Renting out your house can be a great way to hang on to your investment after you move into a new home. Figuring out how to become a landlord takes some knowledge of how the home rental process works. Here’s how to rent a house to ensure it’s a smooth—and financially smart—venture.
Make a financial plan.
If you’re wondering how to rent a house that turns a profit, the answer is with good planning and long-term thinking. Many landlords only expect a few hundred dollars in profit per month, so it’s important to determine if the time and effort of learning how to become a landlord will be worth it for you in your local housing market.
Renting out a home is usually not a get-rich-quick scheme, but an investment for the long haul. Consider the following expenses in your budget:
- Mortgage payment (if any)
- Property taxes
- Regular maintenance
- Repairs and upgrades
Set a rental rate.
Here’s the other side of your budget: the income. Of course, you’ll want your rental rate to be higher than your expenses, but you’ll have to be competitive to attract tenants, too. Research area rents. Tour properties to compare housing quality and amenities. If you need to charge more than what’s out there to justify becoming a landlord, make sure your house offers renters more, too.
Have a property management plan.
Who do you want your future renters to call in the middle of the night when a leaking pipe is filling up the basement? And who will fix it? The answer to both could be you—but if you’re moving two hours away, maybe not.
Make a plan for who will manage the property day-to-day, from fielding maintenance calls to checking on the rental periodically. You’ll also want to make a plan for repairs and planned maintenance. You could contract with a property management company or individual to handle all of it, but doing it yourself will maximize your investment.
Learn landlord tenant law.
Most states have specific landlord tenant laws that cover issues such as security deposits, property access, and notice periods for ending a lease. For example, you can’t just waltz in for a spot-check whenever you want—there are renters rights that require giving tenants notice and those time frames vary by state. Contact your local housing authority to find the best way to research your state and local laws.
There are also federal laws around housing safety and anti-discrimination laws. These often protect renters while they’re apartment hunting, so be sure to be clear on these early on. Check with the Department of Housing and Urban Development for all landlord tenant laws, and specifically research the Federal Anti-Discrimination Law, Federal Housing Law, and Fair Credit Reporting Act.
Set rental policies and write a lease.
You can find a basic lease contract online, but there may be issues specific to your situation that are important to include. Plus, you have some decisions to make about your rental policies: will you allow pets and want to include a pet deposit, or determine who will do the lawn care? What will the process be when a tenant wants to break a lease? Using sample leases found online can be a great way to see how others have approached some of these issues.
You’ll want to make sure the lease agreement is fully legal and doesn’t have any loopholes you haven’t thought of. Consult with a lawyer to make sure you’re going about how to rent a house the legal way.
Create a marketing plan to rent your house.
Finding a great tenant is part of learning how to rent a house. Just like when you sell a house, you want to make your rental shine before listing it. Consider staging it and getting professional photography done to make it look its best. The higher quality the listing photos are, the more some renters may be willing to pay.
Listing your rental home on an online marketplace like Trulia will help you reach the broadest selection of potential renters and communicate all of the details about your rental in one place. You can use the link to spread the word about your rental among friends, colleagues, and neighbors.
Meet and screen potential tenants.
Typically, the first thing an interested renter will want to do is to see the apartment. This is a great opportunity for landlords, too. You’ll get to meet each one and get a feel for whether or not they’ll be a responsible, respectful tenant.
Once you have your contenders narrowed down, it’s smart to get an application from them and run background and credit check. You can use an online tenant-screening service, or do it yourself. Here’s how:
- Have them fill out an application. You can charge an application fee, which can help you learn who is serious about the place and can help offset your costs for renting the house. Most landlords charge between $30-$50, but in really competitive rental markets, some charge up to $100. You can find sample applications online.
- Ask for their social security number and run a credit check. You can request a credit check from each of the three credit bureaus—Trans Union, Equifax, and Experian. Some charge fees, but it’s common to ask the potential tenants to cover the charges.
- Ask for at least three references. Call each person on their list and ask a few basic questions. Are they reliable? Do they meet deadlines? Retain employment? Take care of their living spaces? Have pets?
- Confirm their employment. Ask to see a few months of paystubs to make sure their income can cover the rent, and call their employer to be sure they still work there.
Document your rental and protect their security deposit.
This is a small but important step once you’ve decided on a tenant. You will legally owe your renter their security deposit refund at the end of the lease, so put it in a separate account where it’s safe (some states even require this by law). You may spend some of it on repairs, but you’ll still need it available immediately. You’ll have a legally-determined deadline (it varies by state, but often 30 days) to make those repairs and provide documentation of how the money was spent.
Speaking of documentation, take photos of the condition of your rental home before the tenant moves in. When the lease is over, you’ll want to be able to prove that any damage done to the place did not exist before.
If you’re not sure if being a landlord is the right choice for you after learning how to rent your home, it could be time to sell.