Last Updated: March 27, 2022
Investing in property makes good business sense. But what if you’re not able to live in your dream house just yet? What should you do if you want a tenant to occupy your property while living elsewhere to help with expenses? This article addresses your questions about how to rent out a house and presents step-by-step guidance on the process.
Is Renting Out Your Home a Good Idea?
There are many monetary benefits to renting your property to suitable people. But it also would be foolish to ignore the many drawbacks that are part of the process.
Aid for Living Expenses
If the money received from a tenant can help pay your living expenses while living elsewhere, go for it.
Monies received from a tenant can be utilized to buy an additional property with a low loan-to-value (LTV) ratio. Property owners may also use income from rent to pay mortgages or submit further installments in one month.
Rental property expenses are deductible on your tax returns. Simply declare the cost of renting out a house. Paying for improvements, property tax, and operating expenses can determine your eligibility for reimbursement.
|NOTE: Legal fees, costs incurred while traveling to inspect rental property, and landlord insurance are fully tax-deductible.|
Owning a second home to fall back on in the event of life-changing circumstances can act as a security blanket. (And installing an honest tenant into your rental is an excellent way to keep your property in tip-top condition.)
Learn the Ropes
Screening tenants, running background checks, and gaining experience in property management helps you gain valuable property market experience without too much risk. You can also learn how to rent your house without an agent while the stakes are low and benefit from the additional source of income.
For uninformed property owners new to the business of realty, becoming a landlord can pose a severe financial risk.
Property Market Fluctuations and Liquidity
Real estate is not a liquid investment. The selling of property can take an indeterminate time to conclude, tying up capital. Similarly, holding on to real estate in a slumped market can cause financial tension. Competitive market rental value (fair market rent [FMR]) can equally change.
In some instances, selling your property asset when the price is right may be the better option.
When renting out your house, the most significant variables include the character and trustworthiness of tenants. Landlords often find themselves burdened with the costs of deliberate damage caused to their property on top of the expenses of regular property maintenance,
Taxes and Insurance
Although mortgage rates are mostly fixed, insurance premiums and property taxes are prone to change. If this should occur quicker than increasing rent, you may be losing money.
A neighborhood is only as good as its neighbors. Therefore, keep an eye on local politics to minimize losses due to neighborhood decline.
Renting your home and being a responsive landlord demands good communication skills, which is not always everyone’s cup of tea.
Responsibilities can be daunting, such as tenant screening, looking after security deposits, drafting a lease agreement, and determining monthly rental charges. In addition, waiting until a check clears and facilitating evictions on occasion is not easy either.
Hiring a reputable property manager to assist in a rental application and basic details may be prudent.
|Renting property provides income and tax rebates.|
|Landlords learn how to manage and maintain the property.|
|Sourcing quality tenants is vital.|
|Credit checks and references are a must.|
|Be mindful of changing insurance rates and taxes.|
How to Rent Out Your House: Step-By-Step Guide
The rental process can be riddled with hazards and snags. Consider the following nine tips to learn how to manage it successfully.
Before committing to leasing your valuable property to an unknown person, consider the following.
- How much will you require in monthly rental fees?
- Have you investigated comparative rental agreements of similar properties in the area?
- Is it worth your while? How can you make use of the extra income?
- What are the terms of the agreement (monthly/quarterly/yearly)?
- What do you require from your tenants?
- What will be allowed and forbidden?
Landlord and Tenant Laws
Tips for renting a house will be incomplete without mentioning legislation applicable to rental properties. Landlords and tenants have bound by-laws, rules, and rights to regulate rental practices. An estimated 182 US municipalities employ rent control rules that comprise the following.
- The Fair Housing Act protects against discrimination when renting, buying, or applying for a mortgage to buy a home.
- Governmental rent control programs limit the amount of rent a landlord can exact from leaseholders.
You should also familiarize yourself with the correct procedure of reporting an occupant to a credit bureau.
|NOTE: California employs statewide rent control to limit rent hikes to no more than 5% (+ local inflation rate).|
When renting out a house for the first time (and each consecutive time), signing a lease or rental agreement with your tenant is vital. Online templates can be utilized for this purpose, although input from a lawyer can help finalize legalities.
- Understand the differences between a lease and a rental agreement.
- Detail all terms and policies discussed during the tenant interview.
- Identify both parties involved in the lease.
- Include a description and the exact address of the property.
- Mention the terms of the agreement—how long is the lease?
- Include details of how much rent is charged and when and where it’s due (include a security deposit).
Preparing your home for potential tenants improves the chances of securing worthy occupants. Consider sprucing up your property before putting it on the market.
- Once you know how to rent out a house, conduct a thorough spring cleaning.
- Repair all damaged structural and aesthetic features.
- Upgrade appliances, kitchen space, and bathrooms.
- Paint shabby-looking areas.
- Ensure utilities (gas, water, electricity) are safe and up-to-standard.
To advertise your property for rent, post pictures that highlight the best features of it. Make sure the images are clear and of good quality. And take snapshots of the outside and inside areas.
If you’re wondering how to rent your house quicker, taking staged pics of an aesthetically-pleasing living room or vibrant outside area can increase your rental’s reach and, therefore, the chances of it being snatched up.
|NOTE: About 23% of realtors report that home-staging leads to increased offers.|
Advertising a place to rent is easy to do online with such stalwarts as Apartments.com, Zillow, Avail, Craigslist, and more. Listing is typically free and opens up a large pool of potential tenants.
Knowing how to rent your home and advertising rentals on social media are invaluable tools. Simply create an entry on a marketplace to list your spot in the sun.
Word-of-mouth can also be particularly successful when trying to rent out a home. Talk to friends, realtors, or other landlords to generate leads and mind valuable tips.
Additional promotional methods include newspaper advertisements, flyers, email campaigns, and posts on community billboards.
Viewings are a crucial part of renting out your home. A landlord can arrange property viewings, even if there are tenants in the property. Tenants, however, require a 24-hour notice from the landlord before a viewing. Landlords can also arrange agents to go to the viewing on their behalf.
|NOTE: A tenant has the right to refuse the landlord access to the property.|
Interview and Screen Potential Tenants
Tips to rent a house include asking the right questions when interviewing applicants.
- What are the reasons for your current move?
- What date do you wish to move in?
- What is your monthly income?
- Do you have pets?
- How many people will be moving in?
- Do you (or others) smoke?
- Do you (or others) have a criminal record?
Remember to thoroughly screen applicants. Employ a reputable tenant screening service to verify income, access credit history reports, and check rental habits. And be sure to collect positive reference checks to confirm details. (Looking into a criminal record is optional.)
Establish a Rental Agreement/Lease
Is ironing out details and signing the agreement the final step in renting my house? The following points are necessary to conclude the deal.
- State the exact number of those occupying the property and include names and social security numbers.
- Decide on the extent of access you (the landlord) will have to the property for keeping a well-maintained house, inspections, and viewings.
- Ensure that you know the procedures for evicting a tenant.
- Detail how you will handle damaged property and inherent legal fees.
- Specify utilities included in the rental price (gas, electricity, water).
- State termination policy linked to the rules and prohibitions, such as smoking, pets, and unlawful activity on the premises.
- Sign and date the agreement.
Various factors apply in how to rent out a property. Be mindful of the benefits and inherent drawbacks of renting before taking the plunge. Consider the background and credit history of the applicants before committing all details and specifics on paper. Then enhance and upgrade your property to attract high-caliber, trustworthy tenants who reflect the landlord’s position as gratifying and straightforward.
Property owners are legally required to inform lenders of their intention to rent out the property to a third party. Failure to do so risks violation of their loan agreement. Once consent to lease permission is obtained, plans to advertise a place to rent may commence.
Providing you’re mindful of legal requirements, renting a dwelling is not difficult. It’s best to read up on relevant legislation, research rates, and taxes you may need to pay and draft a lease agreement detailing your specifications. And don’t forget to check out the demand for rentals.
In your resolve to determine how to rent out a house, research the appropriate rent amount and list your property as available. Next, get it ready for lease by preparing the necessary paperwork and financial requirements. Then, interview and select suitable candidates, then enjoy the life of a landlord.