From Homeowner to Landlord

By the numbers

As with any business, becoming a landlord requires market research and the ability to keep detailed records. Take a look at local listings to find out what rates landlords are offering. You can find plenty of listings in the classified section of your local paper or at sites such as Craigslist.com. Visit some of the rental units when the description matches that of your own home to get an appropriate rate comparison.

The rent should at least cover mortgage payments, property taxes, homeowner's insurance and upkeep costs required to maintain the home in a habitable condition. Annual upkeep costs range from 1.5% to 4% of your home's value. But consider hedging toward the upper end since future tenants may not treat your home with the same care you would. Your calculation of rental rates should also include the risk of going without rental income for a few months in between tenants.

Also consider seeking outside help to set up your books and prepare tax returns. You also may want to consult with a financial planner or a legal adviser to make sure you haven't overlooked anything, and that you are properly protected against any lawsuits from future tenants.

The right attitude

In addition to time, effort and money, there is an emotional component to being a landlord. Are you willing to have other people live in your home? Even if you aren't living there anymore, it may be difficult to shift your attitude from homeowner to landlord. If you can't make the switch, you may be able to hire a rental agent to act on your behalf. The agent's role can range from finding new tenants to handling monthly rent checks, as well as the 24-hour on-call duties required of a landlord. The more you ask of the agent, the more expensive the services will be. Expect to pay the equivalent of a couple of months' rent every time you have to find new tenants, or a monthly fee of 15% of rent or more in the event your agent is carrying out regular duties.

Renting your home may allow you to have your proverbial cake and eat it too -- you won't have to sell at the bottom of the market and rental income could cover your mortgage. But renting your home to tenants is an important decision: Potential landlords should do their homework before posting a "For Rent" sign.