Step 1. Get a HELOC on your current home
Get a HELOC (Home Equity Line Of Credit) immediately.
You don’t have to draw anything on it, so you don’t owe anything or make payments unless you borrow from it.
You can use the HELOC for the downpayment on your new house and/or as a safety net for any repairs or vacancies on your rental.
Banks will not give you a HELOC once your house is rented. You have to do it while it is your primary residence.
Step 2 : Get Pre-approved for a new house
Part of that pre-approval is knowing what your current house will rent for.
In some cases you’ll have to have a signed lease in place before closing on the new house.
That doesn’t mean your tenant moves into your house before you close, it just means you have a signed agreement with them.
Step 3 : Make your house ready to show as a Rental
Prep it much like you would for sale.
Declutter, make needed repairs, and take beautiful photographs for the rental listing. The better your home looks to prospective tenants, the more competition you have for your home. And you get a pool of well qualified tenants vying for your home.
You’re going to need to market it as a rental and be ready for someone new to move in when you move out.
Step 4 : Talk to your Homeowners Insurance Company
If you move forward with renting out your home, you’ll need to add more coverage to your homeowners insurance policy.
Most traditional homeowners insurance policies don’t cover rental-related issues.
Step 5 : Decide if you will self-manage or hire a Property Manager
Looking for the right tenants can be time-consuming. You need to check references and credit scores and you need to show the home sometimes over and over again
Once you find the tenant you need to create and sign the lease agreement.
You’ll be responsible for accounting items like setting up a separate account for security deposit and collecting rent each month.
And of course there is the task of answering tenant calls about maintenance. You’ll need to find a reliable handyman to have on call in case you can’t personally go over and fix the item. A tenant will often expect a near-instant response to any problem, large or small.
If you’re managing one property, the time commitment might be well within your comfort zone.
However professional Property Management can do all for you for a fee.
*Need referrals for property managers? Email me!
MORE QUESTIONS ON RENTING AND BUYING?
Wendy Monday • Broker
PARKS Real Estate
@wendymondaysellingnashville on Instagram