Renting your home may appeal to homeowners who aren’t living in their home, and either aren’t ready to sell or are looking for additional income. But to be successful at renting out your house, you need to prepare your property and find good tenants.
Here are 12 steps that aspiring landlords who want to know how to rent out a house can take to get themselves ready for the role.
- Be sure to understand and comply with housing laws from local, state, and federal authorities before renting out your home.
- It’s important to estimate your costs and set your terms so you can earn a profit and your tenants know what to expect.
- Even after you choose your tenant, there are still ongoing matters to address to ensure your property is well maintained and your tenants are satisfied.
1. Assess Your Situation
It’s important to look at your current situation from both lifestyle and financial perspectives when deciding whether to rent your house.
Be honest in your answer because renting your house takes a lot of prep work. Understanding why you want to rent can serve as a motivator. If you have good reasons for renting out your home, you’re more likely to follow through on the preparation.
It can be useful to make a list of the benefits and drawbacks when deciding whether you want to take the steps to becoming a landlord.
Pros and Cons of Renting Out Your Home
|Potential consistent stream of income.||It may be difficult to find tenants, and you get no income from a vacant rental.|
|Can be a more passive stream of income if you hire a property manager.||You risk having tenants that won’t take good care of the property.|
|Your rental income can cover expenses you would have paid on your own, like property taxes and insurance.||You are still responsible for maintaining the property and making repairs.|
2. Learn the Law
Knowing your legal responsibilities will protect you and your tenant if there are disagreements. It also could help protect your property against major financial losses.
Landlord-tenant laws vary by state, but landlords generally are required to provide a habitable place to live for tenants, make repairs in a timely manner, and ensure the home is free of pests.
Learn about the landlord-tenant laws that apply in your area by checking with the appropriate state and local housing authority. It also may be useful to consult an attorney to ensure you’re abiding by fair housing requirements that prohibit discrimination against a tenant or applicant based on factors such as their race, gender, or sexual orientation.
Understanding the local real estate market will help you set a fair rental price, and market your property effectively to prospective tenants.
Every rental market is different, and demand can vary from season to season, says Mihal Gartenberg, a real estate broker with Coldwell Banker Warburg in New York City.
“The most important thing a landlord can do to prepare their home is to understand the market they are entering and their competition,” she says. “Landlords should consider more than price, like understanding timing and costs, which could influence whether you have an easier and faster time renting out the home.”
Knowing how much it costs to successfully rent out your house will help you price your rental so that the rent you collect will earn you a profit. Some of the most common costs include insurance, maintenance, repairs, and property management.
You’ll likely need landlord insurance, in addition to your homeowners insurance, to protect your property from unexpected events. This can include damage to your property from fire, wind, and other types of accidental damage.
Since you’re responsible for maintaining your property and making repairs, consider setting aside a percentage of your rental income each month to pay these costs.
Even if you manage the property yourself, you’ll still have property management costs. Common expenses may include paying for a service to collect rent payments, conducting credit and background checks, and hiring contractors for repairs and upkeep. Though it costs more, paying a property manager can take a lot of these tasks off your plate.
5. Set Your Terms
You want to be clear about the terms when renting your house, so applicants and tenants know what to expect. Below are some factors to consider when setting your rental terms.
It’s important to set a fair price so that your home makes a profit but isn’t priced too high for the market.
“Ultimately, the market sets the price, and if a unit is overpriced it likely won’t get a lot of interest and will linger on the market,” says Christopher Totaro, sales director at Coldwell Banker Warburg in New York City. “A rental home being on the market for more than 30 days is code for ‘overpriced.’”
You may be able to limit the number of tenants who can occupy your rental property, as long as it complies with local, state, and federal laws.
While pets increase the wear and tear on your property, you can charge a fee to cover the increased maintenance and cleaning costs. If you’d rather not risk it, you can refuse to allow pets.
If you’re considering a short-term rental arrangement, think about a daily, weekly, and even monthly rate. Consider a fee for cleaning the rental between stays.
For long-term rentals, you’ll need to think about a security deposit and a monthly rate.
You can pay the utilities yourself and factor those costs into the rent, or you can leave it to your tenant to pay their own utilities.
Once a price is set, you should walk through the rental to see if any work needs to be done before renting it out. Examples include painting the walls, switching out appliances, making sure all major systems are working, and refinishing floors. You’ll also want to evaluate the property for safety.
7. Market and Show Your Rental
Knowing how to market and show your rental can make a big difference between renting it out quickly or having it take much longer. When listing your rental, consider outlining the property’s main features, as well as nearby amenities.
The two other major components of this step are attracting prospective tenants and showing your property.
If the rental market in your area favors landlords, finding responsible tenants may be relatively easy. You’ll also want to be upfront about what you expect from tenants, such as whether you require them to purchase renters insurance.
If the rental market is slow, you may want to offer some incentives to attract responsible tenants, Gartenberg says.
“I like to advise landlords to cover the costs of the broker fee to attract tenants,” she says. “If the rental market has a lot of open vacancies, including concessions such as a free month of rent, landlords should consider whether they want to offer the concession or lower the monthly rent.”
Depending on your schedule, and how many tenants express interest in your house, you can schedule individual appointments or an open house.
When you receive rental applications, it’s time to check them out and choose the best fit for your property.
Some tenants may have references from current or previous landlords that will help you determine whether the applicant will pay their rent on time and take care of the property. You can request references as part of the rental application.
You can check an applicant’s credit score, though there may be a fee for doing so. To cover this charge, consider asking applicants to pay it or charging an application fee.
You may want to meet with prospective tenants face to face. You can ask whether they have pets, their desired move-in date, and why they want to rent your home.
After you receive some applications, you’ll get to the exciting part: choosing a tenant.
When choosing a tenant, you’ll want to consider whether they can afford the rent and their character. Factors to go over include their credit score and income, whether they have a consistent work record, and any recommendations from previous landlords.
You also must abide by fair housing laws, which prohibit you from discriminating based on an applicant’s race, skin color, sex, nationality, religion, disability, or family status.
It’s a good idea to have backup choices, in case your first choice has already found a rental or decides yours isn’t the right one for them.
When drafting the lease, consider consulting an attorney. Key items include fines for late payment, how nonpayment will be handled, what maintenance you agree to take care of, when you’ll be available to address issues, and the length of the lease.
“Knowing what terms you are willing to offer will streamline the rental process, especially when it is time to generate a lease,” Totaro says. “Since it is critical to know that your lease terms must be legal and not violate fair housing laws, this is a good reason to consult an attorney.”
Once you’re clear on the terms of the rental agreement, send it to your tenant to look over. If they agree, then you’ll both sign the lease.
If there are questions or concerns, this is the time to come to an agreement — before you sign a legally binding document.
Before the tenant moves in, you’ll want to collect the security deposit and the first month’s rent. Also, be clear with your tenant about how you want to collect payments. Will you have an online portal where they can pay by bank transfer or credit card? Or do you want them to pay by check?
After collecting the security deposit, consider depositing it in a separate bank account so it’ll be there in the event you need to refund it to the tenant.
Though it will eat into your rental profits, hiring help can be worthwhile if you want a more passive role in managing your rental. Hiring a property manager or an accountant to help with managing your rental’s finances takes those tasks off your plate. Also consider seeking out contractors you trust in case you need to hire one for repairs or maintenance.
“As a real estate agent, I always counsel landlords to have a list of plumbers, heating experts, roofers, construction workers, handymen, electricians, and attorneys at the ready who can respond immediately to any complaints or problems that may arise,” Totaro says.
Just because you successfully rented out your house doesn’t mean the work is over. There are ongoing matters to take care of to ensure your tenants are happy and your property is well maintained.
You want to be able to trust your tenants, while ensuring that they’re taking good care of the property. You may occasionally contact them to ask how things are going, and if they have any questions or concerns about the property. That way, your tenants know that you care and will hopefully come to you quickly with any problems or concerns.
Records of your interactions with your tenant, as well as maintenance requests and repair costs, will help you know exactly what’s happening with your rental. It’s also helpful for bookkeeping and for tabulating income and expenses for your tax returns.
If you and your tenant aren’t agreeing on an issue, make sure to clearly communicate and document it in writing. It could mean taking notes during a call, or sending letters or emails. Handle disputes in a respectful and professional way.
Renting Out Your House FAQ
Here are answers to frequently asked questions about renting out your house.
The downsides of renting a house include potentially difficult tenants and failing to make money when the property is vacant.
Yes, the money you make on rent counts as taxable income.
It’s possible to rent a house without a real estate agent, though it will take more work. That’s because you’ll have to be the one to market and show the property, and negotiate with the tenant.
Being prepared for the special challenges and financial rewards of renting a property is key for aspiring landlords. While it can feel like a steep learning curve if this is your first time renting out your house, it can be well worth it, especially if you continue to apply that knowledge to any future properties you rent out.