Other Things to Consider
Once you've got all the legal basics covered and have decided you can handle the demands of landlording, you have other kinds of rental space-related decisions to make before your tenant moves in.
Terms of the Lease or Rental Agreement
Since you will be potentially sharing part of the building you live in with tenants, you need to think carefully about what you will and will not allow. Consider the following questions in advance and include the appropriate stipulations when you draw up your lease or rental agreement.
Are pets allowed?
Who will supply appliances?
Are laundry facilities included?
Who pays for garbage pickup?
Is smoking allowed?
Who will shovel snow?
Will you allow satellite dishes and other technical devices such as a DSL line for Internet?
What utilities are included?
Are Licensed Professionals Required?
If you're doing extensive remodeling, you may need to find licensed builders, plumbers, and electricians to do the work. If so, will you hire them yourself or do you plan to have a builder or general contractor in charge? General contractors usually have licensed plumbers and electricians that they work with. But you'll probably save money if you do most of the remodeling yourself and hire your own licensed professionals because then you won't have to pay the contractor's fee.
The best way to find out what the project will cost is to make a detailed plan, shop around for competitive prices on supplies and materials, and get quotes from at least three licensed builders and other professionals. Put a budget together and go from there.
Will Rent Cover Your Extra Expenses?
You have probably thought about how much you'd like to realize each month in rent. But have you also thought about the extra expenses that you'll have to pay? You'll have extra insurance premiums, interest on any money you borrow, and times when you're not collecting money because the unit is empty. You may have to pay higher utility bills. There will be repairs, legal and accounting fees, advertising, and other out-of-pocket expenses to pay.
Will the rent you charge cover those extras? The only way to find out is to estimate the costs, figure out how much income you'd like each month, and calculate how much rent you'd have to charge to cover costs and have income left over. Then look at some classified ads or speak with a realtor. Is the amount you came up with a realistic figure for rentals in your neighborhood? Once you have a list of expenses and an ideal rental price in mind, your first task is to set up a working budget. It will help keep you on track.
