Affording That Second Home!
Preparing to Rent Your HomeÂ
If you have taken the plunge and bought a second home you can help pay for it by renting it out for the short term, during high seasons (like summer and fall). While it is true that you might not be able to enjoy the house during prime periods for the first few years of ownership, the rental income can certainly add to your bottom line, help pay the mortgage and increase the overall value of your history. (now you will have a rental history) That’s what I did when I bought my first house in the Hamptons (read about it in my book Invest in Your Nest). I could not have afforded that house if I had not rented it out during the summer.
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Here are a few things you should keep in mind. First of all, check with your community, owner’s association to make sure renting your place out to more than one family living in a house is allowed. ( that is more of a share situation common with Hampton rentals.
Second, finding renters takes time out of your busy schedule. Do you really want to be fielding phone calls at work from Craig’s List ads? I don’t. Hire a local real estate agent, one who has a track record with rental properties and who has a screening procedure in place. He or she can also help you set the monthly or seasonal rate.
 Check with your tax pro about the income implications from renting out your place. If you’re simply planning on having a couple of friends take it over for a couple of weeks you probably don’t have to report the money you make…but you also cannot deduct any expenses related to it. So if your best friend’s summer fling boyfriend breaks a window you can try to get him to pay (don’t bet on it) or eat the repair costs yourself (more likely).  If you plan on making regular rental income part of your overall financial plan, and want to let the house for the a good part of the summer and fall, then you must report the income – but you can take deductions related to repairs and maintenance.  Typically the entire summer rental income is paid in advance by the renters . Also, the renters pay for the maintenance of the house including landscaping,cleaning, pool etc. In addition, make sure that all utility bills are changed to the renters name. You don’t want to get stuck at the end of the summer paying a huge electric bill for the pool heater! The security deposits are usually equal to 10% of the total rental cost. This security deposit will cover any unforeseen damage to your home . Make sure that the Rental contracts include a provision that says that the renter pays for any damage to your home.  Finally, “dress†your home with simple but sturdy furnishings – that’s what places like K-Mart, Target, and Wal-Mart are for. Futons and sturdy rocking chairs for the living rooms, and a table with four chairs for the dining room are fine. Twin and double beds, nightstands, and a chest of drawers for each bedroom are perfect. Provide a set of simple white china and inexpensive flatware, and a basic set of pots and pans for the kitchen. Stock the linen closet with sheets and towels, but recommend that your tenants bring their own beach towels.
For more advice log on to my website at www.barbarak.com and remember…Â
 If I can do it so can you!
Empower Yourself,
Barbara K
