5 Things to Know When Renting Your Home
Is it a good idea to rent your home? Not knowing what you’re getting into can make you decide to become a landlord, one of the worst in your life. Managing a property isn’t as simple as trusting your tenants and watching the rent checks come in the mail. Knowing the basics of renting a house can reduce your risks and help you have a more successful experience.
There are many things to consider before renting your property to a stranger. From finding the right tenant to running background checks, writing lease agreements, finding the right insurance, and understanding legal responsibilities and the tenants’ rights, becoming a landlord or operating a vacation home will give you a new level of responsibility.
Before renting your house, read these 5 helpful tips to help you protect your property.
5. Find the Right Tenant
Before you have a prospective tenant sign on the dotted line and you hand over the keys, carefully screen them and all the adults (anyone 18 and over) who will live in the home. It’s common for a landlord to run background and credit checks and request references. If a prospective new tenant or anyone else who wants to live in the home refuses to give you permission to run a background and credit check, this is a good sign that you should deny the rental application.
Ask potential tenants to fill out an application form, listing their basic information: name, employer, salary, previous landlords, and references.
To check credit reports and criminal history, you’ll also need their Social Security number and signed authorization. There are online agencies that can take over the job and provide background checks. Before choosing one, make sure it is accredited by the Better Business Bureau.
Background checks should always include the following:
- Credit report: You can conduct your own research through one of the credit reporting agencies, such as Experian or TransUnion
- Criminal history: Search state and local records online or find an agency. Landlord.com offers tips on conducting tenant screening.
- References: Contact employers and talk to previous landlords.
Find criminal records, background checks, contact information, and more via Been Verified or one of these background check websites we have tested for you.
4. Protect Your Home With a Lease Agreement
A detailed rental lease agreement is a necessity for both landlords and renters alike. Avoid possible headaches down the road, and make sure to set up a detailed contract for any issues that may arise.
A good lease complies with tenant and insurance laws in your region. Because these laws differ across states, counties, and cities, a local lawyer is a great way to make sure your lease will protect you. Avoid using lease agreements from the internet because they might not comply with your local laws.
A lease agreement should contain the following:
- Names: Include the names of all tenants. If there are residents on the property who haven’t signed the lease, they can’t be held legally accountable for breaking the agreement.
- Lease terms: A month-to-month lease offers more flexibility, while an annual lease provides more stability if you are not planning to sell the property or use it for your own purpose.
- Security deposit: usually two month’s rent or more.
- Rental due date and late fees: Include this so you have protection if people don’t pay.
- Rules of behavior: Include things like noise levels, neighborly conduct, and smoking.
- Pet policies: Specify whether you allow pets and related deposits
- Repairs: Indicate who is responsible for what payments.
- Eviction terms: Include things such as not paying the rent or damaging the property.
3. Your Legal Responsibilities and State Tenant Laws
Before you rent your house and become a landlord, review the Fair Housing Act, which does not allow discrimination when screening prospective tenants, setting rental terms, or evicting a tenant based on color, race, national origin, familial status, a disability, sexual orientation, or gender.
State laws cover many aspects of the landlord-tenant relationship. These things include things like landlord access to the property. They also have specific rules about security deposit limits and the deadline for the landlord to return the deposit to the tenant.
In some states, laws tend to favor tenants. Some states require you to give tenants a 90-day eviction notice, even if they haven’t paid the rent in as many days or there’s major damage to the home. You may be responsible in other states if the tenants steal cable or other utilities. Furthermore, if you don’t word your rental agreement just right, tenants may be allowed to take (ahem, legally steal) some of your property, like small appliances, when they move.
In most states, you are obligated as a property manager to make repairs that a tenant requests if the current condition poses a hazard. However, you may have the right to deny requests to make cosmetic changes or to charge a tenant for damage that he or she caused to the home, like a hole in the wall.
2. Protect Your Property With Insurance
When you rent your house, you’re not technically a homeowner. Therefore, you need to let your mortgage company know that the home is no longer your primary dwelling so they can give you permission to rent it out to another person, according to U.S. News & World Report.
If you own a rental property or rental properties, you’ll need different insurance than for a normal home. You’ll need to change the type of insurance on the house from homeowners or fire insurance to a policy designed for landlords. This landlord insurance covers the rental home and your property in the event of a disaster, but it won’t cover your tenant’s personal property.
Landlords should consider how they can protect their premises, their assets, and their rental income. When a disaster occurs, tenants are often the ones to lose everything and miss out on compensation. Insurance protects against financial loss from things such as:
- Accidental damage caused by tenants
- Fire
- Fixtures such as carpets, stovetops, ovens, light fittings, and window coverings
- Loss of rent caused by tenants leaving and not paying
- Storms and other natural disasters
- Theft
- Malicious damage caused by tenants
Some policies also protect you financially from legal liability if your renters or vacationers are injured or have trouble.
1. Your Plans
Renting your house is like owning a business. In addition to outlining business goals for your rental endeavor, you also have to consider your plans, if you don’t mind. Do you plan to rent the house for only a few years? Are you trying to sell the house but are renting it out in the meantime? When you know your plans, you can better determine if renting out the home is in your best interests and the interests of your future tenants.
Are you only planning to rent out your home short-term? Could you turn it into a vacation rental? Please take a look at what people are looking for to make your property as appealing as possible.
Tip: Hire a Management Company
A property management company can significantly simplify the responsibilities of landlords. These companies typically charge for two key services: finding tenants, which involves advertising and conducting thorough background checks, and managing the property on your behalf.
The cost of finding a good tenant can vary significantly, typically ranging from 50% to 150% of one month’s rent price, depending on the local market. Monthly management tasks include collecting rent, imposing late fees, handling repairs, and dealing with issues like early vacancies and evictions.
To find a property manager in your area, you can visit the National Association of Residential Property Managers (NARPM) website and enter your ZIP code. Additionally, your real estate agent might offer property management services or be able to recommend a reputable provider.
One of the major advantages of using property managers is the emotional detachment they bring to the table. While homeowners may become emotionally involved with tenants, property managers maintain a professional distance. Their primary objective is ensuring that the property owner receives the rent, while also taking good care of the tenants.
If you’re considering renting out your house, whether as a standard rental or a vacation property, following the guidelines in this article can help ensure a smooth process. And if you’re providing furnished accommodations, don’t overlook the tips for decorating the home to make it more appealing to potential renters.
