There are many reasons you may want to turn your house into a rental. You may have inherited a home and no longer plan to live there. You may be moving to a bigger home and looking for a passive income stream. Before you jump in, it is important to understand how to rent your home. There’s a lot you need to know before you make the leap from homeowner into landlord. This is a simple guide on how to rent your home.
Getting Your House Resident-Ready
You may think it is obvious, but you need to spend some time sprucing up your single-family house before putting it on the market. This step will not only ensure that your home is in compliance with the law, but also attract potential renters. When your house is updated and refreshed, you will be able to raise the rent, and make a larger profit.
General compliance and Building Codes
You should check that your home is safe and up-to-code before you make any cosmetic changes. State and local governments both have building code. These codes are mandatory and set safety standards. These codes can cover electrical, ventilation, fire safety, maintenance, sanitation and other issues depending on the location of your property. Research your local and state laws and update them if necessary.
You can then schedule an inspection at your local building department to ensure that your home is in compliance with the code. Some departments provide a free service while others charge a fee. If you don’t take this step, you could end up paying thousands of dollars in fines for not having your property rental-ready. You should have a professional go through your house and give their stamp of approval.
Renovations and upgrades
You can then move on to make upgrades and renovations. The pandemic has changed how people live at home. Many people have permanently switched from working in an office to working from home. Install shelving or a desk to convert a spare room into an office. This will attract renters. Consider installing fiber-optic Internet in your area if you have it available. For home workers, fast internet is essential.
You can also make some simple cosmetic changes without having to break the bank. Upgrade your bathroom vanities and light fixtures to modernize it. Paint the living room and bedroom with a new coat. Get the carpet cleaned if you have it. Consider resurfacing your hardwood floors. You can improve the appeal of your home to potential residents with a few upgrades and updates.
Landscaping
It’s true what they say, you only get one chance to make a good first impression. You want your prospective tenants to be impressed from the moment they walk onto your property. You can give your house an added boost of curb appeal by power washing the sidewalks and gates. Consider adding flowers and shrubs to the exterior of your property, removing any weeds or stumps, trimming trees and mowing your lawn.
Setting rent terms and conducting market research
You can start the leasing process as soon as your home is ready to be occupied. You’ll first need to do some research on the market and decide how much you want to charge for your rentals. You should first evaluate the different neighborhoods around you. Compare your neighborhood to others. Is your home near a good primary school, for example? Are there parks and supermarkets nearby? Is it closer to these amenities or further away? When setting your rental price, you should consider these factors.
Renting websites are a great way to see what other owners have listed. Many landlords will charge their tenants a percentage based on the market value of their house. In this situation, rents are typically between.8% to 1.1% the overall home value. If a house is worth $180,000 then the rent will be between $1440 and $1800 per month. You can charge a higher rent if your house is in a good location, you have recently done some landscaping, and you have made cosmetic changes. Property values can rise faster than rents. You can compare your home to other properties in the area and determine a fair rent price if you see that others are not setting their rents in this manner.
Start the Leasing Process
The process of leasing your home includes all stages. There are many steps to take before you can successfully lease your house. Finding potential tenants is the first step.
Looking for Tenants
It’s no longer enough to simply put up a yard sign to attract renters. You’ll probably have to post your property on rental listings websites in order to attract residents. You may find that some websites provide free listings, but you might also want to consider paid postings. Buildium recommends Facebook Marketplace, Rents.com and Zillow as good options. List your property across a number of sites to ensure you have a diverse group of applicants. You can then start scheduling showings for your home after deciding which website will best suit your needs.
Prepare Your Home for Showings
Think of your home as if you were preparing it for a showing. Your house should be cleaned from top to bottom. Clean your appliances, dust, vacuum, mop and wipe counters. The next step is to stage your house. You can show your home empty, but you want potential tenants to imagine themselves living there. You can do this by helping them imagine how the house will look when it is furnished and styled. You’ll also want to make the home feel warm and inviting. Use the old trick of the realtor to bake cookies just before the show. You can also keep the house well lit and set the thermostat to 70 degrees.
Use your house show as an opportunity to learn more about your applicants. Keep track of the people you have shown around your single-family home and be on the lookout for any red flags. Asking about sublettors or long-term guests at this stage is a good idea. It’s important to not waste your time accepting applications for residents you know will be a bad fit.
Sort Your Applications
You’ll be able to select from a number of applications after a successful series of showings. The Federal Fair Housing Act and common courtesy dictate that you must treat all potential tenants equally. There are some factors that make certain applicants more attractive than others.
Financial Information
You’ll first want to find a tenant with a high credit score and a history of financial responsibility. You should perform a credit check to ensure that your applicants have a good credit score. You can also see the income-to-debt ratio in their credit report. Even if their income is high and they have good credit, if their monthly debt payments exceed their income, you might not be able rely on them for their rent to be paid on time. You’ll need to gather proofs of income. You can also ask for copies of their pay slips.
Criminal Record
After you have checked your credit score and income, should perform a criminal history check. Some states do not allow landlords to discriminate against tenants with criminal convictions. Check out your local laws on renters and landlords.
Know Your Rights and Theirs
You can start developing your lease once you have chosen your ideal resident. You should first familiarize yourself local, state and national laws governing landlords and tenants. Both renters and landlords are protected by landlord-tenant law. These laws define the rights and obligations of both landlords and tenants, as well as how they can interact. Every landlord, for example, has the right charge a deposit. The state and local laws determine how landlords will hold this money. In Kansas, for example, landlords must keep tenants’ security deposit in a different bank account than the one in which rents are deposited. The account doesn’t have to earn any interest. In Massachusetts, the landlord must pay any interest that is earned on a security deposit. You’ll want to be familiar with all the rental laws in your state, as well as national laws.
Develop Your Lease
Your tenants will be informed of the rules of your property by a lease or rental agreement. To avoid future misunderstandings and conflicts, make sure your lease is very detailed. You can choose a Fixed-Term Lease, a lease that has a fixed end date or a Month-to-Month lease. The lease will automatically renew until the landlord or tenant decides to terminate the rental agreement. There are many resources available to assist you in drafting a lease. You can also hire a real-estate attorney to guide you through the process. Each lease should contain certain basic information, including:
- Name and contact details of the landlord
- Address of the house
- Names and contact details of all tenants
- List of appliances included in the house
- The landlord is responsible for all utilities and services.
- The tenant must pay for all utilities and services
- Early termination of a lease by the landlord or tenant
- Rent, payment date and method
- Tenant parking information
Permissions within a lease agreement
The lease should include any special services and permissions. You would have to specify whether you intend to allow tenants to bring their pets to the property. You’ll need to include information on pet rent and pet deposits if you plan on allowing tenants to keep pets on the property.
Renters Insurance
You should also require (or encourage) that all tenants have insurance. This information should be included in your lease. Renters insurance will cover any damage or theft to your residents’ personal property. Renters insurance also includes liability coverage. Your tenant is covered if they invite visitors and someone gets injured. Your tenant’s policy will cover their temporary relocation in the event that your home is rendered uninhabitable by a natural catastrophe or other catastrophes. You can concentrate on getting the house repaired while your tenant has a place to stay and doesn’t need to terminate their lease. This will save you from having to search for a new tenant , and it won’t cost you money while your property is being repaired.
Hire a local property manager as another option to consider
You may consider hiring a property manager to assist you. A property manager has the experience and expertise to turn your home into a profitable rental. The property manager will take on as many or as few of your responsibilities that you desire. Hiring a professional property management company may be a good option if you’re interested in turning your rental property into a passive source of income.
