Renting out your house is a great option for many homeowners. It can help you pay off your mortgage faster, create an additional source of income, and provide tax benefits.
Can You Rent Your House?
Many homeowners can legally rent their houses. However, you must follow specific rules and guidelines, especially if you have a mortgage
Requirements before renting your home may include:
- Lender-approval – Most primary residence government-backed loans require that the homeowner lives in the home for at least 12 months before renting the space
- HOA approval – All HOA communities have CC&Rs that dictate whether you can have a rental property within the community
- Local laws and zoning – Each municipality also has specific rules that must be followed
- Certificate of Occupancy – When there is a change in owner or tenant, a new certificate of occupancy is required
5 Steps To Rent Your House
Here are the steps to follow to prepare your house to rent
- Calculate Return on Investment
- Get Your House Rental Ready
- Understand Landlord-Tenant Laws
- List Your Rental Home
- Choose a Highly Qualified Tenant
1. Calculate Return on Investment
One of the most important things you need to do before you rent your house is to calculate your property’s return on investment (ROI).
Obviously, a landlord’s goal is to make money on top of covering property expenses. This can fluctuate depending on the current rental market in your area, if you have a mortgage, and the overall condition of your home.
To calculate ROI you need to determine how much you can charge for rent and estimate the expenses for the home. Don’t forget to include:
- Mortgage cost
- Insurance
- Property taxes
- Utilities
- Maintenance
- Advertising
- Tenant screening
- Reserves for vacancy and eviction
- Property management (if you plan to have one)
2. Get Your House Rental Ready
To get your house rental ready, you need to look at your space with a critical eye. Look over every room and determine what needs to be repaired or upgraded.
Consider your budget and make a list of what needs to be completed now and identify things you can do yourself. Here is a list of common repairs and upgrades landlords should consider:
- Install new carpet
- Apply a fresh coat of paint
- Repair any flawed windows, window locks, screens, blinds or shades
- Replace any broken or malfunctioning electrical outlets and covers
- Check that all deadbolts and doors are working properly
- Enhance the lighting
- Upgrade kitchen appliances
- Upgrade countertops
- Ensure all smoke detectors and carbon monoxide detectors are functioning properly
Stage Your Space
82% of real estate agents said that staging a home helps their clients visualize the property as a home. By taking a few extra steps, you can help get your property rented quickly.
Start by decluttering the space. Overly decorated, messy, or disheveled rooms do not attract highly qualified tenants. In terms of furniture and decor, think less is more.
It’s also important to choose neutral tones, especially with new carpet or paint. This helps buyers to connect with the space and think of what the home would look like as their own.
If you choose to work with an agent, ask for their expertise when getting your home ready. Working with an agent may offer you special connections or discounts with handymen, local cleaning services, landscapers, and staging services.
3. Understand Landlord-Tenant Laws
Renting your house means you become a landlord. All landlords have state and local laws they must adhere to. While laws vary based on your location, here are some general rules to consider:
- Warranty of Habitability – All tenants have a right to a safe and clean place to live. Landlords must ensure their tenant has access to heating and air, electricity, hot water, proper trash disposal, working bathrooms, and more.
- Housing Discrimination – Federal laws state that landlords cannot discriminate against renting to a tenant based on their race, color, religion, sex, familial status, national origin, or disability – also known as the Fair Housing Act.
- Rent Control – Many areas also have laws that address rent increases. Most states set a specific time period for landlords to notify tenants of an increase while others set specific guidelines as to how much rent can increase in a year.
Landlord Insurance
You will also need to contact your insurance provider to discuss coverage. Turning your home into a rental property will likely require landlord insurance. This helps to protect your property from excess damage and helps to protect you should someone get hurt on the property.
Landlords should also consider requiring renters insurance. This protects the tenant’s belongings in case of an extreme situation.
4. List Your Rental Home
Once your property is rental-ready, you can work to list your home. If you have an agent, they will typically take care of listing your home for you. If you are working without an agent here are a few steps you need to take:
Write a Rental Listing
Learning how to write a rental listing that is informative and interesting is essential to gaining the interest of potential tenants. People do not want to read through a ton of information to find what they are looking for. Here are a few steps to follow:
- Create an intriguing headline
- Write an engaging property description
- Identify lease terms
- List how to apply and contact information
Use a Professional Photographer
High-quality photos are a total game changer when it comes to a property listing. Potential tenants may spend only a few seconds looking at your listing before they determine if your home is a fit, so you need to make sure your first impression is a good one.
Professional real estate photographers understand how to use light and angles to help your space look attractive. They also may offer 3D layouts to help potential tenants visualize your floor plan.
Ask your agent (if you are using one) if this is a service they offer their clients. Many full-service real estate agents have a contract with a photographer and will handle scheduling a photographer for you.
Advertise
Landlords have an advantage in today’s rental market. There are many rental listing sites available for you to list your property.
Once you have written your rental listing and have professional photos, you can use sites like Canva to create a rental flyer. You can post your flyer on local boards and on your social media channels.
Many rental listing sites also have a simple format that you can plug your information into.
5. Choose a Highly Qualified Tenant
Landlords need to be picky when searching for the right tenant. While you don’t want to face long vacancies, getting in a hurry can also bring problems down the line. There are a few steps you can take to help you choose a qualified tenant.
Create a Custom Application
There are many rental application templates available online. You will want to make sure your application is tailored to meet your requirements. Be sure your application includes:
- Contact information
- Employment and income information
- Rental history
- Contact information for confirming employment, personal references, and at least one previous landlord
- Release form for background and credit reports
- Information for additional tenants or animals (if allowed)
Screen Tenants
Once the application is complete, you can begin the screening process. There are many tenant screening services and some rental listing sites that include tenant screening in their services.
You should also be sure to actually check the tenants’ references. You never know what you will find out by spending a few minutes making the necessary calls.
Sign Lease Paperwork
After you have found an applicant that meets the necessary criteria, it’s time to sign the lease. There are also many free lease templates available online, but you will need to make sure you add information specific to your property. Be sure to include:
- Lease terms (12-months, 6-months, month-to-month)
- Security deposit amount
- Rent amount
- Utility information
- Fees (late payment, amenities)
- Property rules (pet policy, smoking policy)
- Maintenance procedures
Use a move-in checklist to document the condition of each area of your home before renting. You should also allow the tenant to look at the list, note any adjustments, and sign the document. This can help you determine if you can use a portion of the security deposit to cover the cost of repairing any area outside normal wear and tear.
Should I Use an Agent for My Rental Property?
There is no requirement that you use an agent to rent out your property. But, agents can provide a lot of value if you are new to the rental market or don’t have a lot of time to invest. The benefits of using an agent include:
- A local area expert to help you list your property at the right price
- Marketing experience
- Connections with local handymen, professional cleaners, landscaping services, real estate photographers, and more
- Advertising assistance
- Help you get more eyes on your listing by speaking with fellow agents, putting your property on the MLS, and offering to host an open house or broker’s open
- Help with screening tenants
However, if you are on a budget an agent’s services may not be worth the expense. Agents typically charge a flat fee of 50% of the monthly lease amount, 10% of the yearly lease amount, or an entire month’s rent.
