Determine your expenses for the property. Calculate your actual monthly expenses or carrying costs for the property: any mortgage payment, real estate taxes, insurance, homeowners association or other common charges such as monthly condominium fees and any assessments the homeowners association may have added. If there are monthly assessments on a property, factor into your calculation how long they are expected to last.
Analyze your cash flow. Determine how much monthly rent you can secure for the property and for how long. Then, compare that to your expenses to determine if the place is "going to carry itself," says Michael Corbett, Trulia's real estate expert and author of the book "Before You Buy!" In addition, he and others advise having a maintenance or emergency fund for the property for "when things break," Corbett says. A key question to ask yourself is what to do if you don't think you can break even or make a profit. "Analyze: Can I carry that extra debt? Is it worth it to me? Is the market appreciating?" Corbett says. Sometimes it's worth taking a shortfall now because you will be able to sell the property down the line at a higher price, he adds.
Weigh personal factors. Renting your home is more than a financial decision. It's a personal time commitment, which isn't for everybody. Be aware that as a landlord, you may receive calls at inconvenient times unless you hire a management company to handle repairs and emergencies for you. In that case, your costs can be higher. Approximately 1 to 2 percent of tenants do not pay the last month's rent or fail to pay at some time during the term of the lease, Barefield says, so weigh whether you are prepared for either situation. Ask yourself whether the personal costs are worth the trouble. How much time do you have to spend on a rental property, and is the financial return going to be worth it? Single-family homes tend to require more work and time from an owner than condominiums, but all properties require attention and time.
Get the property ready to rent. Determine how much it will cost you to get your property ready for the rental market. "Do not do anything more than necessary to get top dollar," says Barefield. The basics are painting and cleaning. Most people either don't improve their property enough or go overboard, he says. If you need help, seek out companies that do "apartment turns," Barefield says. They specialize in "turning a unit – taking it from a move-out to a rent-ready unit," he adds.
Renting your home as an investment can be worth it, but be sure to weigh both the financial and personal factors. For some people, like Ryan Severino, owning a rental property isn't desirable. "It's not just pure economics," he says. "If we rent it, how much difference it is going to make in our lives in terms of day-to-day living? I owned the house I wanted to own, and wanted to put the money into other investments."