Renting Out a Home – An Overview

Do you want to rent your house? There are a variety of reasons why homeowners offer a property for rent. You could have inherited a home that you do not want to live in. You may have bought a second home as an investment. Or maybe you have to move and do not want to sell your current home. Whatever your reasons for renting out your home, you want to make sure you do things right to get the best possible results.

Let's take a look at some of the best tips for renting out your home. Following the advice will put you in a much better to have an easier time renting your property.

1. Plan your finances.

Renting a home can be an excellent way to build equity over the long-term, but you need to plan your finances properly to ensure you get good results. Like most investments, a rental home does not guarantee you a return. You have to be smart about the way you organize your situation to minimize your risk and maximize the potential for a positive return. You need to think long-term and be careful about how you move forward.

There are a number of concerns that you need to address in your planning, including:

• Mortgage payment. Most property owners have a mortgage that needs to be paid. If you are one of them, your planning needs to account for the mortgage payment you have to make each month on the home. You need to be sure that you will bring in enough rental income to pay the mortgage payment and then still have enough left over to cover other costs.
• Insurance. Your property needs insurance coverage – you may even be required to carry insurance depending on your mortgage terms.
• Property taxes. You know that you are going to have to pay property taxes each year. It is possible to get an accurate idea of what your property taxes will be by doing a little research.
• Routine maintenance. The various components of a home wear out over time. In truth, some of those components will probably wear out faster with renters in the home because renters tend to be harder on a property than owners. Keeping your property in good condition – which is necessary to attract renters – requires routine maintenance. Do not skimp here if you want to have a successful long-term rental.
• Repairs. Things are going to break on and in the home. Since you are the owner, you will be responsible for fixing those things. You need to plan for repairs to keep your house in excellent working order – and also to ensure you meet your legal obligations. Landlord/tenant law varies by area, but all areas require you to keep the house in habitable condition as a landlord.
• Understand vacancy rates - everyone wants to have their property rented full time, but that is not always possible. There are things that can rear their ugly head at any time. Usually, they do when you least expect it. For example, who could have predicted a pandemic and what it has done to renting real estate.

2. Decide what you will charge for rent.

After you have gone through the financial planning stage, you should have a good idea of what your baseline financial needs are going to be. Now you need to decide what rent you will charge to meet those needs – and hopefully generate at least some income on top of that number. The challenge is setting a rental rate that meets all of your financial needs but is still competitive with other rents in your area.

Unless you are offering something exceptional which will attract renters even if the price is higher than everyone else’s, you are going to have to charge an amount that is similar to what other landlords are charging in your area for similar properties. For example, if you own a waterfront property, you'll probably be able to charge higher rent. Maybe much higher!

You can get a better idea of what a competitive rental rate is by researching rentals in your area. You can find lots of options online, but you will be best served by doing some legwork and looking at homes in person as well. You can take tours of properties just like any other prospective renter to get a clearer picture of what different landlords are offering renters.

You should also give some thought on whether you would consider rent to own. There may be a percentage of renters that might consider purchasing your property when the lease is over. A rent-to-own situation could work out well if you're on the fence about selling at the moment.

3. Decide how you are going to manage the property.

A rental property requires regular management. Renters are going to need help from time to time – hopefully not too often, but often enough that you have to be prepared for it. Things will break and need fixing. Sometimes items will break in the middle of the night and require immediate attention. Someone needs to check on the rental from time to time as well, just to verify that everything is as it should be.

The cheapest way to manage a property is to do it yourself. However, if you are moving hours or days away, you are not going to be in a position to manage the property. That means you will need to find someone else that you can trust to do it for you.

Usually, that means you will have to hire a property manager unless you can get a friend or family member to do it. Just remember, this is a significant investment, and you need to know that it will be appropriately managed.

It is smarter to pay a professional than to entrust the job to a friend or family member that may not do what is needed to protect your property and your renters.

4. Learn the law and write a lease.

There are probably landlord/tenant laws in your state. Whatever the laws and regulations are that apply to your situation, you need to know them and know them well to avoid making costly legal mistakes. You are unlikely to have enough time to become an expert, but you can learn the basics so that you can act with confidence concerning your property. Renters also have specific rights that you have to respect – knowing what they are will make it a lot easier to avoid mishaps.

Probably the easiest way to get a basic understanding of your legal obligations is to talk with a real estate attorney. You can also take advantage of the attorney’s time and get them to write a lease for you. If you do not want to pay for an attorney, you can find basic leases online that you can adapt to your situation.

5. Market and rent your home.

You want to attract great tenants, which means you need good marketing. Make sure the home is cleaned up and in good repair, then take photographs that make it look great. You can try doing it yourself, or you can hire a real estate photographer. Just make sure that the photos look as good as possible because the better they look, the more renters will be interested.

Just like selling a home, many landlords will also not want to deal with prospective tenants and hire a real estate agent to help with the rental. You need to figure out whether this expense is worth it to you or not. Rental fees charged by a real estate agent generally are either a half or full month's rent.

When considering tenants, pay attention to the following:

• Have them fill out an application. You can charge for this, just try to charge an amount that is competitive to other fees in your area.
• Get a social security number and run a credit check. You can also charge the tenant for this process as part of the application fee.
• Get references. Ask for three references and verify those references by phone.
• Verify employment and income. Ask for pay stubs to ensure they make enough to cover rent and contact the employer to make sure they work there.

6. Put the security deposit in a separate account.

You are legally required to give the security deposit back at the end of the lease. Protect the deposit by putting it in a separate account and avoid dipping into it if at all possible. Make sure the tenant fills out a condition form before taking possession of the property. Doing so will protect both yourself and the tenant. The document should spell out the condition of the home and describe any imperfections.

Final Thoughts on Renting Out Your House

Renting out a home is not rocket science. It really boils down to understanding your local rental laws and then filling your vacancy with an excellent tenant who will respect your property. If you can do these things, you'll more than likely have a pleasant renting experience.

More Valuable Realty Times Resources

Get more essential real estate advice in these additional articles at Realty Times.

• How to dispose of moving boxes - everyone looks for moving boxes when they are renting, buying, or selling a home. Not many people think about the aspect of disposing of them. Get some great tips on how to get rid of your moving boxes.
• What to know about mortgage brokers - when you finally decide to break from renting and own a home, one of the most vital steps will be procuring a mortgage. See what you need to know about working with a mortgage broker to find the best loan.