A Landlord’s Guide to Renting Out a Home
The time has come. You bought an investment property. You upgraded the cabinets, patched up the walls, and put in fresh new carpets. Finally, you are ready to start renting out your house — or are you?
As a first time landlord, you might be a little bit anxious about choosing the right tenant and entering into a binding lease agreement with them. After all, you may be stuck with them for a while. There is plenty that can go wrong when renting out a house for the first time, and to be honest some things probably will go awry no matter how many precautions you take. But as a new landlord, learning how to deal with unexpected situations goes with the territory. To help you on your journey, follow these landlord tips for renting a house and you will be well on your way toward managing your rental like a pro.
Set your price and paperwork
One of the first things you need to do before advertising is to establish a fair market price for your rental. The best method is to research comparable rental properties in the area. Choose other rental homes that have similar features and amenities to yours for a more accurate comparison.
Another thing that is absolutely essential to do before listing your rental is to make sure you have an ironclad understanding of state and federal fair housing laws. The Federal Fair Housing Act makes it illegal to discriminate against tenants on the basis of race, color, national origin, religion, sex, familial status, or disability. Know that various states have laws that protect additional classes. In practice, this means you need to be very careful in how your rental listings are worded. For example, saying your home is “great for families” would be a violation as it potentially discriminates based on familial status.
Finally, you’ll need to prepare a rental application and a lease agreement. The lease is a binding agreement between you and the tenant that grants them the right to inhabit and use the property. It also outlines the duration of the lease, the monthly rental amount, any fees, and policies — such as whether pets are allowed or not. Because state laws vary, you’ll need to make sure that any lease or application form you choose conforms to the laws where your rental is located. To be on the safe side, consider getting an attorney to draft these documents for you.
Consider ways to boost your investment
- Add solar panels: The addition of solar panels not only appeals to conscious tenants but lowers utility costs as well. Google’s Project Sunroof can calculate the savings potential for your home.
- Adding rental storage spaces: Adding additional storage space, such as a backyard shed, is an amenity that can boost the rental amount. If you have a tenant that isn’t interested in the storage space, you could rent it out to someone else for storage only.
- Make it pet friendly: While you might be inclined to not allow pets because they might cause damage, any incidents are typically covered by rental deposits and by the best landlord insurance policies. By allowing pets you will widen your potential tenant pool and can earn additional income by charging pet rent.
- Include a washer/dryer: An in-unit washer dryer is one of the most sought-after amenities. Some renters won’t even consider your home without it. Having one in the unit or house will allow you to charge more for rent each month.
- Don’t neglect the yard: Curb appeal matters when it comes to rentals. Great-looking landscaping can help you command higher rents. Outdoor living spaces such as patios, decks, and fire pits, can add value as well.
The moment you’ve been waiting for — advertising your rental. There are a handful of methods for getting bites on your property, but we will start with the most basic first. If you’re lucky, putting a “For Rent” sign out front might be all it takes. But unless your property is on a busy street, you might be waiting a while. Classifieds in your local paper are the next logical step. You can also list on Craigslist or rental listing aggregators like Apartments.com for a small fee.
Your other option is to hire a real estate agent who will find you a tenant. Realtors typically charge anywhere from half a month’s rent up to the full monthly rental rate as a commission. This might seem steep, but could be worth it if your rental is in a particularly competitive market and you are having trouble attracting tenants on your own.
Conduct tenant screenings
Once you find a prospective tenant, you’ll need to screen them. This primarily involves checking their credit report, verifying their income, and looking to see if they have any criminal convictions. You will also want to ask about their previous rental history. What minimum standards you are willing to accept is up to your discretion, but it is a good idea to have those in writing so they are applied equally to all prospective tenants.
Primarily you will want to avoid running afoul of fair housing laws, so make sure you don’t ask any questions that could be considered discriminatory, whether in person, on the phone, or in a rental application. Some questions you can ask include:
- How many other occupants will be living with you?
- What do you do for work?
- Why are you moving?
- Do you own any pets?
Set up your payment portal
When putting the lease together you’ll need to let your tenant know how rent is to be paid. As a landlord, you can generally choose which forms of payment you are willing to accept, but it must be written into the lease. For example, you may choose not to accept cash or personal checks. You also need to establish not only when rent is due every month, but also how rent can be paid, whether it is by mail, placed in a drop-off box or via a payment portal.
Many landlords are opting to accept payments via online payment portals. These are becoming more commonplace as landlords discover the reliability they offer in terms of collections. Some platforms are free for landlords to use, while others offer more robust features for a nominal fee.
The bottom line
Being a first time landlord has its ups and downs, but if you follow the basic landlord tips outlined above you’ll be in good shape. As a new landlord, you should be prepared to continually learn more about the business and improve your process over time.
Frequently asked questions
What should I include in my rental listing?
Include information about the size of the property, the number of bedrooms, the number of bathrooms, and any amenities. Familiarize yourself with fair housing laws to avoid accidentally including any language that could be considered discriminatory.
Can I rent out my house if I have a mortgage?
If you plan to rent out your primary residence, you’ll most likely need to notify your mortgage company before proceeding. Conventional loans generally require that the borrower occupy the home, but they may allow you to rent it out under certain conditions.
How do I rent my house without an agent?
Renting out your home without an agent involves a hands-on approach and attention to detail. You will need to familiarize yourself with laws that govern real estate leasing and educate yourself on industry best practices. To better protect yourself, have a real estate lawyer draft a lease agreement for you to use.