Renting out your house is a great way to dip your toe into the world of real estate. You are familiar with the location, it’s an asset you already own, and it grants you the ability to return to that home in the future. If that’s not enough, renting out your house also allows you to pay down your mortgage while holding onto the property, kick starts your future of investing and helps build your retirement fund. While renting out your house seems like a no-brainer, there is a lot to consider before you start collecting rent payments. Below is a list of 8 things you should know before renting out a house.
- Rent Price Should be Based on Local Competition
- Marketing is Key
- You Must Have a Strong Lease
- Tenant Screening is Crucial
- Security Deposits Act as an Insurance Policy
- Property Inspections should be Performed Regularly
- Landlordship is Time Consuming
- Strong Tenant-Landlord Relationships Matter
Let’s jump into this list so that you’re able to begin your real estate career feeling prepared and informed.
#1 Rent Price Should be Based on Local Competition
At first, it might seem difficult to nail down a price for rent, but it’s actually pretty simple. The most important thing is knowing your local market. What are other landlords in your area charging for properties similar to yours? A little bit of research on listing sites like Craigslist, Apartments.com, and Realtor will enable you to see the running rate for properties with comparable location, size, and condition to your own. Of course, your goal will be to turn a profit, but settling on an appropriate price will be the only way to attract potential tenants.
#2 Marketing is Key
Although yard signs can be an effective form of marketing, putting up a “For Rent” sign might not be enough to pull in interested renters. First, take plenty of decent-quality pictures that exhibit what your house has to offer. Then post those pictures with an informative and engaging description on listing sites. You can also take out a newspaper ad to reach local renters. The more effort you put into marketing your property, the better your chances will be of reaching quality renters.
#3 You Must Have a Strong Lease
The free lease you found online will not cut it. For your own protection, you definitely don’t want to skimp when it comes to creating leases. Below is a list of common information contained in lease agreements:
- Names of rental tenants
- Address of the rental property
- Lease agreement term length
- Monthly rent amount
- Security deposit amount
- Late fee definition, penalties, and fees
- Landlord-tenant laws
- A move-in condition report
- Rental policies
- Provisions for or against pets, utilities, smoking, and more
- This information provides a good place to start, but you will need to customize your lease based on your unique situation, preferences, and applicable laws. Each state has its own tenant-landlord laws, and your lease must reflect those regulations. Additionally, leases for every new tenant will vary from the previous.
#4 Tenant Screening is Crucial
Just because you get along with a prospective renter at a showing, doesn’t mean they’ll make a good tenant. Screening tenants is a vital aspect of the application process. The goal of screenings is to ensure that a tenant will pay on time, respect your property, hold up their end of the lease agreement, and be a safe addition to the area. As such, a thorough screening should include credit report checks, past landlord checks, employer checks, and county-level criminal checks. Fortunately, these days it’s easy to get set up with free rental screening services.
#5 Security Deposits Act as an Insurance Policy
Essentially, a security deposit is a sum of money paid by a tenant to ensure they fulfill the terms of their lease. The deposit is paid upfront and then returned either in full or in part once the tenant moves out. The money from security deposits should be held in a separate bank account and only used to repair damages made to the property or cover unpaid debts. Many states have laws in place that regulate how much a landlord can charge as a security deposit, but most landlords choose to charge the price of one month’s rent.
#6 Property Inspections Should be Performed Regularly
Although tenants should reach out to you with maintenance requests when needed, performing regular inspections will ensure you catch damages that go unreported or unnoticed. Many issues worsen over time, so addressing damages promptly will help maintain the health of your property. Scheduled inspections can be performed quarterly, bi-yearly, or yearly. When completing an inspection, test smoke detectors, check beneath sinks, replace furnace filters, look for obvious signs of damage, and ensure that the unit is being used appropriately.
#7 Landlordship is Time Consuming
Hopefully, by now you’ve realized that being a landlord requires more than providing the property and collecting rent checks. The job is multi-faceted and quite involved. If you’re renting out your own house, a property manager is not likely a good option. For transparency, here’s a list of all the different responsibilities you’ll be taking on.
- Advertise when looking for new tenants
- Process rental applications
- Sign the rental lease
- Collect monthly rent payments
- Keep track of the financials
- Schedule maintenance repairs
- Issue legal notices
- Enforce rental policies
- Understand and navigate landlord-tenant laws
- File evictions
- Don’t fear though, modern, free property management software solutions can automate much of this for you and simplify your life.
#8 Strong Tenant-Landlord Relationships Matter
Your friendliness should not end once the lease is signed. Establishing and maintaining a strong tenant-landlord relationship encourages tenants to treat your property with respect, uphold their end of the lease agreement, be prompt and timely with rent payments, renew their lease when the time comes, and so much more. There are a lot of little things that landlords can do show that they care. When tenants put in requests, respond to them promptly. Offer a fair grace period for late payments. Remember special dates like birthdays and holidays. Small gestures like these can play a significant role in making the rental process a good experience for both you and your tenant.
