Things to know before renting out your own house

In the current real estate market, many homeowners find it more prudent to rent their homes rather than sell if they're moving. However, shifting from occupant to landlord is a tricky business, and there are a few important things to keep in mind.

According to Kimberly Lankford of Kiplinger, a personal finance advice website, the first thing a prospective landlord should do is change the insurance policy on the property from homeowners insurance to rental-home insurance. Under the new policy, the building will be covered and the property owner will have liability protection, but the tenants' possessions will not be covered. It is important, however, to include a provision in the lease documents requiring the tenants to insure their own belongings with renters insurance.

At least there is some good news: this is a great time to be a landlord, according to the U.S. Census Bureau. The agency recently reported its lowest listing of rental vacancies since 2002. Although the listings are known to fluctuate, this is a very good sign for landlords and potential rental property management officials.

Lastly, keep your eye on the time. According to Kiplinger, renting for more than three years can cost a property-owner the opportunity to claim tax-free profit from an eventual sale. So, if you do eventually want to sell, make sure all tenants have vacated before three years are up.