Real estate investments are one of the best ways to earn money. Whether you seek out and buy a rental property or decide to rent out your home, you can collect rent and with any luck, make a nice profit with minimal effort on your part.
If you want to rent out your home, you must first prepare your home to show to potential tenants, and then take care of some specific measures to protect yourself legally and financially. Here are the steps to follow.
Cleaning and Repairs
The very first thing you must do if you want to rent your home is to give it a thorough cleaning and repair anything that’s broken. That means cleaning windows, floors, walls, and appliances. If you are planning on including appliances with your rental, make sure that they are all in good working order. If they are not, replace them.
You should also check the plumbing and wiring and resolve any other maintenance issues. Put fresh batteries in the smoke detectors and test them to make sure they are working. Before you show the house, it’s also a good idea to take care of any landscaping issues. You’ll have fewer problems renting your house if the yard is in good shape and everything inside is clean.
Finally, you will also need to declutter and remove any items that you don’t intend to include with your rental. If you are renting your home furnished, only furniture that you plan to leave there should be in the house when you show it to prospective tenants.
Set a Fair Price
Once you have prepared your home inside and out, the next step is to set a fair rental price. There are several considerations to keep in mind when pricing a rental:
- Your mortgage. If you still owe money on your mortgage, the monthly rent must be sufficient to cover your mortgage payment.
- Cost of maintenance and repairs. Even if your home is in pristine condition at the start of a rental, the likelihood is high that you will have to undertake some maintenance and repairs in the time your tenants are there. Build a little something into the rent to cover your time and effort.
- If you have brand new appliances that are included in the rental, or other amenities such as a pool, a fireplace, or hardwood floors, take those into consideration. You can charge more when your home has special features.
- Average rents in your area. You must do some research to determine what landlords are charging for rentals in your area. Make sure to do apples-to-apples comparisons that take square footage, location, and amenities into consideration.
You don’t have to go overboard tacking extra money onto the rent, but you charge more for things that require additional maintenance, such as a swimming pool.
List Your Rental and Show Your Home
After you have set a price, it’s time to list your home for rent. You have two options. First, you can list the home yourself by taking out ads online or in your local paper. Second, you can sign a deal with a real estate agent to rent your home. There are benefits to both. With a real estate agent, you will have to pay a fee – but they’ll also handle things like showings and tenant screening for you. If you handle the listing yourself, you’ll save on the fee but spend valuable time handling the rental process.
Keep in mind that an experienced real estate agent can also help you with the previous step. Someone who works with rentals in your area all the time is likely to have a very clear idea of what you should charge to rent your home.
Showing the home is an essential part of the process. If you rent the home yourself, you’ll be responsible for taking tenants through the home and pointing out its desirable features. If you hire an agent to do it for you, you can take a back seat.
Sometimes, people who rent their homes themselves skip this part of the process, but doing that is a big – and potentially costly – mistake. When a potential tenant expresses interest in your home, you must have them complete an application. The application you use must make clear that you will be conducting both a credit check and a criminal background check. The tenant must sign the application.
If you have an agent, they will handle this part of the process for you. If not, you can check credit with one of the three major credit bureaus (Equifax, Experian, or TransUnion) and also get a criminal background check online. Keep in mind that credit checks are usually instantaneous while the background check usually takes a few days.
Only rent to tenants who have a history of paying their bills on time and who have no criminal record. To do otherwise is to borrow trouble.
Issue a Lease and Know Your Rights and Responsibilities
The final step is to draw up a lease agreement between you and your new tenant. You can find boilerplate leases online, but you need to check to make sure that the lease you use accurately reflects your state’s laws.
At this stage, it is also very important to know what your rights and responsibilities as a landlord are. Every state is different, so take the time to read up on your state’s laws, including information about property damage and eviction. It’s a good idea to require some kind of security deposit from your tenant. Many landlords also require payment of both the first and last months’ rent as a precaution. As a final step, you may want to hire a management company to handle maintenance, especially if you do not live in the immediate area.
Finally, you need to contact your bank and let them know that you are renting your home. They may have insurance and other legal requirements that you have to fulfill and you need to take care of those things.
Following these steps will help ensure a smooth rental experience for both you and your tenant.