How to Rent Your Home
When it comes to renting out your home, there are essentially two options: renting it out on your own, or hiring a property management company to do it for you. We’ll walk you through both options below.
DIY: Renting Your Home On Your Own
DIY renting can save you money on property management; however, if done improperly, it can end up costing you a ton in legal fees. So before you jump in with both feet, make sure you’re up for the duties and responsibilities that come along with being a landlord, and that you’ve considered all the costs associated with it as well.
Determine the Costs
The very first thing you need to do in terms of figuring out costs is calculating how much rent you can collect for the unit, given its size, location, and amenities. Do your homework, and check out what other homes or buildings like yours cost to rent in your neighborhood.
Add to this base cost the landlord-related expenses that you will need to keep in mind:
- Property Taxes
- Upkeep (Landscaping, Maintenance, and Repairs)
Once you have a good idea of how much the property will cost you in monthly expense and how much you can fairly collect for rent, you will know if it’s a worthwhile endeavor for you. If you’re not on a tight budget and believe the home is in an appreciating area, renting it out may still be a good idea even if it takes a while to make a profit. You will also need to figure out if it makes more sense for you to do a month-to-month lease or a fixed-term lease of one or two years.
Find and Prepare For a Tenant
After you’ve set the rate on the rental unit, advertise online or in a newspaper. Show the unit to prospective renters and give them a rental application, which will likely include a credit report and a request for references.
When it comes to finding a tenant, it’s important that you are fair and do not discriminate based on gender, family type, race, or sexual orientation. But you also want to make sure to exercise good judgment in choosing a tenant who will be responsible and reliable. Check what your state or city rules are for how to run a credit, employment, or background check. Don’t skimp on this step – a poor credit score doesn’t mean you’re necessarily going to have trouble, but you want to be aware of any potential problems before they arise and especially when you are selecting a tenant.
Once you’ve found a tenant and agreed on the rental terms, make sure you have everything ready to go:
- Figure out how you’re going to collect rent (check, PayPal, etc.) and when.
- Make sure the unit is clean and fully functional before the tenant moves in.
- Have a secondary contact in case you are out of town, so that repairs can always be completed in a timely manner – establish relationships with plumbers or electricians.
- Set up business records separate from your personal records to track your income from the rental property.
- Make sure you review the terms of eviction with the tenant and have a plan (as well as money to cover the time it takes to find a new tenant) for a possible eviction.
Both landlord and tenant rights vary by state, but the landlord’s basic obligations are to provide a unit that is safe and sanitary and respond to tenant issues in a timely and fair fashion. The tenant’s basic obligations are to pay rent and adhere to the lease. If you have any questions about the eviction process or tenant rights in your area, look up your state’s regulations or seek legal counsel.
Working with a Property Management Company
If all of that sounds like more headache than it’s worth, you can always hire a property management company to handle things for you.
Working with a Property Management Company
A property manager will generally cover most of the landlord’s duties:
- Finding a tenant
- Collecting rent
- Arranging for repairs
- Handling an eviction (if necessary)
Hiring a property management company is a great fit if you don’t have the time or desire to be a landlord, but still want to rent out your unit or if you are not going to be living close to the rental. If you decide to go this route, review the contract carefully, and ideally have a lawyer or financial advisor look it over, so you understand what duties the property manager will perform and at what cost to you.