Considering renting out your house? There are many reasons you could be here. You may want to earn extra income, pay down debt, or use renting as an alternative to selling during a slow housing market. Renting out your home can be a great opportunity, but it also comes with legal, financial, and day-to-day responsibilities. Read on to learn what to consider before renting out your house and how to prepare for becoming a landlord.
Key Takeaways
- Renting out your house can generate income and allow you to retain ownership, but becoming a landlord also comes with ongoing legal, financial, maintenance, and management responsibilities.
- Before listing your property, research applicable landlord-tenant and Fair Housing laws, prepare the home for occupancy, determine an appropriate rental rate, and establish consistent screening criteria.
- A well-written lease should clearly explain rent, deposits, responsibilities, policies, disclosures, and other important terms while complying with applicable federal, state, and local laws.
- Landlord responsibilities continue after a tenant moves in, so owners should be prepared to handle maintenance, communication, legal compliance, rent collection, and other day-to-day management tasks.
Is Renting Out Your House Right for You?
As a Washington, DC, property management company, we recommend you consider the pros and cons of being a landlord before you learn how to rent out your house in the first place.
Renting out your house can give you several benefits. For example, it can provide a steady source of income, which helps you cover your mortgage or other expenses. Furthermore, it allows you to retain ownership of the property while building equity over time.
On the flip side, renting out your house can come with many responsibilities. You must stay on top of the house repairs, keep an open line of communication with tenants, and ensure the property meets all legal and safety requirements. Moreover, you will have to handle all of this yourself unless you hire a property management company to support you.
Know Your Legal and Financial Responsibilities
When renting out your house, it’s essential to consider the legal and financial obligations involved. Here are some of the main landlord-tenant laws you need to keep in mind:
-
Maintenance: Landlords generally have a responsibility to maintain rental properties in a safe and habitable condition and comply with applicable building, housing, and safety codes. This may include maintaining essential systems such as plumbing, heating, and electrical systems and addressing qualifying repair requests within the time required by applicable state or local law. Periodic property inspections may also help landlords identify maintenance concerns, subject to applicable notice and entry requirements.
- Fair Housing and Tenant Screening: Landlords must comply with the Fair Housing Act and any applicable state and local anti-discrimination laws. If you use consumer reports to screen rental applicants, you must also comply with applicable requirements of the Fair Credit Reporting Act (FCRA). Other federal, state, or local accessibility and civil rights requirements may apply depending on the property and circumstances.
- Taxes: Rental income generally must be reported on your federal tax return. Landlords should keep accurate records of rental income and expenses, including expenses that may qualify for deductions.
- Lease Agreement: You should also create a written lease agreement that clearly outlines the rights, responsibilities, and expectations of both parties. Lease terms should comply with applicable laws governing matters such as security deposits, required disclosures, fees, lease termination, and other aspects of the tenancy.
Get Your Property Ready to Rent
Once you’ve decided on renting out your house, it’s time to prepare your property for it. Here are some tips for that process:
- Thorough cleaning: Get the home ready by making sure that it is sparkling clean. Vacuum carpets and clean all kitchen appliances, bathrooms, toilets, and windows.
- Repair and Maintenance: Address all maintenance issues. Check for leaks and cracks, fix all appliances, check safety features like fire extinguishers, and more. Consider hiring qualified professionals for repairs, inspections, or other work that requires specialized expertise or licensing.
- Update the house: A fresh look goes a long way in attracting potential tenants. Consider painting, upgrading outdated fixtures and hardware, landscaping, and more. Also, note that neutral colors appeal to most tenants, so you should opt for those.
- Review Lease Requirements and Policies: Before creating or updating your lease, review applicable rental laws and determine the policies and terms you’ll need to address. These may include rent and payment requirements, property rules, maintenance responsibilities, and other terms permitted by applicable law.
How to Determine the Right Rental Price
As you’re setting your rental price, remember: catering to your local market is a critical part of your success. You’ll want to do some research on pricing to see what similar properties in your area are going for. Aiming too high can scare off potential tenants, while going too low might mean missing out on earnings. Finding that sweet spot is key! Also, you should consider other factors, like the condition of your property, the amenities it offers, and how quickly you want to fill the space.
How to Market Your Rental Property
Now that your property is ready and meets all the rental requirements, it’s time to market it. Here are some marketing strategies to help you get started:
Highlight the Property’s Features
Before marketing your rental, identify the property’s strongest features and amenities. For example, you might highlight updated appliances, storage space, parking, outdoor areas, nearby transportation, or other objective features of the property and location. Keep your advertising focused on the rental itself rather than describing the type of tenant you want to attract, and make sure your marketing practices comply with applicable Fair Housing laws.
Advertise Your Rental Online
Social media platforms and popular rental listing websites can be effective ways to advertise rental properties online. Include clear photos, an accurate property description, rental terms, amenities, and other relevant details. When advertising housing online, avoid using audience-selection criteria that unlawfully exclude or favor people based on protected characteristics.
Offer Virtual Tours
Virtual tours can help you reach potential tenants from anywhere. They allow prospective tenants to get a feel for the property without the need for an in-person visit. In today’s digital age, most people prefer checking online first before physically going to see something. So, this method lets you create a digital footprint that can help you rent your property faster than relying on traditional methods.
How to Screen Rental Applicants
When screening rental applicants, establish written, objective criteria and apply them consistently to every applicant. Depending on your criteria, screening may include factors such as income verification, rental history, credit information, and other legally permissible information.
Make sure your screening process complies with the Fair Housing Act and applicable state and local laws. If you use a consumer report, such as a credit or tenant screening report, you must also follow applicable requirements under the Fair Credit Reporting Act, including adverse-action notice requirements when an unfavorable decision is based partly or completely on information in the report.
What to Include in Your Lease Agreement
Before a tenant moves in, you’ll need to create a lease agreement that clearly documents the terms of the tenancy. Consider including the following:
- Parties: Clearly identify the landlord or property owner and all tenants who are parties to the lease.
- Property: Add a detailed description of the house, and include furniture, fixtures, number of rooms, and other amenities.
- Lease period: Outline the duration of the lease. Specify whether it’s a month-to-month, six-month, or year-long lease. This helps set expectations for both you and the tenant.
- Include terms and conditions: Clearly outline the rent amount, security deposit, due date, payment methods, utility responsibilities, and any other lawful fees or charges.
- Include Your Policies: To avoid potential conflicts, state clearly your policies for guests, noise, and more. Specify whether pets are allowed, any restrictions or fees, and guidelines for overnight guests.
- Disclosures: Include all disclosures required under federal, state, and local law. For example, federal law generally requires landlords of most pre-1978 housing to provide tenants with specific lead-based paint information, disclosures, and records before they sign a lease.
- Add Tenant and Landlord Responsibilities and Rights: Clearly define each party’s responsibilities and rights to avoid misunderstandings. For example, you should state which maintenance issues the landlord will deal with vs. the ones tenants will deal with. Keep in mind that landlords generally cannot shift legally required habitability and maintenance obligations to tenants simply by including different terms in the lease.
Again, federal, state, and local laws will dictate what you must and must not stipulate here.
Preparing for Tenant Move-In
After you finish preparing for tenants, finding them, and signing their lease, it’s time to prepare for move-in day. By going through this process, you can help get all your ducks in a row.
While there is a more detailed move-in procedure you should read up on, we’ll scratch the surface of what it can involve here. For instance, this may involve completing any required or appropriate inspections, addressing repairs, cleaning the property, handling the security deposit in accordance with applicable law, and checking utilities.
Additionally, it would be a good idea to create a detailed checklist of the house’s overall condition. As you do this, take note of your walls, floors, appliances, fixtures, and other features. Consider having both the landlord and tenant review and sign the checklist, and follow any move-in inspection or condition-report requirements under applicable state or local law. In doing this, you can protect both parties and set clear expectations for the future.
FAQ About Renting Out Your House
What do I need to do before renting out my house?
Before renting out your house, make sure you understand applicable landlord-tenant laws, insurance and tax considerations, and any licensing or registration requirements in your jurisdiction. You’ll also need to prepare the property, determine an appropriate rental price, create a legally compliant lease, market the property, and establish a consistent tenant screening process.
Do I need a license to rent out my house?
It depends on where the property is located. Some cities, counties, and states require landlords to obtain a rental license, register the property, complete inspections, or meet other requirements before renting a home. Check the requirements that apply to your property’s specific location before advertising it for rent.
How much should I charge to rent out my house?
Research comparable rental properties in your area with similar locations, sizes, features, and conditions. Local rental demand and the property’s amenities can also influence its market rent. Avoid choosing a rental rate based solely on your mortgage payment or other ownership expenses.
How should I screen potential tenants?
Create objective, legally permissible screening criteria and apply them consistently to all applicants. Depending on your criteria and applicable law, screening may include income verification, rental history, credit information, and other relevant information. Landlords must comply with Fair Housing laws and, when using consumer reports, applicable requirements of the Fair Credit Reporting Act.
Do I need a written lease to rent out my house?
Requirements vary by jurisdiction and rental arrangement, but using a written lease is generally a good way to document the terms of the tenancy. A lease can establish the rent amount, payment requirements, lease term, security deposit, maintenance responsibilities, property rules, required disclosures, and other important terms.
Should I hire a property manager to rent out my house?
It depends on how involved you want to be in managing the property. A property management company can handle responsibilities such as marketing, tenant screening, rent collection, maintenance coordination, inspections, and day-to-day tenant communication. Property owners who live far from the rental, have limited time, or do not want to manage these responsibilities themselves may find professional management particularly useful.
Managing Your Rental Property Long-Term
Although renting out your house can be a great way to generate income, it can come with challenges. From vacancy problems to legal liabilities, you may face roadblocks that are difficult to solve alone. That’s where a property management company would step in.
At Bay Property Management Group, we’re here to make the process easier for you. Whether it’s by helping you market to tenants, screen them, draft lease agreements, or handle legal compliance, we’ve got you covered. Think of us as your property management partner—here to help you navigate the tricky parts and make your landlord experience easier.
Reach out to us today to start simplifying the process of renting out your property.
