Renting out your condo can be a great way to earn extra income, but it also comes with a lot of responsibilities. As a landlord, you will be responsible for maintaining the property, finding and screening tenants, and handling any issues that may arise. In this article, we will discuss the steps you should take if you are considering renting out your condo.

Many factors influence the decision to rent or not. These are some of the most common reasons to rent a condo:

• It's not your home, but you're not ready to move.

• As an investment, you purchased the condo.

• Financial help is required to pay the mortgage on your primary residence.

It is important to weigh the pros and cons of renting your condo no matter the reason.

Renting out your condo is a great way to get benefits

There are obvious benefits to renting a condo, such as an extra source of income. However, you might not be aware of many other benefits at first. These are the top benefits of renting a condo.

• Supplemental income: 

  You'll get $18,000 annually if you rent your condo out for $1,500 per month.

• Increased property value over time:

  The more you keep your condo in good condition, the more it will sell for.

• Taxes reduced by expense deductions

There are downsides to renting your condo

However, renting your condo can have its downsides, especially if there is a decline in the housing market. These are some of the potential problems you should be aware of before renting out your condo.

• Your income could be lower than you anticipated

• Selling later may prove difficult or expensive: 

  You may not be able to recoup your initial investment.

• Repairs can be costly

• It is possible that you will be responsible for managing difficult tenants

  This could include dealing with late payments and property damage.

Here are some things you should know before renting a condo

You should do your research before renting a condo in an HOA-managed complex:

• Read your condo association's governing documents.

• Find out the restrictions of your condo association.

• Calculate the rent you should charge.

• Be sure to inform your tenant about the HOA rules.

• Discuss the coverage you require while your condo is being rented with your insurance provider.

Do I rent my condo by myself or hire a property manager to manage it?

This decision is ultimately yours. However, a property manager usually charges 10% of the monthly rent and a portion for the first month when a tenant moves in. Regardless of which route you choose, the landlord or property manager is responsible:

• Marketing to Find New Tenants

• Screening tenants

• Signing and creating leases

• Monthly rent

• Keeping track of your finances

• Scheduling maintenance

• Providing legal notices

• Filing and paying all lawyer fees

What is an HOA?

An HOA is a group within a condo community that sets and enforces rules for individual property owners. You automatically become a member of an HOA when you purchase a condo. Dues are paid to the HOA, and rules are enforced. The 2017 American Housing Survey found that an HOA governs 80.4% of condos. The Community Associations Institute has more information about HOAs.

Is it possible for an HOA to screen potential tenants?

Some associations may ask you to submit the rental application of a potential tenant in order to screen them. However, associations cannot do this unless it is compliant with both state law and the federal Fair Housing Act.

Are homeowners associations allowed to prohibit renting?

An HOA can restrict your ability to rent out your property. However, those restrictions are determined by your association. Before you lease your condo, make sure to read the HOA rental rules. Likewise, before you make an offer on a property that you are interested in as an investment, be sure to read the Declaration of Covenants, Conditions, and Restrictions (CC&Rs) and Bylaws.

Condos subject to HOA rental restrictions

Renting out condos is permitted. However, you must comply with HOA rental restrictions. These restrictions may include a rental cap or limitations on the term of the lease.

• Lease restrictions:

  Could place a minimum term to avoid vacation rentals or a high turnover rate.

• Rental caps 

  Can limit the number of condos that are available for rent at any one time. In addition, most HOAs allow rentals on a first-come, first-served basis. This means that there is a possibility you will end up on a waiting list.

• There may be new requirements for condo owners

  Although these are rare, they usually state that you must reside in your condo for at least one calendar year before renting it.

Are condominium rental restrictions required to be disclosed by HOAs?

Yes. Yes. All covenants, including rental restrictions, should be made public upon purchase of a condo. However, because any restrictions did not bind you at the time of purchase, they aren't usually enforced in court.

What are the reasons why HOAs might place restrictions on the rental of condos?

HOA-managed communities often have rules that prohibit owners from renting their property out to preserve community safety and property values. The HOA is aware of your identity because you're a member. However, the HOA has less information about renters on your property and can therefore not correct any problems that may arise.

Can you change your condo association rental policy?

Although it is possible to challenge the HOA's rental policies, there are no guarantees that you will be able to change them. The process can also be expensive and time-consuming. Therefore, before challenging an HOA, we recommend that you seek professional legal advice. Here are some options that can help you change the rental policy of an HOA.

• Participate in your association

  Get to know your neighbors and attend board meetings. You can join forces with other owners to amend the HOA bylaws if you feel rental rules should be changed. The board should be presented with a draft of a rental policy and a lease reflecting these changes.

• Lobby the state for changes in power for HOA boards

  Florida is one of the states that has a high rate of foreclosures. Homeowners have been able to rally and have their rental rights governed under state law. Florida's HOAs are allowed to limit rental rates in communities if owners consent to amendments in the bylaws or if the property is sold after the amendment.

• You must ensure that your rental restrictions are in compliance with the amendment process and conform to state law.

  An attorney can review your association's bylaws to determine compliance. Even if you think you have a case against your HOA. Remember that lawsuits can be costly and that winning is not always guaranteed. Although HOAs may be able to pass legal fees on to homeowners in the community, remember that your actions can significantly impact the whole neighborhood. To find a solution, you should first consult your HOA.

What type of insurance do you need for your condo?

Condo insurance can often be added to your primary property insurance as an add-on. However, you must also consider the possibility of lawsuits as a landlord. Discuss your needs with an insurance agent to determine the coverage you need.

What does it mean for taxes if you rent out your condo?

Converting your principal residence into an apartment rental has tax implications. Rates will vary depending on where you live. To find out how your taxes will change, speak to your CPA.