How to rent out a house: A Beginner’s Guide
How to rent out a house? You’re probably thinking this simple question shouldn’t require a complicated answer. What can possibly be so difficult about renting out a house? There are people out there, who are looking to rent a place, you happen to own one, so you just sign a paper, give them the keys and collect your money every month. Easy-peasy, right?
Except…it’s not quite that simple at all, as any landlord with experience can tell you. Maybe it happens like that for some extremely lucky people but that’s not how renting out a house works in general.
In this guide, we’ve explained in detail how to rent out a house and we’ve organized neatly the steps that you need to take. After reading it, you will certainly have a better idea of how to rent out your property in a way that optimizes your profit and minimizes your effort.
How to rent out a house: A beginner’s guide in 8 steps
You can rent out your property by following these eight simple steps. Of course, different situations demand a different approach, so you need to personalize your plan in order to make sure your individual needs will be met and that you’re making the best out of your specific circumstances. This is why it’s best to trust a property management in Orange County company to help you rent out your house. This way, you can be sure you’re getting the best profit out of your property and that it’s being taken good care of.
If you’re looking for a property management company in Orange County, contact Caris Property Management here and get professional help for renting out your property.
In case you want to try to rent out your property by yourself, make sure you read the guide carefully and follow the steps, while still making adjustments to fit your particular situation better. Before you start, you need to calculate the costs of being a landlord to make sure you can afford them. Forecasting your expenses is of great importance when it comes to renting out property. When making the calculations, don’t forget to include costs associated with meeting health and safety requirements, marketing costs, insurance, and repairs and maintenance money. Estimating your expenses will be a lot easier and more precise if you’re using a property management company to rent out your property.
Step #1: Know landlord laws:
Before you do anything else, it’s best to make sure you’re doing it in a legal way and without breaking any regulations. And trust me, there are so many of those when it comes to renting out a house: local zoning laws, state laws, federal laws, and so on. You need to follow the health and safety code carefully and to respect your tenants’ rights. For example, if there are any lead-based paint hazards, you must disclose this to the tenants or you will be breaking the law. The Fair Housing Act and the Fair Credit Reporting Act require that you get a permit before you run a credit check on a potential tenant and you must also disclose which reporting agency you’re using and what information in the person’s report made you turn them down if you did. The laws in different states vary on important issues such as security deposits, level of access to the property, how much notice you need to give the tenants if you want them to leave the property, how you should proceed with the evictions, etc. There are also so many laws that prohibit landlords from selecting tenants based on certain protected criteria, for example, race or color.
So you want to read about all the laws that may be concerning you as a landlord. You may find more detailed information concerning landlord laws on Nolo and similar websites, but it’s best to consult a local real estate lawyer who can also help you draw the lease.
You need to fully understand the laws concerning rental property before you take any of the other steps on the guide.
Step #2: Get landlord insurance:
Protect your property before you go and put it out there. There is a difference between homeowner’s insurance and rental home insurance, which is also known as fire insurance. You must decide for yourself which one to pick, but in any case, it’s best to encourage your tenants to buy renter’s insurance for their own belongings.
Landlord insurance typically covers two main categories: property and liability protection. The idea behind both of them is to protect you from financial losses, even if they are of such a large scale as having your house crumbling down in an earthquake or damaged severely by fire. Liability protection covers you if your tenant gets hurt. And yes, this one can be on you – for example, the window falls down on a tenant and hurts them and the court determines it was from the landlord not maintaining it properly. So you will have to cover the medical bills and based on your policy, your insurance can actually do that for you.
However, the policies of your insurance depend on the area of the property, the state law, and many other things, so you may need to take out additional ones to cover things like vandalism and burglary. It’s best to consult an AAA (Accredited Advisor in Insurance), so you can pick the best insurance for your property.
Step #3: Figure out the rent:
Of course, you can’t just drop a random number. You need to start determining the price by researching the prices of comparably sized rental properties in the same neighborhood. You want your price to be competitive but also fair. Aim higher if your property has any particularly valuable amenities such as a dishwasher, a washer and dryer, or hardwood floors.
Compare the rent you have in mind with the ads in newspapers, online resources, and neighborhood rental signs. Even if the rent is lower than your mortgage payment, you need to make it comparable to what’s in the rental property market or you’ll have a very high vacancy rate.
Step #4: Prepare the space for renters:
As soon as you put out the home for rent, you will start receiving tenant applications, if you’ve done the marketing part right. You will have to show the house if you haven’t hired a property management company and it must look good. Plus, you need to have the property at its best for the pictures that need to be taken for the listings.
If the market is down, you need to put extra effort into making the property look appealing for renters, because tenants can afford to be picky and more attentive at such times.
Clean the house , it’s best to hire a professional cleaning company to do so, and make sure that all appliances are working and in good condition.
Here’s some advice on the furniture: don’t put too much. Especially during down markets, landlords try to stuff the property with as many things as possible, hoping this will capture the tenants’ attention.
In fact, tenants often look for properties that give the feeling of a lot of space and light and when there is plenty of furnishings, that’s exactly what seems to be lacking. Another thing that makes this strategy a poor one is the fact that the landlord is responsible for maintaining and replacing all the items provided with the property. Do you really want to deal with that much maintenance all by yourself? Just stick to clean and neutral-colored decor, make sure all the appliances are working, and draw all the curtains to let the light in.
Step #5: Draw up a lease agreement:
Sometimes a well-written lease is all that protects the landlord from a bad tenant. It’s best to have the lease prepared by a professional who can make sure both parties understand their rights and obligations. The lease needs to comply with the fair housing, rental, tenant and insurance laws of your area and it’s difficult to keep track of those unless you’re an experienced lawyer. Don’t use blank leases you found online because they may violate the laws and regulations of your area.
Some things that should be definitely included in the lease agreement are:
• Lease term. The annual lease provides more stability, so people usually stick to it.
• Rental due date and penalties for late payments.
• List of tenants.
• Security deposit.
• Who is responsible for repairs and the terms on them, as well as those on routine upkeep and maintenance like lawn mowing.
• Rules of behavior on the property such as noise levels.
• Pet policy and if there are any deposits related to this. Include specific rules if you have any, f.e. what happens if a dog constantly barks and the neighbors are complaining. Being clear on such issues saves a lot of problems in the future.
• Showing arrangements in case you put your home on the market while the tenants are still occupying it.
• Terms of eviction.
Step #6: Market your property:
This is one of the most important steps in the guide on how to rent out a house. Focus on marketing to find the right tenants and get the best profit from your property.
Start by taking a good look at your house and what stands out about it. People pay attention to appliances such as a dishwasher and a dryer. Include things that make your property stand out in the listings. Vaulted ceilings, stainless steel appliances, maple furniture, granite, a big fireplace – all of these can make your property more appealing to tenants. You have air conditioning? Make sure you point that out. A big yard or a spacious garage? Don’t forget to include pictures of them. Put pictures of all the rooms in the property in the listing, as well as photos of the front of the house. Don’t talk about the house only – if it’s a family house, mention the schools or parks nearby. If you’re renting out an apartment in a busy area, talk about the local social scene, the clubs, and the restaurants, and try to market the property to young people who like to have fun. And most importantly – get creative with the descriptions and the pictures! You need to make your listing stand out.
When you’re marketing your property, think about the group of tenants you’re targeting and make sure you’re addressing them specifically. The only thing more important in the rental business than finding yourself tenants is finding the right tenants. If you want to attract young people who like to travel, focus on online marketing and social media activity. Seniors are mostly looking at ads for rental property in the newspapers. Each group is reached by a specific kind of marketing so you need to understand that before you start marketing your property.
Step #7: Pick the right tenants:
The profit-effort ratio depends a lot on how well you do on this step. Find responsible, long-term tenants that will treat your property with respect and care and you can count on a stable profit without having to put too much time into it and stress over things. Pick renters that only care about having things their own way and watch your life turn to hell.
That’s why you need to be extra careful when you’re reviewing the tenant applications. Rental property investors count on having a high occupancy rate for their profit, so it’s in their best interest to have tenants as soon as possible. That’s why they frequently make the mistake of choosing the first tenant that shows a serious interest in the property without thinking thoroughly about how this will affect them in the long run. Try not to do this and always keep in mind that having no tenant for a while is better than having a bad one.
Scan your tenants with precision – this can help you figure out how to rent out a house. You need to perform extensive background checks on each application to learn as much as possible about their previous renting experiences, whether they were ever evicted and why, if they paid their rent on time. It’s just not enough to ask a couple of questions because people will always try to show themselves in their best light. You need the applicant’s Social Security Number and signed authorization to perform checks on their credit reports and criminal history. If you’re going to hire a professional agency to provide the background checks for you, make sure it’s accredited by the BBB.
Step #8: Be prepared for evictions:
Just in case step #7 didn’t work out as well as planned, you need to be prepared to evict a tenant. To do that, you’re going to need an attorney. If the tenant refuses to leave, you can’t just grab their stuff and throw it out, even if it’s on your property. You must go to court and the authorities have to remove the tenants physically if they refuse to do it willingly. It can be quite a mess. Property management companies can handle this for you, so if you don’t have much experience as a landlord or don’t want to stress yourself out if you can avoid it, it’s best to hire one.
Just eight steps but so much work and effort, right? Renting out property is not as simple as it may sound. This is why it’s best to save yourself all the stress and running around and calculating expenses and trying to make it work, and hire a property management company that can market your property in the right way, screen the tenants and pick high-quality ones, manage the showings, and handle the evictions for you. Contact Carris Property Management and find out for yourself how the services of a property management company Orange County can be of use for you!