If you’re getting short on money, need to pay down debt, or just want an extra income, renting out your house seems to be a great option. While renting your house out may seem as easy as posting an ad on Craigslist, it’s not as simple as that. You need to prepare your house and prepare some legal requirements before you leap into the world of being a landlord. Below are the steps that every new landlord must do for successful renting out of their property:
1. Get a home inspection
Thoroughly inspect your house structure, fixtures, and repair major problems. It’s best to hire a professional who can help you inspect and fix any maintenance issues before your tenants move in. Look at potential problem areas like gutters, pipes, roof leaks, cracks on walls, ceilings, flooring, faucets, electrical outlets, and burnt-out light bulbs. Any areas that are damaged, not working properly, or need to be replaced must be dealt with right away. This will help protect you from any potential legal issues while saving you from maintenance phone calls while your tenants are already renting out the property. Also, having home inspections before a tenant moves in and after he or she moves out will provide you documentation of any damage caused by the tenant.
2. Prepare the house
Once the structural and maintenance issues are fixed, you need to prepare the home by thoroughly cleaning it. Tenants are choosy at times, because of the wide availability of other rental options, so don’t turn them off with a dirty place. Deep clean the floors and scrub the tile grouts. Clean the windows, blinds, and vents. Shampoo the carpets and remove stains. Repaint your walls in a neutral color to make it look cleaner, brighter and more preferably by more people. You may upgrade your shower, kitchen countertops, air conditioning, washer and dryer, and garage, if in case it needs one to make it more desirable. Trim the lawn and make it neat, and tidy.
Also, consider the safety of the tenant. Renters will at least look for basic security features like smoke detectors and fire extinguishers, so make sure these are provided and are in working order.
Develop a list that will make the house more appealing. For ads, words that are attractive for renters include “state-of-the-art,” “granite,” “maple,” “hardwood floors,” and “stainless steel appliances.” Make sure use these words that apply to your home for your ads.
3. Check your furniture and appliances
You have to keep your furniture and appliances clean and working, too. If you are renting out a furnished house, make sure you keep everything in working order. If you have valuable items, furniture, and fixtures that you don’t want to be damaged or stolen, remove them. If you want to provide appliances, ensure that is clean inside and out. Renting out a home with appliances will allow you to increase the rental price, but it can cost you if the appliances would need constant maintenance and repairs.
4. Determine how you can manage to be a landlord
If you’re planning to manage the house rental yourself, make sure you understand the responsibility involved in this business. First of all, do you have the time to handle your landlord obligations, despite having a full-time job, a business or anything else? Being a landlord means having more responsibilities you’ll need to fit in your life such as finding tenants, collecting rent, staying on top of repairs, making lease agreements, avoiding wear and tear on your property and keeping an eye on your tenant’s housekeeping skills.
If you’re not going to manage the home yourself, consider hiring a good property management company. They typically charge 4% to 12% of the monthly rent for their services, but they will be responsible for finding potential tenants, handling repairs, collecting rents, handling tax payments and dealing with early vacancies and evictions if needed. If you prefer to hire a management company, find a licensed professional you can trust.
5. Get an insurance policy
Protecting your property with the correct insurance policy is very important, as you need a different policy for when you’re using it as a primary residence or renting it to a tenant. Contact your mortgage and insurance company about this change. While living in the house, the insurance you have was a homeowner’s policy, which covers the structure, damages, and belongings in your house. Once you start renting the house out, you’ll need rental home insurance or fire insurance. This covers your home’s structure, medical expenses, loss of rental income, and legal costs. Encourage your tenants also to buy renters insurance, since you’re not responsible for their belongings.
6. Hire professionals to help you
It’s important to hire or ask for help from real estate attorneys and accountants to make sure you’ll be abiding local property laws, tax laws and zoning ordinances when turning your house in a rental property. For example, the IRS requires that all rental income must be listed on your tax return, and an accountant can help you with that. He or she can also help you minimize your tax bill.
A real estate attorney, on the other hand, can help you navigate landlord-tenant regulations which vary from state to state. They can also help you in drafting the lease agreement. They can help you create a good lease agreement to ensure that you’re protected from financial harm resulting from tenants finding loopholes in your agreement.
7. Set a competitive price
Once your home is ready for rent, set a monthly cost for the rent by learning what other rental properties in your neighborhood or community are offering. You know that potential tenants will be scouting around for the best deal, so make sure you set a competitive price for your rent and highlight the most desirable and valuable aspects of your home. Get an idea by searching online, checking out newspapers and neighborhood rental signs.
8. Protect your rights with a lease agreement
Speaking of lease agreements, it is important this documents signed by both landlord and the tenant so each party understands their rights and obligations. A lease should mention the terms and conditions related to these items:
- Lease term
- Security deposit
- Rental payment due date and penalties for late payment
- List of tenants
- Pet policies
- Repairs and who’s going to shoulder what
- Maintenance responsibilities
- Pet policies
- Rules of behavior
- Association rules that must be followed by the tenant
- Eviction terms
9. Find good tenants
Start looking for potential tenants as soon as your property is ready to be put up for rent. You can find them by advertising online or in newspapers, and also by spreading the word through your relatives, friends, and co-workers, in case they know someone who might be interested.
Once you have identified potential tenants to rent your house to, ask them to fill out an application form listing their names, employer, salary, previous landlords and references. Also, ask for their Social Security number, and get a signed authorization to check their credit reports.