Renting out your condo is a great way to earn extra money. With a little time and effort, you can create an excellent rental business.
Can You Rent Out Your Condo?
You can rent out a condo that you own, as long as you follow the rules and requirements of your COA, lender, insurance provider, and local government.
How to Rent Out Your Condo
Here are the steps to successfully rent out your condo:
- Determine Rental Eligibility
- Learn Landlord-Tenant Rights & Laws
- Get the Condo Rental Ready
- Create a Move-In Checklist
- Hire a Cleaning Professional
- Set Your Rental Price
- Create an Efficient Rental Application
- Market and Advertise Your Condo
- Accept and Screen Applications
- Select a Tenant
- Sign the Lease and Collect the Security Deposit
- Establish Communication Procedures
1. Determine Rental Eligibility
Two main factors are considered to determine your ability to rent out your condo.
If you have a mortgage on your property, you must determine if your lender will allow you to rent out your condo. Most government-backed loans require you to live in your home for at least 12 months before renting it out.
You also need to have a plan for your new primary residence. If you plan to take out a new loan, you need to ensure you can qualify for both. Keep in mind you typically cannot have two FHA loans in place.
USDA loans do not allow rentals. If you have a USDA loan, you need to discuss other loan options with your lender.
Condominium Association Rules
Every Condominium Association (COA) has a specific set of rules for their community within the bylaws and CC&Rs (Declaration of Covenants, Conditions, and Restrictions). Some communities forbid rentals while others may have a cap on the number of rentals. Be sure to research the rules in your community before you list your rental.
2. Learn Landlord-Tenant Rights & Laws
When you rent out your condo, you become a landlord. All landlords have federal, state, and local laws they must follow. Learning the rules is essential to keep you from violating tenant rights. For example, the eviction process in Vermont can take anywhere from 4 to 7 months while in Louisiana it may take only 2 to 5 weeks.
3. Get the Condo Rental Ready
As a landlord, you will need to use a critical eye to survey your space. Walk through each room and identify areas that need maintenance, repairs, or upgrades. Keep in mind that this is a home you are renting, not one you will live in, so set and stick to a budget.
Start a list and determine which tasks you want to handle yourself and which tasks need a handyman or other professional.
The most common upgrades to a rental include:
- Fresh Paint
- New carpet
- Updated flooring
- Updated appliances
Call a few local handymen to discuss your new rental. Check to see if they offer any specials for landlords and what services they offer. Building a business relationship with a local handyman can help you in case of an emergency.
4. Create a Move-In Checklist
Once your property is ready for your new tenant, create a move-in checklist. This checklist will help you to document the condition of each area of the home before a tenant moves in. Anything that isn’t in the same condition (minus normal wear and tear) can allow you to use part of the security deposit. Your list should include:
- Light fixtures
5. Hire a Cleaning Professional
A high-quality cleaning professional can make all the difference in your condo. A clean property makes a great first impression on potential tenants.
Many local cleaning services offer move-in and move-out specials for landlords. Using these types of services can save you time and money.
Have a professional take photos of your home just after the cleaning service leaves. This will help ensure your property makes a great impression on potential tenants.
6. Set Your Rental Price
Finding the right rental price is an act of balance. The price must be profitable for you but also a competitive rate to attract highly qualified tenants.
To find the rental price “sweet spot” start by determining how much you need to charge to make a profit. Add up the cost of your mortgage, insurance, COA fees, and other applicable costs.
You should also look around at similar properties to determine what other rental rates are. Don’t forget to look at the additional amenities offered in the condo community, location, and any other important features.
Another resource is to look at the fair market rent for your area to get a general idea.
7. Create an Efficient Rental Application
An effective and efficient rental application will help you gather important information about potential tenants to help you determine if they are qualified to rent your condo. You can utilize online rental application templates or create your own. Be sure your application includes:
- Contact information
- Employment and income information
- Household information including additional tenants or animals
- Rental history
- Contact information for confirming employment, personal references, and at least one previous landlord
- Release form to pull credit information and criminal background reports
- Authorization form to contact references
8. Market and Advertise Your Condo
To effectively market your condo, consider what your ideal tenant is looking for. Create an advertisement that looks professional and portrays all the key features of your property including available amenities. Check out sites like Canva that offer templates and other tools to help. Be sure to use high-quality photos and easy-to-read fonts.
Post your advertisement in as many places as possible. Utilize websites, social media channels, and apps like Next Door. Many of these platforms also offer paid ads that can help you reach your ideal tenant. Paying for one weekend of ads can be fairly inexpensive and is effective in helping to get the word out.
9. Accept and Screen Applications
Once an application is complete, you can begin the screening process. It is critical to use the same process for all tenants who apply to ensure you are meeting federal Fair Housing laws which protect tenants against discrimination.
Landlords need to be very thorough during the screening process. Consider using a tenant screening service to run credit and background checks. Document all contacts with potential tenants including sending a written notice when you deny an application.
Keep in mind, landlords can accept multiple applications. You never know when a potential tenant may change their mind or something may come up in a background check.
Appropriately screening your applicants now will help you in the long run. Making the extra effort to contact references will help you to identify if the applicant is truly qualified. People can be dishonest and work to look good on paper while in reality, they have a history of excessive property damage and a list of prior evictions.
10. Select a Tenant
Once an applicant meets the necessary criteria, act quickly. Highly qualified tenants are a hot commodity in the rental market and the sooner they move in, the sooner you get paid.
Call the applicant to let them know you would like to move forward and set a time to meet and complete the necessary paperwork.
11. Sign the Lease and Collect the Security Deposit
Signing a lease agreement helps to protect you and your condo. If you don’t have a lease agreement, you can ask your legal representation or look for free lease templates online. It is important to tailor your lease agreement specifically to your unit, so you may need to edit and revise templates you find online. Lease agreements should at least include:
- Lease terms (12-months, 6-months, month-to-month)
- Security deposit amount
- Rent amount and how to pay it
- Additional fees (amenities or parking)
- Property rules
- Maintenance procedures
- Pet restrictions
- Eviction process
Once the lease has been signed by your new tenant, collect their security deposit and give them a receipt. File their paperwork and all rental documents in a secure place to access as needed.
Be sure your tenant is aware of all COA rules, policies, and procedures.
12. Establish Communication Procedures
The #1 common renter complaint is poor communication. As a landlord, you want your tenants to remain happy and satisfied to avoid any early vacancies or bad reviews on your property. Establishing communication procedures from the beginning is a great way to start off on the right foot.
Let your tenants know how to contact you and a timeline for a response. It is a good rule of thumb to try to respond to tenants within 24-48 hours. Although you may be unable to fix their problem right away, let them know you are working on it.
It is also important to make critical repairs within 7 days and 30 days for non-critical repairs.
Maintaining professional and effective communication procedures will help you avoid many tenant issues.
When discussing communication with your tenant, ask them the best method to contact them. This can help save you time and effort.
Should I Use a Property Manager To Rent My Condo?
Hiring a property manager helps to significantly reduce the responsibilities of a landlord. Here are some things to consider:
|Someone else to handle the day-to-day tasks (emergency repairs, legal paperwork, rent collection)
|It cuts into your profits
|Lower vacancy rate
|Relaxed screening process
|Experienced professional working on your behalf
|Finding an effective property management team may be difficult