Terrified Newbie! With a tenant!

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This will be my first post (and I’m a new user as of five minutes ago) I have been listening to your podcasts for a few months now and found my way here. Over two years ago I bought my grandpas house who has now passed. It was my starter home and given it was my grandpas, bought it without hesitation. The house needs all new paint, has a walk-in bathtub that leaks, it’s a 1945 house and doesn’t hold heat well, and carpet is due for replacement / removal. The walls in the basement seem to have various issues as well (discoloration, chipping). I am still living in the house but have acquired a friend who was kicked out of the house he was living. He has a good job and has been helping with utilities and stuff but there has not been any formal agreement placed. Only via text message (I guess verbal then?) It has now been a month and things are going great! But, there is a few things that I’m about to face. I’m in a pretty serious relationship with someone who has a better house than me, and she wants me to move in. I want to move in as well! That’s terrifying to me, why? Because I want to make sure I cover my tracks with renting a house. I want to make my house a rental and so does my friend. He wants to be able to put this on his next year taxes. That’s my issue I want to make it official / legal, however I am zero idea where to begin. I could sell the house but it is sentimental in many ways. I’d rather keep it and rent it, but I’d want to do things right. Here’s what I’m worried about: Given The House was appraised and ultimately I was given a mortgage, it couldn’t be too bad off right? Where do I go to find a checklist in what should be available to tenants? It’s an old house, do I need to upgrade anything? I have upgraded a few things and my friend is happy, but is there any required upgrades? Where can I find these? I was told I have to call my mortgage company and insurance company. Given it’s the weekend I have not done this yet but I am terrified of the potential fines / fees on this. I just wish there was a checklist on Michigan renting. Any and all help would be greatly appreciated!

[Thomas S.]

First there is no way you should begin by assuming it is appropriate as a rental. You need to do the math. You also need to lose the emotional attachment you have for the property. If you do not you are destined to fail. This is a business. Do not consider the property as anything other than a investment otherwise when tenants destroy it you will not recover.

Step one is to evaluate it as a potential rental by plugging in all the numbers. Post it's value and potential rent in your market and we will advise. Include all present expenses that you are aware of.. taxes, insurance, needed repairs etc.

Keep in mind th evast majority of SFHs are not suitable as income rental properties.