Before you decide to become a landlord, consider:
- Your home's condition. Can you lease it in 'as is' condition? How old are some of the system like the air conditioner or water heater? Factor in a cushion of about 10% of the rent for possible repairs while it is leased. However, before making expensive upgrades to the property in order to lease, consider the wear and tear from tenants ( and their possible pets). Make sure you add in the cost for repairs when they vacate in addition to a hefty deposit.
- What is your carrying cost? Compare the total of your mortgage payments, insurance, property taxes, HOA dues and any other expenses to the rental income. If you have a pool and nice garden, you may want to keep your current service people and add that in to the rent. If you use a property manager, they will likely charge about 10% of the monthly rent for their services. A realtor may charge the equivalent of 1 month's rent to find and screen your tenant, lease the property and handle the paperwork.
- Research the local market. Talk to a realtor and find out how leasable your property is. How much can you expect to charge? In North Dallas, single family homes typically lease between $1 and $1.50 a square foot.
- How picky will you be about your tenant? Your tenant can have a big impact on your peace of mind and your wallet. Screen any potential tenant with a credit report and background check. But even that won't tell you how they will treat your home. It's a hassle and can be expensive to evict tenants. You want someone you feel comfortable with.