Are you considering renting out your house? Maybe you have a different investment property that you’re considering renting out for the first time. As you decide to take on the role of landlord, you need to know that you’re going to have lots of new responsibilities as a result.
Naturally, you don’t want to go through this in a sink or swim way because a rental property is a horrible place to sink. That’s why you’re here now. You want to know how to successfully rent out your home in a way that will be easier on you and better for your lifestyle.
Before Becoming A Landlord
When it comes to how to rent out a house, there are several things you need to know before you take the plunge to become a landlord. Let’s say that you’ve already decided that you’re going to do it, but you’re still unsure. Ask yourself these questions to be as prepared as possible for this journey into real estate investment.
How Close Are You?
If you’re going to embrace being a landlord, the ideal situation means that you’re going to live fairly close to the home you’re renting out. There’s a good reason for this, especially when you get that phone call at 3 am saying that the heater went out in the dead of winter.
You’re also going to want to live close by so you can monitor the property. That means checking on the unit regularly to see if any repairs need to be made and to ensure everything is in working order. Just remember, let your tenants know before you show up at the front door. You may own it, but they live there, so be sure to show them some respect.
For those of you that are not close by your rental property, you need to ensure you have a property management company available for your tenants to reach out to when there are issues. The company would be responsible for all of the things a landlord would normally do when you can’t be there.
What Is The Law Of The Land?
Do you know what the landlord-tenant laws for your state or region say when it comes to how to rent out a house? It’s a good idea to make sure you know what you can legally request, so you don’t overstep your bounds. That means that you need to do your homework because if you ask for a nonrefundable deposit and it’s illegal, you could land yourself in hot water.
The laws also cover things like property access, the required amount of time for eviction notices, and security deposits. Laws don’t stop there. They extend to the federal level, and you need to be aware of those laws, too.
There are anti-discrimination laws that are so much more than being against racism or sexism. Landlords are often unaware of these laws, or if they do, they tend to ignore them. They assume that as long as they’re not racist or sexist, it’s not a big deal. Fair-housing laws exist for a reason, so make sure you are acquainted with them to keep that from coming back to bite you.
Where To Find Tenants
There are plenty of places to find potential tenants. You can post ads in online classifieds or simply spread the word. Thanks to social media platforms, you can probably even find a tenant using that as your preferred method when it comes to how to rent out a house.
To help you sort through the tenants, have them fill out an application as part of the process. It should ask for basic information like their name, previous landlords or other references, as well as their employer’s contact information and salary.
Having all of this information gets you started on the screening process. You don’t want to approve a tenant based purely on a piece of paper, but it is enough to get the ball rolling on how to rent out a house. If references don’t speak well of the tenant, you may want to put them in the discard pile instead of continuing forward.
Screen Tenants Before Approving Them
You might think that’s an obvious thing, but if you don’t take the time to screen your potential tenants properly, you may be setting yourself up for some major problems. That means you need to do a background check as well as a credit check.
These types of checks are easy to do online and are a critical part of the approval process. Don’t forget the human element, though, because there are exceptions to every rule. As an example, you may have a rental property that a family wants to rent, but the couple’s credit scores are really low.
Poor Credit Isn’t Always An Automatic “No”
At first glance, you might think, nope, that’s a bad idea. Here’s the thing about that. It is entirely possible that the low credit score could be a result of someone having lost a job and therefore losing income. That’s a quick way to send someone’s credit score way downhill faster than the speed of light.
If that same person finally has a solid job, it is possible that they could be fantastic candidates for becoming tenants in your rental property. With that said, don’t neglect to call references and do a complete interview to get to know the person that will be living on your property
Decide How Much Rent To Charge
You don’t want to overcharge because if you do, you’re probably not going to get much in the way of tenant applications. You also don’t want to undercharge because you have your own financial obligations to take care of.
The best way to decide how much rent to charge is going to be to consider the mortgage payment if there is a mortgage. In an ideal situation, you should also tack on an extra hundred or two hundred dollars to create a positive cash flow, so you have some extra money to put away in case of emergencies.
Don’t Forget To Check Comparables
You’ll also want to check with whatever is available in your market for rentals. You may find rents that are lower or higher depending on what is out there, but the rent for your property should reflect comparable costs. If you owe more on the house than it is worth, you may end up having to ask for a lesser amount than what would cover the mortgage to have any hope of renting out the property.
Once you decide what your rent is going to be, you need to know how that applies to your potential tenants. Do you expect them to make double or triple the amount? What will you do to ensure your tenants pay the rent on time every month? What will the consequences be if they don’t?
Be Willing To Enforce Timely Rent Payments
Paying rent on time seems like something that makes you scratch your head about why we’re saying this, but it’s a real thing. It means that you need to keep your relationship with your tenants entirely professional.
Even if you’re the type of person that likes to be friendly with everyone, you really should draw the line with tenants. Getting too close can result in letting them slide on their rent until you realize that they are several months behind.
Consequences Of Letting Payments Slide
Letting payments slide will hurt you if you are paying on a mortgage with the rent payment. It is going to leave you struggling to make the mortgage payments and putting you in potential financial turmoil. You don’t want that, so you want to be firm with your tenants while still maintaining a respectful attitude towards them.
Remember, having a good, professional relationship with your tenants is going to go a long way to making sure you receive the rent check on time every single month. It will also make life easier for you when you get those calls at odd hours to check on things that break.
Consider Customizing The Lease
You can go forward with a lease in one of two ways. You can pick a standard lease to use, or you can customize the lease to include the terms you want. A standard lease can be found on legal sites if you don’t have a lawyer available to create one for you.
A word of warning when it comes to choosing standard leases – they may not be entirely suitable for your state’s laws. For that reason, you’re going to want to find a lawyer that is at least willing to go through the document to make sure it is legally binding.
Customizing a lease can also be done and is usually a better option for most people. That does require a real estate attorney to help you with the document, but once it’s done, you’re ready to go. Customization includes things such as allowed pets, what types of pets, and any other rules or regulations that need to be followed like leash laws.
The Lease Protects You, Too
Not only does the lease tell your tenant what to expect, but it also protects you as a landlord. Your lease should comply with all of the necessary laws in your area to limit your own liability. Inside of a lease, you’re also going to explain who is responsible for the various areas of the house.
Are you responsible for fixing an issue with the house? Is the tenant responsible? What about regular maintenance like mowing the lawn? Who is supposed to take care of that? Are there any other rules about smoking or noise levels?
Spell Everything Out In Detail
By having details spelled out in a lease, you and your tenant know where responsibility falls. It also allows the tenant to have a plumbing issue fixed even if you’re not there. Of course, if you do allow your tenants to take care of issues without prior approval, you’re probably going to want to include a clause that limits the amount you’re willing to spend.
Eviction terms also give you an out if the tenant is not paying rent on time or causing problems in the home that go against pre-determined regulations. It’s a real problem that some landlords can face, so having everything in a written lease agreement makes life easier for everyone.
Remember Property Insurance
There are multiple types of insurance available, and you’re going to have to get the correct insurance that covers your rental property. Rental properties don’t get the same insurance as a house that you’re living in and claiming as a primary residence.
Rental insurance is not the same as home owner’s insurance. Instead, rental insurance is meant to cover the structure, any medical expenses associated with damages to the tenants while they live there, legal costs if any legal procedures are required, and the loss of the income should the property be in need of repairs.
As the landlord, it is important to note that you are not responsible for the tenant’s belongings. What happens to them is not anything you need to concern yourself with. It would be good business, though, to mention that to the tenant and encourage getting renter’s insurance. That kind of insurance will cover them if they need it.
Be Ready To Conduct An Eviction Process
Evictions happen in almost every landlord’s life because, at some point, you will have that tenant that is going to force your hand. You don’t want to kick someone out because it will make their life harder, but at the same time, you don’t want to put your income in jeopardy either.
It’s a tough situation to be in for sure. When it happens, and it will, you’ll need a licensed real estate attorney to get the process started. You can’t just waltz into your rental property and forcibly kick them to the curb. It doesn’t work that way.
Eviction is a legal process that requires you to complete a court filing and have law enforcement accompany you to remove the tenant. Only a law enforcement officer can actually physically force someone else out of your property if they don’t want to leave.
The process also isn’t cheap. Evictions can cost several hundred dollars at a minimum and may end up costing much more. At the very least, it’s another reason you want to create a positive cash flow so you can cover these expenses should they come up.
Consider A Property Management Company
If you would prefer to have a hands-off approach with the property and the tenant, then you may want to consider a property management company. Going this route means that the company will be responsible for providing the services you would normally handle.
Management typically includes everything from finding the tenant to managing problems that crop up with the property. They will be responsible for collecting monthly rent and late fees as well as dealing with things like evictions. There is a given emotional distance which is important in maintaining a business relationship.
You don’t want to go with just any company to manage your property. What you do want is a company that is licensed to act as a property manager. You can check with your local real estate agent or with the National Association of Residential Property Managers.
Learning How To Rent Out A House
There is a learning curve, but you can do it successfully with the right mindset. If you want to have an active role with your property and your tenants, then a landlord may be exactly what you want to do. On the other hand, if you want to be less involved, a property management company may be a better choice.
Remember to put funds away if and when you can so you can pull them out for that inevitable rainy day. Whatever you decide to do, you’re going to want to be properly prepared to go forward with any other costs that will come from your rental once you decide to rent your house out.