Many landlords in Michigan consider converting their primary residence into a rental property. It can be a smart move to earn extra income while still enjoying the benefits of living in your own home. However, as per Michigan law and regulations, it’s essential to know if you can rent out your house and still live there.
You can rent out a part of your house, like a room or basement, while still living in the remaining space. If you plan to live there, you must divide the property into separate living areas.
Continue reading this article for more insights and tips!
Can You Rent Out Your House And Still Live There?
Yes, you can rent out part of your house and still live there. For example, you can rent a spare room, a basement, or a section of your home to residents. It is a great way to earn extra income while keeping your living space.
Before you start, check local laws and rules about renting out part of your property. Detroit Metropolitan area, MI, has specific regulations for this, like requiring rental licenses or safety inspections.
You should also look into any zoning laws that may apply. Clear boundaries, such as separate entrances or private living areas, ensure a smooth and respectful living arrangement for you and your resident.
How Can A Landlord Convert Home Into A Rental Property?
Most of the time, renting out your property feels like a complicated process. Converting your home into a rental property involves several necessary steps.
Here, we have listed the essentials to help you earn extra income.
1. Update Your Homeowners Insurance
Your regular homeowner’s insurance might not cover rental properties. To stay protected, you need landlord insurance. It covers resident-related risks, property damage, and liability. This extra protection ensures you’re covered if something goes wrong during the rental period. Before renting your home, talk to your insurance provider to ensure you’re fully protected.
2. Check Michigan Licensing Requirements
Before renting your home in Michigan, you must follow the state’s rules. First, apply for a rental license from the Michigan Department of Licensing and Regulatory Affairs (LARA).
Then, get a landlord certificate from your county clerk’s office. Some cities may require extra permits or licenses, so check local rules. Following these steps ensures you’re legal and ready to rent your property.
3. Screen Residents
Finding reliable residents is an essential aspect of renting your home successfully. Screen potential residents by checking their credit, rental history, and references. This helps prevent issues like missed payments or damage to the property.
Additionally, consider working with a lawyer or using an online tool to create a rental agreement. A clear agreement will outline everyone’s responsibilities to help ease the process and save from further legal complexities.
4. Prep the Property for Renters
Ensure that your property is in excellent condition. Make necessary repairs, such as fixing broken appliances or addressing safety hazards. Also, upgrades like repainting or replacing worn flooring should be considered to improve its appeal.
A deep cleaning before showing the property will create a positive first impression. As a professional property management company in Michigan, AmeriHome can help ensure your property is ready for reliable residents.
Starting repairs to cleaning and resident screening, we’ll guide you through every step to secure the best renters and maintain a safe space.
5. Understand Michigan Legal Considerations
Once registered to rent in Michigan and find suitable residents, you must understand the laws and rules that apply to renting out your property.
Here are five important legal considerations you should know:
i) Michigan’s Landlord and Resident Act: This law explains the rights and duties of landlords and residents. It covers rules about rent payments, how to handle security deposits, when repairs should be made, and how to deal with evictions.
ii) Lead Paint Safety Disclosure: If your home was built before 1978, you must inform your residents about the dangers of lead paint. You should give them an EPA-approved pamphlet explaining lead paint safety.
iii) Providing Safe and Habitable Living Conditions: As a landlord, you must ensure the home is safe and livable. The building should be strong, free from pests like rodents, and have working plumbing, heating, and electrical systems.
iv) Security Deposit Limits: In Michigan, the maximum security deposit you can charge is one and one-half times the monthly rent. For example, if the monthly rent is $1,000, the security deposit can be up to $1,500.
Additionally, you must return the deposit within 30 days after the tenant moves out unless repairs or cleaning are needed. In that case, you can request a little more time to complete the necessary work before returning the deposit
v) Rental Agreement Requirements: You must provide a written rental agreement explaining the house’s rules. It should include the rent amount, due dates, what the resident can do (or not do), and any other rules for living in the property.
Benefits Of Renting Out Your Primary Residence?
Renting out your primary residence can be a great way to earn extra income. If you have extra space, it can help pay your bills and provide financial benefits.
- Renting out your home provides a reliable monthly income, which can help with your finances.
- The rent you receive can go toward covering your mortgage payments or other household expenses.
- Renting your property may allow you to claim tax deductions for repairs and maintenance.
- Your property’s value may increase over time, giving you more financial gain when you decide to sell.
- You can rent out part of your home or the entire property, giving you options based on your needs.
- In areas with strong rental demand in Michigan, you can attract long-term residents who provide consistent rental income and reduce the frequency of renters turnover.
Tax Considerations For Renting Out Your Home In Michigan?
If you decide to rent your home in Michigan, you may need to consider the tax rules. The money you earn from rent is taxable. You’ll need to report it when filing your taxes.
In Michigan, landlords pay a 6% tax on rental income. You can either pay it when buying property items or collect it from residents and send it to the government.
The good news is that landlords can claim tax deductions to save money. Here are some deductions explained:
- Real Estate Taxes: You can deduct property taxes you pay each year.
- Repairs and Maintenance: Costs for fixing things like plumbing, painting, or cleaning can be deducted.
- Property Improvements: If you improve your home, like upgrading the kitchen, you may qualify for tax benefits.
- Advertising Costs: Money spent to find new residents can be deducted.
- Insurance Premiums: The cost of insurance to protect your property can also lower your tax bill.
In Closing
Renting part of your home while still living there is a great way to earn extra income, but it requires careful planning. By dividing your space, setting clear boundaries, and following local laws, you can make the arrangement work smoothly for you and your residents.
Always check local regulations and ensure your property is ready for renters. If you need help managing your rental property, contact our experts for professional property management services in Michigan. Our expert advice will make the process even easier!
Frequently Asked Questions
What should I do if residents damage my property?
If residents damage your property, you can use their security deposit to cover repairs. Make sure to document the damage and follow legal procedures for resolution.
How can I ensure a smooth relationship with my residents?
To keep a good relationship with your residents, ensure to talk openly and clearly. Have a written agreement that explains the rules and expectations. Fix any problems quickly and check in now and then to make sure everything is going well.
Can I charge different rent prices for other residents?
No, charging the same rent price for similar spaces is essential. Charging unfair rent can lead to problems or even legal issues.
