Courtesy of the topsy-turvy real estate market, property owners are becoming landlords as a way to avoid foreclosure and prevent buyer's remorse surrounding the decision of buying a home. Although the activity is taking on a number of facades including the wealthy taking on boarders to share their living space, other home owners are simply opting to move elsewhere and rent entire properties as a way to generate revenue in order to manage their mortgage monthly payments. Individuals who opt for the latter need to take extra precaution to ensure that their role as lease granter goes off without a hitch.

Start Thinking Like a Landlord

The role of landlord involves more than collecting rent payments and laughing all the way to the bank. As the property master, individuals have the burden of making sure that tenants have a roof overhead that is safe and up-to-code. In order to properly prepare for the transition into property management, home owners need to:

• Do The Math: When a home converts from primary residents to rental status, so will the tax benefits associated with the property. Homestead exemption tax breaks exist for houses that are considered primary residences of the, but that will shift when a home goes rental. A conversion to a rental property may also negatively impact capital gains tax exemptions associated with selling a home. Property maintenance fees and change in insurance charges may also be part of the mathematical package for review and can help a landlord determine the fair market rent they plan on charging.
• Learn The Laws and Get It In Writing: Landlords have legal obligations to their tenants and knowing them from day one is essential for rental success. Once a landlord knows the law, it is imperative to produce a contract for the rental agreement and make sure both parties are clear of the terms prior to signing on the dotted line.
• Home Prep: Landlords have the responsibility of providing safe homes for tenants and city inspectors will check out the situation to ensure that a house is up to code. Potential landlords need to make sure the rental property is clean and free of debris, that smoke detectors and locks are fully operational, appliances are running smoothly, that chimneys are clean and utility networks (pipes and electrical wiring) are up to date.

Share The Word

In order to stay on the right side of the law, potential landlords must make sure that they do not try to rent their property on the sly. Instead, a property owner needs to contact their lender to ensure everything is done correctly. A call to the mortgage company letting them know that the property is no longer going to be used as a primary residence is a must as they will have to provide permission to allow the change and they may charge a fee to switch the status (MSN.com). Local municipalities must also be notified of the home's status change.

Additionally, the homeowner's insurance provider needs to be notified of the changes, as the coverage must be specifically changed to meet the requirements of rental properties. In some cases, tenants may demand to see proof of insurance prior to agreeing to the rental terms set in place. It is important to note that landlords typically pay 25 percent more for the same level of coverage they had when the home was listed as a primary residence (leading back to "do the math").

Who Will Oversee the Property?

Committing to the role of landlord is a full-time obligation, as when the heat goes out or the roof starts leaking, it will be up to the lessor to make sure everything is fixed and running smoothly on the income property. If the property owner accepts this job as part of the program, they will have to be on it or face the repercussions.

Another option includes hiring a property manager, which relieves the owner of the burden of maintaining the home. According to MSN.com, property-management companies charge approximately 10 percent of the monthly rent for their services. That fee will free the home owner of the additional day-to-day burdens associated with being a landlord.