Becoming a landlord isn't always part of the plan.
Maybe you're relocating, moving into another home, inheriting a property, or trying to sell your Phoenix home but aren't comfortable with the offers you're receiving. Instead of selling, you begin considering another option: What if I rent the house instead?
Here at Rentals America, we've worked with many Phoenix-area owners who became landlords this way. Some expected to rent their home for only a year or two. Over time, many discovered benefits of owning rental real estate they hadn't fully considered. Some kept the property as a long-term investment, and some eventually purchased additional rental properties.
But successfully turning your home into a rental takes more than finding someone willing to live there.
The most important change is often a mental one: This is no longer just your home. It's now an investment property.
Once you make that shift, many of the decisions that follow become much clearer.
Quick Answer: What Should You Do If You Become an Accidental Landlord?
If you unexpectedly become a landlord in Phoenix, start by evaluating the home as an investment rather than simply as your former residence. Determine whether it makes financial sense as a rental, get the property rent-ready, change your insurance to appropriate landlord coverage, establish several months of financial reserves, understand your new landlord responsibilities, set rent based on the market, and decide whether you want to manage the property yourself or hire a professional property manager.
The best time to make these decisions is before you begin looking for a resident.
Key Takeaways
- A home should be evaluated as an investment before you decide to rent it.
- Preparing a home for rental requires more than simply cleaning it and advertising it.
- Your owner-occupied insurance should be changed to coverage appropriate for a rental property.
- Several months of property expenses should be kept available for vacancies and unexpected repairs.
- Market rent is determined by competing rentals - not by your mortgage payment.
- First-time landlords need systems for screening, leasing, documentation, maintenance and legal compliance.
- A home you initially rent because circumstances changed can sometimes become a valuable long-term investment.
What Is an Accidental Landlord?
An accidental landlord is someone who owns a home that wasn't originally purchased with the intention of renting it.
There are many ways this happens. You might relocate and decide to keep your Phoenix home, purchase another home before selling your current one, inherit a property, or discover that your home won't sell for the price you expected.
You may also have a favorable mortgage that you're reluctant to give up.
Whatever the reason, accidental landlords start from a different place than many real estate investors. An investor usually evaluates a property as an investment before buying it. An accidental landlord may have owned and lived in the property for years before ever thinking about rent, vacancy, maintenance costs or return on investment.
That difference matters.
Does Your Phoenix Home Make Sense as a Rental Property?
A home can be a great place to live without necessarily being a great rental property.
Before deciding to become a landlord, try looking at the property as though you were considering buying it today as an investment.
Start with a realistic estimate of market rent. Then consider the property's ongoing expenses, including:
- Mortgage payments
- Property taxes
- Landlord insurance
- HOA fees
- Maintenance and repairs
- Landscaping or pool service
- Expected vacancy
- Future capital expenses, such as an HVAC replacement
Monthly cash flow matters, but it isn't the only potential benefit of owning rental real estate.
Look Beyond Monthly Cash Flow
One thing we've found is that many first-time landlords aren't initially aware of all the ways real estate can potentially build wealth.
Mortgage paydown. Each principal payment reduces the loan balance and can increase the owner's equity.
Long-term fixed-rate financing. Owners who already have attractive fixed-rate mortgage financing may be reluctant to give it up. The ability to obtain long-term fixed-rate debt is one of the characteristics that can make single-family and small multifamily real estate particularly attractive.
Potential appreciation. Property values may rise over a long holding period, although appreciation is never guaranteed.
Tax benefits. Residential rental property may generally be depreciated for federal income-tax purposes once it is ready and available for rent. IRS Publication 527 explains the federal rules for residential rental property, including converting a former personal residence to rental use and determining the property's depreciation basis.
Future financing flexibility. Depending on lending conditions and the property's value, an owner may eventually have opportunities to refinance the property or access some of its equity without selling it.
For these reasons, asking "Will the rent cover my mortgage?" doesn't tell you everything you need to know.
If you're genuinely uncertain whether to keep the property, evaluate renting and selling side by side. The right answer depends on the property, your financing, taxes, expected holding period and personal financial goals.
The Most Important Shift: Stop Thinking Like a Homeowner
This may be the most important advice we can give someone becoming a landlord for the first time.
Once you decide to rent the property, start making decisions as an investor rather than as someone who still lives in the home.
That's sometimes harder than it sounds.
You may have spent years choosing finishes, improving the landscaping or maintaining the property according to your personal preferences. It's natural to remain emotionally attached to those decisions.
A rental property requires a different perspective.
Instead of asking, "What would I want if I still lived here?" start asking, "What makes sense for this property as a long-term investment?"
That change affects decisions about improvements, repairs, landscaping, pets, rental pricing and maintenance.
It also means recognizing what you don't know.
Here at Rentals America, we often find that first-time landlords simply don't know everything that goes into preparing and operating a rental property. That's understandable - they've never needed to know it before.
Rather than guessing, ask questions. Find out what is required, what is recommended and what experienced rental-property professionals have learned from managing similar homes.
Getting those answers at the beginning can prevent much more expensive lessons later.
What Does a Phoenix Home Need Before You Can Rent It?
One of the biggest surprises for accidental landlords is discovering that a home that was perfectly comfortable for them to live in may not yet be ready to operate as a rental.
Here at Rentals America, we use specific Rent-Ready Property Standards when preparing homes for new residents.
At a minimum, you'll want to evaluate major systems and appliances, HVAC equipment, utilities, locks and keys, smoke and carbon-monoxide detectors where applicable, windows and doors, cleanliness, landscaping, irrigation, pools and other features of the property.
Phoenix homes deserve particular attention to air conditioning, landscaping and irrigation. A marginal HVAC system or irrigation problem can quickly become much more consequential during an Arizona summer.
The goal isn't to remodel the home or make it perfect.
The goal is to provide a property that is safe, functional, clean, maintainable and ready for a resident to call home.
If you're preparing a home for the first time, use our Phoenix Rent-Ready Property Standards as a starting checklist.
Do You Need Different Insurance When You Rent Out Your Home?
Yes - this is something to address before a resident moves in.
Your insurance needs change when an owner-occupied residence becomes a rental property. Talk with your insurance professional and make sure the property is covered by a policy appropriate for a landlord rather than relying on coverage intended for your primary residence.
Liability coverage deserves attention as well.
Here at Rentals America, we generally recommend that rental-property owners discuss $500,000 to $1 million of liability coverage with their insurance professional. In our experience, increasing liability limits on these policies can be relatively inexpensive compared with the additional protection provided.
Every owner's circumstances are different, so your insurance professional should help determine the appropriate policy and coverage limits for you.
How Much Money Should a First-Time Landlord Keep in Reserve?
Rental properties occasionally need money at inconvenient times.
A resident may move out and leave the property needing work before it can be rented again. The home might sit vacant longer than expected. An air conditioner could need replacement in July.
Here at Rentals America, we generally suggest having several months of property expenses readily available for vacancies and unexpected repairs.
That doesn't mean the money has to sit permanently untouched or that you should expect to spend it. It simply means having funds available if the property needs them.
The appropriate amount depends on the property. An older home with an aging HVAC system, pool and extensive landscaping may need a larger cushion than a newer, simpler property.
The important part is planning for these expenses before they happen.
How Much Rent Should You Charge for Your Phoenix Home?
Your mortgage payment doesn't determine your home's rental value.
This is another important shift for accidental landlords.
If your mortgage payment is $3,000 per month, that doesn't mean renters will pay $3,000. Likewise, an owner with no mortgage shouldn't accept less than market rent simply because the property's carrying costs are lower.
Prospective residents compare your home with other rentals available to them.
Your rental price should therefore be based on factors such as:
- Comparable rental properties
- Current competing listings
- Location
- Property size and condition
- Amenities
- Current renter activity
And remember that vacancy has a cost.
Holding out for an above-market rent can sometimes cost more than accepting the market price sooner. If renter activity is telling you the asking price is too high, pay attention to that information.
Our Phoenix Rental Market Report provides additional context on current rental conditions and trends.
What New Responsibilities Do You Have as an Arizona Landlord?
Once someone else rents your home, you're no longer simply a homeowner. You have a landlord-resident relationship with legal and operational responsibilities.
Arizona law establishes requirements involving leases, disclosures, security deposits, property condition, repairs, notices and other aspects of that relationship.
Arizona law requires landlords at move-in to provide a signed copy of the rental agreement, a move-in form for documenting existing damage and written notification that the resident may be present at the move-out inspection.
Arizona law also requires certain written disclosures concerning the identity of the person authorized to manage the property and the owner or person authorized to act for the owner.
Federal Fair Housing laws apply to rental housing as well. Other federal requirements can apply depending on the property. For example, federal lead-based paint disclosure requirements apply to most housing built before 1978.
You don't need to become an attorney to own a rental property.
You do need appropriate documents, procedures and professional resources before you need them.
Put a Leasing Process in Place Before You Advertise
Finding someone who wants to rent your house is only one part of successfully leasing it.
Before advertising the property, determine how you're going to:
- Market and show the home
- Handle applications consistently
- Establish screening criteria
- Verify applicants
- Comply with Fair Housing requirements
- Prepare the lease and disclosures
- Collect required funds
- Document the property's move-in condition
- Transfer keys and possession
- Collect rent
- Communicate with the resident
- Handle future maintenance requests
First-time landlords can become so focused on finding a tenant that they don't build the systems needed to manage everything that happens afterward.
A well-screened resident, a good lease and a thoroughly documented move-in can make rental ownership much easier.
Should You Manage Your Phoenix Rental Yourself?
You certainly can manage one rental property yourself.
The better question is whether you want the job that comes with it.
Ask yourself who will handle the property when:
- The air conditioning stops working in July.
- A resident doesn't pay rent.
- A contractor needs access to the home.
- The HOA sends a violation notice.
- The lease needs to be renewed.
- The resident wants to move out.
- There's disagreement over maintenance or property condition.
Someone also needs to maintain records, coordinate repairs, conduct inspections, stay current on applicable requirements and communicate with residents throughout the tenancy.
Distance can make this harder. If becoming an accidental landlord coincides with relocating outside Phoenix - or outside Arizona - the practical demands of managing the property yourself can increase considerably.
Some owners enjoy being directly involved. Others would rather spend their time elsewhere and hire a professional property manager.
Neither choice is automatically right.
Just make sure you understand what you're signing up for before deciding.
What We've Seen With Accidental Landlords in Phoenix
Here at Rentals America, we've worked with quite a few owners over the years who never intended to become landlords.
A common story begins with a homeowner deciding to sell.
The property goes on the market, but the offers aren't what the owner hoped for. Rather than accept a price they're unhappy with, they decide to rent the home - sometimes thinking they'll try selling again in a year or two.
Then their perspective changes.
They see the mortgage balance gradually decline. They begin building more equity. Rental income helps support the property. They learn more about depreciation, long-term financing and the other potential benefits of owning real estate.
What began as Plan B sometimes becomes a long-term investment.
We've even seen accidental landlords enjoy the experience enough that they eventually purchase additional rental properties.
That doesn't mean everyone should keep a former residence forever. Sometimes selling is absolutely the better decision.
But becoming an accidental landlord can introduce an owner to an investment they might never otherwise have considered.
Phoenix Accidental Landlord Checklist
- Evaluate it as an investment. Estimate realistic rent, expenses, cash flow and your long-term goals.
- Make the mental shift. Start making decisions for an investment property rather than your former home.
- Get the property rent-ready. Address safety, functionality, cleanliness, deferred maintenance and rental-specific needs.
- Check your HOA requirements. Most Phoenix-area HOAs allow traditional long-term rentals, but review the current rules for lease terms, registration or other requirements. Short-term rentals are more commonly restricted.
- Update your insurance. Obtain appropriate landlord coverage and discuss liability limits.
- Talk with your tax professional. Understand the tax implications of converting your residence to rental use.
- Establish reserves. Keep several months of expenses accessible for vacancies and unexpected repairs.
- Determine market rent. Use current rental-market evidence rather than your mortgage payment.
- Establish your leasing process. Have screening criteria, documents and procedures ready before accepting applications.
- Decide who will manage the property. Be realistic about the time, knowledge and availability required.
Frequently Asked Questions About Becoming a Phoenix Landlord
Do I need to change my homeowners insurance if I rent out my house?
Generally, yes. An owner-occupied homeowners policy is different from insurance designed for a rental property. Contact your insurance professional before renting the home and obtain coverage appropriate for its new use.
How much money should I keep in reserve for a Phoenix rental property?
Here at Rentals America, we generally recommend keeping several months of property expenses readily available for vacancies and unexpected repairs. The appropriate amount will depend on the property's age, condition and potential major expenses.
Can I rent my Phoenix home if it has an HOA?
Yes. In our experience, most Phoenix-area HOAs allow traditional long-term rentals, although owners should always review their association's current rules before renting. HOAs may have requirements such as minimum lease terms, tenant registration, providing a copy of the lease, or other rental-related procedures. Short-term rentals are more commonly restricted, so owners considering vacation or other short-term rental use should pay particularly close attention to their HOA's governing documents and rules.
How do I know how much rent to charge?
Look at current comparable rentals and competing listings while considering the home's location, size, condition and amenities. Your mortgage payment does not determine market rent.
Can I manage my Phoenix rental if I move out of state?
It may be possible, but distance can make maintenance, inspections, emergencies and resident issues more difficult. Consider the practical demands carefully when deciding whether to self-manage or hire a Phoenix property manager.
What are the benefits of keeping my former home as a rental?
Potential benefits include rental income, mortgage principal paydown, appreciation, depreciation and other potential tax benefits, retention of favorable long-term financing, and the opportunity to build equity over time. The actual benefits depend on the property, financing and owner's circumstances.
Is it better to rent or sell my Phoenix home?
There's no universal answer. Compare expected rental income and expenses, existing financing, equity, property condition, tax consequences, expected holding period and your financial goals. Selling may be the better option for some owners, while others may benefit from holding the property as a long-term rental.
An Accidental Landlord Can Become an Intentional Investor
If circumstances unexpectedly put you in the landlord business, don't assume that's necessarily a bad thing.
Take the time to understand the property you already own. Learn what it takes to make it a successful rental. Evaluate both the costs and the potential long-term benefits.
Then make the decision deliberately.
Your former home may turn out to be an investment worth keeping.
Need Help Turning Your Phoenix Home Into a Rental?
If you're considering renting a home in the Phoenix area and aren't sure where to begin, we're happy to help.
Here at Rentals America, we can help you understand what your home may rent for, what it needs to become rent-ready, and what professional management would look like if you'd rather not handle everything yourself.
You can also continue with our Phoenix Landlord Playbook for a deeper look at preparing, leasing and managing a Phoenix rental property.
