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How to Rent Out Your Home

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If you own a property you cannot currently sell nor live in, you may be considering renting it out. However, before making the decision, there are many factors to consider and preparations to make. Does your home need repairs? How much will you charge for rent? How will you advertise? How will you screen your tenants?

Before beginning the complicated process, it's important to conduct thorough research on the logistics of renting out your home--this guide is a great place to start!

Condition and repairs

Before renting out your home, you want to ensure that it is in the proper condition. While you should make major repairs before potential tenants move in, it is up to you how much money and work you want to put into the home.

Be sure that all appliances are functioning, everything is up-to-code, safe, and without need of repair. All pipes, wiring, and heating and cooling systems should be inspected and declared suitable by professionals. Have the carpets professionally cleaned, the walls freshly painted, and the lawn well-manicured.

Research comparable rentals in the area to find out what your competition looks like and set your goals accordingly. The idea is to ensure that the money you put into the house will be worth the rental payments you receive. If your house requires a heap of repairs that will leave you in the poorhouse before it can be an adequate home, renting it may not be a wise option.

Using a property manager

Becoming a landlord is a time-consuming job, with many tasks involved to keep everything running smoothly. If you have a full-time job, a family, or numerous other obligations that demand your time and attention, you might require assistance.

Hiring a property manager to handle the plethora of duties associated with renting out your home will certainly lighten the burden--but it will cost you. Property managers typically charge about 50 percent of the first month's rent and 10 percent of the subsequent monthly payments. In exchange for this fee, the property manager will take care of:
  • Advertising the property
  • Preparing and signing leases
  • Evictions and legal notices
  • Showing the property to interested tenants
  • Collecting rent
  • Scheduling maintenance and repairs
  • Keeping track of finances
  • Handling tenant complaints
If you have the open schedule and the resources to juggle these obligations yourself, you may not need a property manager. However, if you take on more than you can handle, a costly mistake will be much harder on your wallet than the manager's fees.

Setting rent

One of the most important steps when placing your home on the rental market is deciding how much it is worth. Research similar properties in your area to determine a fair monthly amount. Regardless of how much you would like to receive, if you set the rent above the current market value you are unlikely to hear from any interested renters.

Check rental listings on websites such as Trulia, Zillow, and even Craigslist. You can even call landlords of like properties and ask about rates, posing as a potential tenant. This will help you establish the "going rate" for a property of similar size and condition as yours.

Security deposit: The cost of a security deposit is usually set around one to two month's rent--however, there are laws in place to limit the amount you are permitted to charge. Security deposits should be held in a separate bank account, since they are required to be returned, sometimes with interest, if there are no damages done to the home.

Advertising

  • Post online. The internet is the most useful medium of our time, and is likely to draw the most prospective renters to your property. Post your listing on websites such as Craigslist, Trulia, Zillow, and other rental listing websites. Many of these sites are free, easy-to-use, and generate a great deal of traffic.
  • Newspaper ads. Though expensive and declining in popularity, newspapers can still be a useful tool in advertising. Since newspaper ads charge by the word, keep your language brief and precise, but be sure to include all essential information. Details of the property (such as number of bedrooms/bathrooms) and your contact information are imperative--you may not want to include the address. Forcing interested renters to call you prior to dropping by is often preferred.
  • Yard signs. Propping a "For Rent" sign in your front lawn can notify any passersby that your property is on the market. However, for security reasons, you may prefer to not advertise that the property is vacant. If you are still living in the residence, you may also have to deal with unscheduled drop-ins to view the property.

Screening tenants

The screening process is an imperative step in renting out your home--you want to ensure that any potential tenant is reliable, trustworthy, and able to pay their rent in a timely fashion.

Pre-Screening
Before even showing the property to a tenant, you should ask the following questions:
  • What is your gross monthly income?
  • Are you employed?
  • Do you have references?
Any interested tenant that answers "no" to any of these questions should not be considered. Remember not to ask any questions that could be considered discriminatory--there are laws in place to protect renters from seven specific classes of discrimination--race, sex, skin color, nationality, religion, disability, and familial status.

The application
Any interested renter that views the property should be given an application--even if you do not wish to rent to them. Refusing anyone the opportunity to apply for the rental leaves you vulnerable to discrimination suits.

The application should include the following:
  • Names of all potential renters
  • Birth date
  • Social Security number
  • Phone number
  • Previous address
  • Place of employment and employer contact information
  • Past employers
  • Release of information statement
  • Signature
  • Application fee--this amount is to cover your cost of conducting a background check. Check with state laws to ensure that there is no limit to what you can charge, and research other property management companies to find out what most landlords are charging in your area.
Verifying the Information
Call the potential tenant's employer to verify their employment status and purported income. Gross monthly income should ideally equal about three times the amount of your requested rent to ensure prompt payment in its entirety. Call past landlords or other references to find out what kind of tenant they were--did they pay their rent on time? Did they destroy their last rental? Did they give proper notice? Be sure to call past landlords as well as current--if they are a poor tenant, their current landlord may lie in an effort to have them vacate.

When conducting the background and credit check, be sure to check for the following:
  • Felonies
  • Evictions filed and carried out
  • Bankruptcy
  • Debt
  • Delinquent payments
  • Foreclosures
  • Garnished wages

The lease

Once you approve an applicant (be sure to accept the first applicant that meets the requirements to avoid discrimination accusations) you can notify the applicant. To avoid being left with a vacant property if the applicant changes their mind, request a deposit within 24 hours of approval to hold the property. Any applicants that did not meet your requirements should be notified with a written statement, detailing the reasons that they did not qualify.

When creating your lease, you should consult your attorney to ensure it follows any laws in your state. Some important things to include are:
  • Name of tenant(s)
  • Address of property
  • Length of lease
  • Amount of rent
  • Security deposit amount and conditions for its return.
  • Late fee policy
  • Pet policy
  • Conditions for decorating, smoking, etc.
  • Utility payments (included or not?)

You may also want to have your tenant sign a move-in condition report--this is a detailed description of the condition of the home to ensure that your tenant does not claim any damage done to the property was existing when they moved in. Taking photos of the home before your tenant moves in is also helpful proof of the property's condition.

Make sure the tenant understands all conditions illustrated in the lease, and do not hand over the keys until everything is signed and the rent and security deposit are paid in full.

Nicole La Capria  Posted by Nicole La Capria on August 12, 2013

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