How To Rent Out Your House
The rental market is booming. If you're thinking about renting your house, give yourself the best chance of success with these expert tips.
Whether you own a second home you’d like to rent out for extra income or you’re thinking about purchasing a place to start your rental empire, it pays to be prepared. I tried my hand at it about 10 years ago after moving into a bigger place. And while the income was nice, the stress was not for me… and I had wonderful tenants!
I talked to Ryan Barone, co-founder and CEO of RentRedi property management software, to get today’s best practices for how to rent out your house. Here’s what you need to know.
Price Your Rental
Renting your house involves some startup costs. So before you shell out a ton of cash, make sure you can recoup the investment.
It’s important to price your rental house right, Barone says. You’re in this to make money, sure. But if your expectations are far out of whack compared to similar rentals in your market, you won’t get any takers. On the other hand, if you’re underpriced, you won’t be able to pay the mortgage and property taxes.
Take an honest look at what your place has to offer. Barone says these are the main things to consider when pricing your rental:
“Assess the price of rentals near yours to determine if your price is on par with what others are asking,” Barone says.
Check rental search engines and do some old-fashioned shoe-leather sleuthing, too. Walk around the neighborhood, visit properties for rent and do a side-by-side comparison to your place. Factor in the year built, size, amenities and condition of the properties.
Pay attention to trends in your city, too. “If your rental is in a part of town that’s seeing high demand,” Barone says, “this could warrant a higher cost of rent.”
“Space can go a long way for renters,” Barone says. When you compare your home to others in the vicinity, make sure the price per square foot make sense. “If you charge the same price as your neighbor whose property is 200 square feet smaller,” Barone says, “you may want to reassess.”
Don’t forget about the number of bedrooms and bathrooms, too. “Square footage aside,” Barone says, “if your unit has two bedrooms, you should account for that in the price of rent.” A larger home generally fetches more rent. But if you’ve taken out a wall to make a suite, reducing the number of bedrooms, you might not be able to charge as much.
Today’s renters want perks. “If your rental has access to a pool, a gym, in-unit or onsite laundry, or even just upgraded appliances,” Barone says, “you’re likely holding the keys to some very coveted space.” Factor in your home’s benefits to the cost of rent so you don’t sell yourself or your property short.
Get Up To Code
Landlords must provide renters with a habitable place to live. This “implied warranty of habitability” means a tenant can expect a home that’s structurally sound, offers heat and running water and conforms to local building codes.
This can’t be waived, either. So before you open your doors for business, make repairs to your property so it complies with all laws and regulations.
Check your local government website for requirements. You’ll likely need an inspection, so start this process well in advance of when you want your first tenant to move in.
Write a Lease Agreement
Anyone who’s ever signed a lease as a renter knows they can be overwhelming at first glance.
Crafting the agreement as a new landlord can also be nerve-wracking, but Barone says you have options. “New landlords can start by looking at previous leases they signed, to get a sense of the kinds of details they would like to include,” he says. Online resources offer sample leases to help you figure out what to put in there, too.
Before offering it to a potential tenant, have an expert look it over to make sure you’re not missing anything — or worse, doing something illegal. “Landlord laws vary by state,” Barone says, “so it’s important to consult an attorney and confirm the appropriate documents are being utilized for the state your unit is located in.”
If something changes after the original lease signing, you can document the change in a lease addendum. “A lease addendum is a legally binding document that both landlords and tenants agree to and sign,” Barone says. “Addendums modify the original lease agreement and/or provide additional information related to specific rental policies.”
Let’s say your renter adopts a pet midway through the lease term. “Landlords can compose a lease addendum to account for the new pet,” Barone says, “whether it be a charge for monthly pet rent or a pet deposit.” Addendums mean you don’t have to rewrite the whole lease to make one change, assuming you both agree to it.
Conduct Potential Tenant Interviews
For independent landlords, conducting interviews with prospective tenants can be a heavy lift. So Barone says to consider the amount of time you can put into the task.
Be sure to complete background checks, credit histories and employment verification. States and cities may have tenant screening laws, so make sure you follow them to the letter.
Don’t enter into a lease agreement blindly, Barone says. Ask your tenant whether they smoke or have pets. Get written or verbal references from past landlords or employers. Eviction is a painful process for tenants and landlords, so head off problems now.
Property management companies can take this burden off you by screening tenants, so consider that if you’re more the hands-off type.
“RentRedi’s auto-tenant screening allows landlords to automatically get a completed tenant screening with every application submitted,” Barone says. “This feature, which is TransUnion certified, allows landlords to instantly review the tenant’s credit, criminal and eviction reports, as well as the full application and documents.”