Renting out an unoccupied room, garage apartment or basement is a great way to generate additional income. However, leasing and managing a rental unit takes thorough preparation and administrative work.
1. Research Zoning Laws
Some states place regulations on homeowners renting out “secondary suites,” otherwise known as guest houses and finished basements. Here are a few regulations homeowners must adhere to in most states:
- One “household” maximum per unit
- Restricted number of units
- Limited number of residents in the rental unit
- Required amenities (i.e. separate parking)
Consider state guidelines before making upgrades to prepare a unit for renting. A property is not worth the cost of alteration if it doesn’t adhere to the basic protocols.
2. Gauge Interest
Even if an in-home unit is legally fit to rent, it may not be appealing to the general public. Tenants have a variety of resources at their fingertips to search for rentals in any given city, under any budget and at any size. Potential leaseholders are able to compare and choose properties easily. A brand new apartment listed under the same price as a dated mother in-law suite within an occupied home is more likely to generate leads. Landlords should use the same online tools to compare their units to determine a price points or necessary upgrades prior to marketing their properties.
3. List It
Once the regulations and restorations are taken care of, property owners should advertise. Zillow allows individuals to list their rental units for free. Promoting a rental online increases the likelihood of competition and decreases the amount of time a property sits on the market. Take high-quality, bright photographs to showcase the room(s) to make an honest and welcoming impression. Keep the listing description short but detailed. Make sure to disclose any strong stipulations (i.e., no pets) on the listing, so those who aren’t a good fit don’t bother scheduling a showing.
Under federal law, property owners cannot discriminate based on race, color, disability, religion, sex, familial status or nationality. Advertisements cannot imply restrictions under any of these categories. Keep these guidelines in mind when generating an initial listing description.
4. Prepare for Management
Landlords have to be available 24/7 to deal with emergency issues. The landlord could lose valuable tenants if they don’t follow through with repairs or respond to requests in a timely fashion. With a busy job or young children, it may be best to hire a property manager to oversee the unit(s). Further, landlords must be impartial, firm and approachable. Avoid becoming too friendly with tenants, as this can make enforcing policies more difficult.
The longer a landlord is in practice, the easier the leasing process becomes. These four guidelines are a start for homeowners considering renting their spaces for the first time. With proper preparation, owners quickly gain the experience and knowledge to run smooth businesses for passive income.