The Do’s and Don’ts of Turning Your Primary Residence Into an Investment Property

After you’ve built up some equity in your home, you might consider converting it to rental property.

Making the switch can be a great way to earn passive income if you plan to buy a new home to serve as your primary residence, but it’s important to know what’s involved in making the change.

Do

Converting your home to rental property requires planning. Here are some tips to help you get started.

Make Sure You Can Use Your Home as Investment Property

Before converting your primary residence to a rental property, you must confirm that it's even an option. Then, check with your lender to ensure that the terms of your loan allow you to use your property in this way.

You'll also want to review the HOA rules in your community since they may have policies that limit your ability to use the property for rental income.

Change Your Insurance Coverage

You'll no longer be able to use your traditional homeowner's insurance once you rent to tenants. Instead, shop for landlord insurance that provides sufficient property and liability coverage. This policy protects you against property damages and injury claims from your tenants or guests.

Network With Professionals

While you might think you can handle your investment property on your own, some issues require a professional's touch.

For example, you might need a real estate agent to market a rental vacancy or develop a business relationship with a general contractor to get repairs done. You might add attorneys, electricians, and plumbers to your contacts list along the way.

Don't

Here are a few common mistakes to avoid when converting a primary residence to a rental property.

Forget to Research Landlord/Tenant Laws

If you don't try to learn your area's landlord/tenant laws, you could put yourself at legal risk.

Research your obligations as the landlord and determine how anti-discrimination laws will apply to you. An attorney can help you meet your legal obligations, but you should still understand the relevant laws.

Start Without a Financial Safety Net

The advantage of converting your home into an investment property is that you're already familiar with the basic condition of the property. Even so, roof damage or a failing water heater might surprise you.

As such, you should ensure enough savings to cover any repair emergencies. In addition, being prepared is essential for keeping your property habitable.

Put Off Your Obligations After Converting Your Primary Residence

In addition to having the financial resources to cover repairs, you'll need to ensure the work gets done promptly. This might involve using reliable contractors, so you don't have to set time aside to do the work yourself.

Give your tenants an easy way to contact you and make rent payments. Better communication will help you maintain more positive relationships.

Interested in Buying a New Home? We Can Help

If you want to buy a home in San Diego, connect with a top-rated team of realtors who listen, are readily available, and will work tirelessly for you. Contact The Selby Team to get started on finding your new home.