Last Updated: September 28, 2023
Renting out your house can be a lucrative endeavor, but it requires careful planning and execution. If you're new to the world of landlordship, there are a few key steps you need to take to ensure a smooth and successful rental experience. In this beginner's guide, we'll walk you through the process, covering everything from legal considerations to finding the right tenants. So, let's dive in!
Benefits and Drawbacks of Renting Out Your House
Before diving into the nitty-gritty details, it's important to weigh the benefits and drawbacks of renting out your house. On the plus side, renting can provide you with a steady stream of income and help you build wealth over time. Additionally, renting out your house gives you the flexibility to move or travel without selling your property.
However, there are also potential drawbacks to consider. Being a landlord comes with responsibilities and potential headaches. You'll need to invest time and money into maintaining your property, dealing with tenant issues, and complying with legal and regulatory requirements. Additionally, the rental market can be unpredictable, and there's always a risk of tenants damaging your property or defaulting on rent.
15 Steps To Renting Out Your House
Now that you understand the benefits and drawbacks, let's dive into the step-by-step process of renting out your house:
1. Establish Rental Eligibility
The first step is to determine if you're legally allowed to rent out your house. Check with your lender to ensure you have their permission, review your insurance coverage, and familiarize yourself with local and federal renting and zoning laws. Bear in mind that some lenders require you to live in your primary residence for at least one year before renting it out.
2. Determine Rental Type
Next, decide on the type of rental you want to offer. You can choose between long-term rentals, which typically involve a 12-month lease, or short-term rentals, which cater to occasional tenants through platforms like Airbnb or VRBO. If you're looking for a middle ground, you can also consider renting out part of your home, such as a spare bedroom or basement apartment.
3. Understand Profitability
To determine whether renting out your house is financially viable, calculate the return on investment (ROI). Consider factors such as mortgage payments, property taxes, utilities, maintenance costs, landlord insurance, and any required fees or permits. Additionally, research the rental market to understand the approximate rent price you can charge and compare it to your expenses.
4. Consider Hiring Help
Being a landlord can be a time-consuming and challenging role. Consider whether you have the capacity to handle all the necessary tasks, such as advertising, tenant screening, maintenance, and lease management. If not, hiring a real estate agent or property management company can alleviate the burden and ensure a smoother rental experience.
5. Learn Landlord-Tenant Law
As a landlord, it's essential to familiarize yourself with both federal and state landlord-tenant laws. Laws such as the Fair Housing Act, Fair Credit Reporting Act, and security deposit regulations vary, and it's crucial to abide by them to avoid legal issues. Educate yourself on these laws to protect your interests and maintain a positive landlord-tenant relationship.
6. Get Rental Ready
Before listing your property, thoroughly inspect every area and make necessary repairs, upgrades, and improvements. Pay attention to walls, windows, doors, light fixtures, appliances, plumbing, and other essential features. Consider staging your space to make it more appealing to potential tenants. Remember, first impressions matter!
7. Obtain Necessary Documents
Ensure you have all the required documents and permissions before renting out your house. This may include a landlord permit, certificate of occupancy, landlord insurance, and clearance from any relevant homeowners or condominium association. Failing to comply with legal requirements can have severe consequences, so make sure to check all the boxes.
8. Stage Your Space
To attract high-quality tenants, it's crucial to present your property in the best possible light. Clean and declutter the space, upgrade lighting, choose furniture that fits the area, and use neutral tones for a universally appealing ambiance. Consider professional photography to showcase your property's features effectively.
9. Determine How Much To Charge For Rent
Pricing your rental appropriately is critical to attract qualified tenants and generate a profit. Research comparable properties in your area, consider fair market value data, evaluate the 1% rule (rent should be 1% of the property's value), factor in location and seasonality, and analyze the demand-supply dynamics in your rental market. Don't forget to account for any rent concessions you might offer to attract tenants.
10. Write an Enticing Rental Listing
Crafting an engaging rental listing is crucial to catch potential tenants' attention. Create an interesting headline that highlights key details, such as price, location, square footage, and the number of bedrooms and bathrooms. Include a compelling property description, specify rental terms, and use high-quality photos. Make it easy for interested parties to apply and contact you.
11. Advertise Your Rental Property
To reach a wider audience, utilize popular rental listing sites such as Zillow, Trulia, and Apartments.com. Price your property competitively, use high-quality photos, offer online payment and maintenance request options, and consider paid advertising if necessary. Leverage social media platforms and word-of-mouth to expand your reach. If you prefer a more hands-off approach, consider working with a real estate agent or property manager.
12. Tenant Screening
Thoroughly screening potential tenants is vital to mitigate risks and ensure a successful rental experience. Gather detailed information through applications, perform background and credit checks, contact references and previous landlords, and conduct interviews to gauge suitability. Make sure to follow fair housing and anti-discrimination laws throughout the screening process.
13. Sign the Lease and Collect the Security Deposit
Once you've selected a suitable tenant, it's time to sign the lease agreement. Customize a lease template to include essential information such as names of the tenant(s) and landlord(s), lease duration, rent price and payment terms, house rules, and expectations. Collect the security deposit and provide the tenant with a copy of the agreement and a receipt.
14. Set Communication Procedures
Establish clear communication channels with your tenant. Provide them with a printed document outlining emergency contact information, maintenance request procedures, notification protocols for landlord access, and your personal and/or property manager's contact details. Promoting effective communication helps maintain a healthy landlord-tenant relationship and ensures timely issue resolution.
15. Document Everything and Go The Extra Mile
Maintain detailed records of all interactions with your tenant. Document repairs, maintenance requests, rent payments, and any other pertinent information. Going the extra mile by being positive, friendly, and proactive can foster a positive tenant experience and reduce tenant turnover. Consider small gestures such as birthday cards, holiday treats, or sharing community event information to build rapport.
Congratulations! You've completed the rental process and are now a landlord. Remember to stay informed about legal and market developments, maintain open communication with your tenants, and continue providing a well-maintained, comfortable living space.
Enjoy your journey as a successful landlord!
Note: The images used in this article are from iPropertyManagement.com and serve as visual aids to enhance the content.