  Each of these sites has a different type of advertising available for adding more exposure to your ad.  Following the guidelines set forth in the Pictures and Video section, make every effort to try to fully immerse your potential renter in your home.  What is it that makes your home special?  Show your guests that through pictures, descriptions and video, and you will have a successful listing!

Answering Inquiries - Speed is the name of the game here.   Even if you only answer back an inquiry (assuming it is done via email) that you've received it, you are already setting the bar for how you interact with your potential renters by quickly responding.  Renters are looking for responsive and helpful "landlords" - especially with vacation rentals so be prepared to be an expert in your area. Try to gain as much knowledge about your area as you can.  The more information that you can provide, the less legwork they have to do on their own.  Most people will appreciate this (and your level of dedication to them) and it will help to build rapport with your guest. Depending on the length of rental, you can tell your inquirer about local restaurants, shopping, attractions, places of worship, hidden places that only locals know about.  These types of things will set you apart from other homes.

Qualifying your renters
From the first contact with a group interested in renting your home, you will want to gain as much information about them as you can.  Ask if they mind if you do a background check and/or a credit check.  If they have an issue with this, there may be an issue - or there may not. The key is to feel every person out.  Imagine that you are inviting them to stay with you in the home. What would you want to know about them?   Some good questions to ask:
  1. Where are you from?
  2. What brought you to looking at the (where your home is located) area?
  3. Will you be bringing all of your family (this is a leading question - you're already assuming that they are traveling with family.  This gives you an opportunity to learn about the ages, etc, in the party if they are not family)
  4. What is the purpose of your trip? vacation? family getaway? party?
  5. What do you plan to do when you get here (this gives you the opportunity to help with their plans as well as finding out what type of people they are)
  6. Have you ever rented a home before?
  7. How many vehicles will you be bringing? Some neighborhoods have restricted parking
  8. Will you be bringing any pets (pet deposit, etc?)
  9. If you have a pool, you will want to know the ages of all travelers and swimming capabilities
  10. What made you choose my home?
Licensing, taxes, fees - Check with your city, county, and state tax collector to see what taxes you are required to collect.  This usually involves obtaining a business license and a sales and use tax registration (Florida) for short term or long term rental property.  You can usually check with the building department of your city for more information.  In terms of income taxes, you will need to decide whether or not you want to form a separate entity (LLC, S-corp, C-corp) to operate your rental business.  There are numerous tax advantages to doing so - check with your tax professional for specifics relating to your home and income for the most accurate information.  By setting up a separate company, you can then move your home into that company's ownership.  This will help to shield you from legal issues should any arise.

Legal -  Consultation with an attorney that is knowledgeable in real estate and the the rental market is highly recommended.  When you are writing a lease or rental agreement, the peace of mind that comes with a legal professional looking it over is invaluable.  Lawyers, thought usually pricey, can also help you with a lot of the setup of LLC, etc, if you don't feel comfortable doing these types of things on your own.

Banking - Setting up banking can be done a few different ways.  To start (and until you decide whether or not to set up your rental business as its own entity) keeping everything in your name is fine.  However, we do recommend setting up separate banking for your "Home" account.  All income and associated expenditures to your business should be from this account.  By doing this, you will save you and your tax professional a lot of time, and you a lot of money.  Most questions regarding banking and how to handle your monies are best answered by a banking professional, which we are not!

Protecting your valuables - If you have something that can't be replaced or that you can't live without, don't leave it in your home.  It's that simple.  If there is something that is irreplaceable that can't be taken from the home, etc, take a deposit commensurate with its value.  In addition, alert your renters to the fact that this item and its significance.  This will help to enforce the deposit (and subsequent loss of deposit) should something happen to this item.  The degree to which you want to protect your valuables can be as simple as putting a lock or deadbolt on a closet door or as elaborate as constructing a room to house your valuables while you're away.  In either case, protect yourself by adding a clause to your rental agreement stating "any tampering or evidence of tampering of locked personal spaces will result in full forfeiture of security deposit - no exceptions".  We personally have a $1000 security deposit will all of our rentals.  In addition, we require a $5000 insurance policy be purchased by all renters in order to cover any items on property that may get damaged, lost, or stolen. You may also consider an off-site storage unit.  Usually, you can find these as climate controlled 24 hour units giving you the convenience of getting to your possessions anytime day or night and the security of knowing they are in a climate-controlled setting.

One more thing:  This post is, by no means, a comprehensive guide on the rental of your home. Each section is just an overview of what you should encounter on your way to building your rental business.  If you would like more information, guidance, or assistance (or just a plain old opinion with some feedback), we offer telephone and/or video conferencing services.  Drop us a line and we can go over costs, etc.  And, as always please leave us a comment if you have experience in any of the areas we covered.

Disclaimer: We are not paid writers, neither for our writing or our opinions. We represent our experiences with products, services, etc, with 100% accuracy and give our unbiased feedback.

No comments:

Post a Comment