Do you own a home in San Francisco? Ever thought about converting it into a rental property? If so, Nick Scarabosio of Jackson Group Property Management is just the guy to call. As part of a family-run business with four generations of real estate and property management experience in San Francisco, Scarabosio definitely knows the San Francisco rental market. Here he talks about how to turn your home into a rental property and talks about some things to consider before taking the plunge.
If you’re interested in turning your home into a rental property, the first thing to do is contact a professional property manager and ask him to take a look at your home. A property manager is someone who works day in and day out with both tenants and property owners, and should be able to give you a good sense of your home’s potential as a rental property. Some property managers charge for this type of evaluation, while others do not. In most cases, the evaluation will involve a simple walk-through of your home and a discussion of some of the property’s pros and cons as a rental. The property manager will also talk to you about how much you can expect to charge in rent and can give you a realistic sense of what your expenses will be as a rental property owner.
A number of factors will affect rent. Does your home have a garage? A particularly desirable location? An updated kitchen and bathrooms? While renters are in every neighborhood and at every price point, you need to make sure you’ll be able to charge at least enough rent to cover your mortgage and expenses, and hopefully enough to make a profit.
Many potential property owners wonder whether they should renovate an older home prior to renting. While the age of the home itself isn’t a big factor in the San Francisco market, the age of the home’s interior definitely is. Of course, every renter wants to see granite countertops and stainless steel appliances, and they’ll certainly boost the appeal of an older home. But it’s easy for a property owner to go overboard on improvements and ultimately shoot himself in the foot. Over-improving a property may make it more appealing to renters, but if it won’t significantly impact the amount you’re able to charge in rent, it’s just a waste of money.
At Jackson Group, we have a formula we use when considering improvements on a rental property. We compare the amount we’re currently getting in monthly rent to what we expect to be able to charge after we’ve made the improvements. The difference is then multiplied by 48. This will determine the maximum amount of money we’re willing to spend on improvements. Our goal is always to make our money back on any improvements within the first four years. So if, for example, we expect to get an additional $200 per month on a property after improvements, we plan to spend no more than $9,600 on improvements.
Unfortunately, there’s no single improvement you can make that will automatically make your property more desirable to renters. Tenants are always looking for something new. If remodeling the kitchen or bathroom just isn’t within your budget, just be sure the property is spotlessly clean and well staged for showing. Clean your carpets, touch up your paint, make sure everything’s in working order, and take a look at smaller, less expensive improvements that may offer big visual impact. Updating light fixtures, for example, can make a big difference to your home’s aesthetics without costing a fortune. Even if you can’t afford major improvements, paying close attention to cleanliness and functionality will make a good first impression on potential tenants.
