Renting out a house can bring great financial rewards or significant pitfalls. This guide shows how to rent a house by being proactive. You will learn how to assess your property, decide if a management company is needed, price your rental, find and screen quality tenants, and how to protect yourself as a landlord.
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The seven steps for how to rent a house are:
1. Assess Your Property as a Rental
Taking the time to assess your property pays big dividends. Before you list a unit for rent, taking the time to understand your tenant culture, fix problem areas, and demonstrate proactive practices can help gain trust in you as a landlord, create peaceful environments, and make you more money.
In addition, understanding the neighborhood rental comps, turnover rates, and amenities helps you price and market your property. Some properties aren’t best suited as a rental. For example, it doesn’t typically make sense to buy a large expensive house with a $3,000 mortgage payment when the comps tell you it would rent for $2,500.
In contrast, if you have or plan to purchase a property with a $1,200 mortgage, little deferred maintenance, and the rentals comps are at $1,400, it may make sense. It depends on your goals but assessing the property type, location, and rental comps are a great place to start.
2. Determine if You’ll Hire a Property Management Company
Hiring a company to care for one of your biggest financial assets is an important decision. While it can seem appealing, there are considerations and tips. We’ll examine the positives and negatives of hiring a property management company when considering how to rent your house, examining elements like maintenance, cost, and selection of tenants.
Some pros and cons of hiring a property management company include:
Positives of Hiring a Property Management Company
Hiring a solid property management company can take away many of the stressors of owning and managing your rental property. Late night calls, tenant complaints, and property maintenance all are handled by the management company, which frees up your time and gives you increasing flexibility as the owner.
Here are some things property management companies will do for you:
- Source, select, show the property, and sign leases with tenants
- Evict tenants when necessary through proper legal procedures
- Collect rent and provide financial management of properties
- Hire contractors to complete necessary repairs
- Hire contractors to maintain property, such as winter plowing
- Source calls and tenant complaints
If you travel frequently, live a significant distance from your property, have a busy career outside of your real estate investments, or simply don’t want to do anything aside from checking your accounts, a solid property management company can be a smart investment.
Negatives of Hiring a Property Management Company
Hiring a property management company can impact your profit margins and your ability to have control in decisions that impact one of your largest financial assets. Choosing to be the landlord of your property may come with additional tasks, but it puts you in the driver’s seat to be the person making some important decisions regarding your property and those who live there.
Some negatives of hiring a property management company include:
- Possible lack of control around tenant selection
- No quality control on those that maintain your property, what they choose to maintain, or the caliber of contractors hired
- An average 10% reduction in monthly profit margins as a fee for property management
Giving the management company control of tenant selection and property maintenance are likely larger concerns for most landlords than the 10% profit reduction because they have the potential to destroy solid investments. Vetting your property management company well (e.g., by seeing other properties they manage and how they go about their processes to maintain the homes they are entrusted with) can help alleviate concerns.
While most people who live near their properties can easily manage the places they own in a small portfolio, you may consider using a property management company as your portfolio grows or you decide you want a different lifestyle than landlording provides.
3. Prepare Your House for Rent
Your property should be safe, durable, and able to attract and retain tenants while serving your bottom line. Make sure you provide a solid place for renters to live but don’t fall into the pitfalls of over-improvement in your property. This means cleaning up and making any safety repairs but avoiding expensive remodels that can eat into your bottom line.
Here is how to prepare your property for rent:
Think About Baseline Expectations
When considering how to rent a house, remember that most tenants are looking for a place that is clean, safe, and provides them a place to live that is transitional. While people shopping to purchase homes may have more stringent standards, most people considering renting a unit will have expectations that are in line with the area the property is located in.
As a landlord, you want to be sure that you keep up with what your competition is offering, consider if any upgrade will get you tenants, and offer a property that is clean and appears well cared for.
Some baseline preparations include:
- Safety repairs: Be sure that the property is safe. For example, while rewiring a property isn’t necessary, if you have outlets that have sparked or burn damage, replace or upgrade them.
- Health repairs: Any repairs done in the name of health should be completed, e.g., any spots of mold, intruding water, infestation with insects or rodents, and even lead paint. Some jurisdictions have rules around lead paint in older homes that range beyond mandatory disclosures.
- Cleanliness: Hiring a cleaning company to scour your property after the last vacancy or before the first tenant comes is a worthwhile investment.
- Expected upgrades: While it’s not necessary to make your units into HGTV showpieces, and most have outdated features, be sure to keep up with tenant expectations for your area to be able to continue charging maximum rent.
- Replace paint and carpet when worn or damaged: Many landlords simply do paint and carpet as a general rule, but these can sometimes be preserved with conscientious tenants.
Consider ROI on Upgrades
To prevent the common mistake of over-improvement when deciding how to rent your house, always consider the return on investment (ROI) of each upgrade you are thinking about. For example, there may be a well-functioning bathroom vanity that is a bit outdated. Is it worth replacing if it remains functional and keeps up with current market expectations? Likely not.
A good rule of thumb in considering upgrades is to decide:
- Is this upgrade necessary? If not, it can be delayed indefinitely.
- Will this upgrade pay for itself by justifying increased rent? Features like the creation of basement storage units are relatively inexpensive and can pay for themselves.
- Will this upgrade keep up with baseline expectations allowing me to keep my rents top of market for my area? You want to maximize your profit and decrease the chances of vacancy. By keeping your units on par with the area, they will remain in demand.
- Will the price point of this upgrade be able to pay for itself? Many upgrades can become expensive and would not be justified in your area. For example, adding central air might not be an upgrade that is justified over window units if you live in New England, where temperatures are not frequently that hot.
Demonstrate Proactive Practices
It’s common for investment properties to have years of deferred maintenance, so making some effort in this area can go a long way. Fixing broken fences, setting up porch furniture, repairing broken mailboxes, or providing ashtrays outside (rather than simply having cigarette butts discarded) are inexpensive but important cues to what type of landlord you are.
Being proactive about the things that could be obvious upgrades or simply nice touches doesn’t have to be expensive, and can even make you money. For example, installing coin-operated laundry where there was previously no laundry can also bring in additional revenue and be a value add. Creating separate storage spaces in the basement and charging additionally for these monthly can also be both an upgrade to tenants and a money maker for you.
Remember that every investment you make in your rental property should come down to your bottom line. While there will always be ways you could improve upon the aesthetics of your units, be sure to make the decision to upgrade based on what the market demands and return on investment, rather than what you might prefer for your own living arrangement.
Purchase Landlord Insurance
After preparing your property to be in top shape, purchase a good landlord insurance policy to protect yourself and your asset. Landlord Insurance provides more protection than a typical homeowners policy. Landlord insurance covers structural damage, personal injury, and lost rental income from listed perils like storms, accidents, and vandalism.
When shopping for landlord insurance, you will need to ask questions similar to those you would ask if you were shopping for homeowners insurance, as well as a few additional ones to ensure you get the best protection. Ask about deductibles, liability coverage, and rental income protection, and make sure to check out our guide on landlord insurance.
4. Determine How Much to Charge in Rent for Your House
Determining how much to charge when considering how to rent a house includes identifying the fair market rent for properties in the area, calculating the fair market rent for your house, and determining how much you’ll charge.
Review External Sources to Identify Fair Market Rent
The external sources you use to determine fair market rent will be sources that showcase local data that include:
- Local newspapers: Many small towns and locations still use newspapers to advertise available apartments for rent. Be sure to note properties that offer the same size and amenities as your own in your area, even though photos will be limited.
- Neighborhood Facebook groups: Neighborhood Facebook groups are a plethora of local rental information. Look for recently posted apartments or rental units, and for community reaction to the pricing of those units. People are usually not shy in expressing their opinion, and you can easily see the going rates for units similar to yours.
- Rental yard signs: Yard signs often post the rental price and bedroom/bath count on them to encourage those strolling or driving by to call. Given you can see the location and general external condition, these prices are important to note.
- Craigslist: Craigslist often lists photos, addresses, and rental details about units on the market. Here you can see not only what units are offered, but what the landlord includes in the rent price, such as heat or garbage pickup.
- Zillow: By searching in your neighborhood under the rentals menu option, you can make note of apartments that are of similar size and condition to your own.
Doing a quick search of the above external resources, you can begin to have an approximate price range that your rental unit would fall under, given what the current market demands can sustain.
Develop a Fair Market Rent Estimate for Your Property
In creating your own rental estimate, write down the lowest and highest rent currently charged for your bed/bath count in your area, and then compare your units in areas such as:
- Square footage: Though there may be many two-bedroom units, for example, there is a big difference between a cramped two-bedroom in an 800-square-foot space versus a 1,200-square-foot space.
- Location: Even though two properties may be in the same ZIP code and even the same neighborhood, there are always more and less prestigious or advantageous areas within them. For example, are you walkable to a coffee shop that may increase value, or located beside a fraternity house that may detract from value?
- Condition: Be objective in your assessment of your own property and how it compares to others on the market. If your unit is looking outdated and a bit worn, it’s not a proper comparison to freshly-updated modern units.
- Included amenities: Potential tenants are always willing to pay a bit more for convenience and perks. Amenities such as off-street parking, laundry on premises, an open pet policy, or heat included in rent can justify charging more.
Establish Your Rental Rate & Security Deposit
Consider your market rental comps to estimate your current rent value and required security deposit. Some landlords price competitively in order to rent fast, while others wait for a higher price. The pitfall of waiting is that one month unrented can substantially hurt your bottom line; a $75 to $100 discount could be worth a $1,500 monthly payment.
Most security deposits are one month’s rent in addition to the rent to be paid at the time of move-in. The security deposit gives you a little insurance in case there are damages at move out. When the tenant moves out, this money is returned within 30 days minus any documented damages.
5. Finding Fantastic Tenants to Rent Your House
Finding wonderful tenants will be the most important thing you do in preserving your asset; it will also be the backbone of your experience as a landlord. Fantastic tenants maintain the expectations set forth in their lease, and provide a far better quality of life for the individual managing the property with less problematic behavior.
The best way to choose a good tenant is to gather as much information upfront and verify that information. Taking an application, checking credit, references, and backgrounds inform you of their rental history and is a good indication of what kind of tenant they will be. In addition, verifying protects you from tenant scams.
Some ideas for you to rent your house to great tenants include:
Sources to Find Exemplary Renters
Finding the best tenants starts with the medium you choose to advertise your property, and thinking about what groups of people tend to be searching for apartments in those places. Using methods like newspapers or signs can initially seem outdated with the advent of more digital platforms, but they serve as an important resource, as seen below.
Some options for sourcing solid tenants include:
- Newspapers: The average daily newspaper reader is 57.9 years old, making them a perfect spot for finding quiet, long-term tenants who create minimal damage. It may seem old-fashioned to advertise in this way, but it is targeting a very specific tenant.
- Signage: A sign on your property can get the attention of those already living in the area who have friends or family needing a place to stay. Placing a sign in front of your property can be effective if you have good foot traffic.
- Neighborhood Facebook Groups: Social media is an overlooked but effective sourcing location that puts you in touch with those who are known and often local to the area.
- Zillow: Over 50% of visitors to Zillow are looking to buy or sell in the next 12 months, indicating a more established group of individuals looking for rentals.
- Craigslist: This platform attracts a broad range of applicants, but is a last resort for quality renters. Be sure to screen potential tenants carefully, as Craigslist applicants tend to have varied backgrounds and just want a place to live.
Once you gather a pool of individuals who are interested, be sure to set a time to tour the property, where they can gather and pick up an application to continue the process.
Using a Tenant Screening Service
Most landlords with years of experience trust tenant screening services to help further the process of selecting that perfect tenant. When you are considering how to rent your house, it is not only infeasible to do all the credit and background checks on your own, but services are far more thorough as well, saving you time and money.
After you have given the tour of your property and have rental applications in hand:
- Review applications personally: Parse out the individuals you know will not be a good fit. Perhaps they do not meet your minimum income-to-rent ratio, or have pets despite your no pet policy.
- Send promising candidates to your screening service: A screening process will further your promising candidates along by checking for eviction history, criminal history, credit checks, and other important background searches that could affect tenancy.
Be sure to build in the price of the screening service you use into your “rental application fee.” This allows you to run background checks without financial cost, and also helps to pay for your time spent reviewing applications personally or doing any checks you may want to do on your own. For example, calling previous landlords is often a task that new landlords take on, despite the use of a screening service.
Which Tenant Screening Service is Right for You?
6. Use Good Property Agreements to Protect Your Rights
Lease agreements are installed to help protect both tenants and landlords. Having proper procedures, documents, and resources to verify that information gives you assurance and recourse if things don’t go as planned. Verify your state-specific lease is legally valid, provide lead-based paint disclosures when required, and provide a walk-through checklist.
We recommend you utilize a service to help you perform background checks and verify previous addresses, evictions, and Social Security numbers. Visit RentPrep to learn more about their affordable tenant screening packages.
Almost all states and local jurisdictions have specific laws around what can or cannot be a part of residential property leases. We offer free templates to help get you started, but make sure to have a local real estate agent review them or purchase a rental software package.
Here is where to find tenant leases that will assure your rights:
- Landlord software packages: Products like Avail.co have online leases available that meet legal standards for every state and city within that state. Online leases through landlord software packages have the benefit of having legal review—without the charge that sometimes comes with a custom creation at an attorney’s office. A landlord subscription to Avail costs only $10 per month.
- Real estate attorneys: If you have a local real estate attorney, they can certainly craft an agreement that meets your needs as a landlord. One thing about custom attorney lease agreements is that they may include more than the typical one-size-fits-all model that software packages provide. By adding additional terms to the lease, you can add in contingencies and other elements that may give you further protections.
Further Legal Protections & Rights
For further legal protections, you want to be sure to also conduct a walk-through the day of move-in, and be sure to give a lead disclosure if your property was built prior to 1978. Though you may trust your incoming tenants will care for the property, and are assured that your property has no lead paint, it is always in your best interest to legally do these steps.
Conduct a Formal Walk-through
On the day of move-in, walk with the tenant to inspect the property thoroughly. On that day, be sure to bring a walk-through checklist, and fill the form in together. Be sure to take plenty of photos and a video of the property prior to the tenant moving in, and both of you should initial and sign the walk-through form.
The signed and initialed walk-through form, along with those photos and video, will be proof of your property’s condition upon rental. Should there be damage that requires utilizing the security deposit, or if there is any legal action you want to take against a destructive tenant, you will have ample support. Be sure to keep these documents on file.
Give the Lead Paint Disclosure
Homes built prior to 1978 require a lead paint disclosure according to the Environmental Protection Agency. You want to be sure to give them both the pamphlet as well as the signature confirmation form proving they received the pamphlet for your files. While you may have done extensive renovations, and painted over the walls of your property many (many) times, still give the disclosure. It covers you legally, and is an important document to have on file.
7. Be a Conscientious Landlord
It is important to teach your tenants what you expect from them and, in turn, what they can expect of you. There is no manual on how to rent your house that will lead to perfect management, but this will get you started.
Having rental management systems in place to handle rent payments, maintenance, deposits, and property inspections will keep you organized and help you protect your assets. Get to know your tenants, have maintenance crews lined up, and perform drive-bys on a regular basis.
Some more details about how you can be a conscientious landlord are:
Take Time for Introductions and Set Expectations
Many landlords who purchase properties simply send a letter of transition and don’t even take time for personal introductions. Taking the time to introduce yourself and learn about your tenants will give you information, and leave them with a favorable impression that begins the process of building a solid foundation with those who live in your investment property.
Having this foundation can give you solid information about future tenant fit, and also often leads to those in your building being more transparent with the goings-on of your property. For example, tenants who understand your involvement might give you a heads-up around criminal activity, or simply be more likely to report maintenance problems with the house, which helps preserve your asset.
Here are some tips:
- Schedule a meet and greet for each unit: Introduce yourself, and meet the people living in each of your units. This is also a good time to see how your tenants live and how they care for the property.
- Ask about any unaddressed issues or problems: There is a big difference between buying a rental house and learning intimately what some of the minor but problematic issues are from those who live there. Remedy as many complaints as you can from the start; they often prevent further property damage.
- Know your culture: There is a culture that exists in your house whether you know it or not. In talking with your tenants, be sure to understand what their home environment is currently like, and what they want from it. Those who are shift workers, people who work at home, elderly individuals, and others might all have unique preferences and needs to consider for selecting future tenants who will gel with your building.
- Be sure they have contact information and know expectations: Every landlord operates differently. Be sure they’re aware of what they can expect from you, how to reach you best, how long it typically takes for you to respond, what issues qualify as “emergencies” to you, and what your process is.
Have Systems in Place for Repairs & Maintenance
Put together a Rolodex of contractors you can call for various concerns, so that when tenants call for repairs, you can address them quickly with a level of service you trust. For new landlords, it is a wonderful idea to create a small book of contacts for home repairs that you cannot complete yourself, and get to know your contractors before you need them.
Here are some types of contractors to have in your book, ready to go. Be sure that some of them have emergency availability, and are able to be contacted on weekends:
- General handyman: If you are not a handy person, your general handyman will be your go-to call for most of your tenant complaints. Look for a jack-of-all-trades who completes solid work at a reasonable price point that you can rely on. Another great trait of a handyman is one who knows the limits of their own abilities, so that important problems are addressed by a professional.
- Plumbing/heating services: While most minor plumbing and heating issues might be remedied by your handyman, there will be times you have something arise that should be handled by a pro. For example, if you have gas heat, it is always important to have a professional working with gas lines.
- Electrician: Electricians will usually be utilized to address large or whole house issues, such as circuit boxes or updates, rather than replacing light fixtures or other things a handyman could likely do.
- Roofing services: Roofing services are not a common call issue, but having a service that you already know does reliable solid work can be a lifesaver when disaster strikes. Be sure your roofer is a specialist in the type of roofing your property has, be it slate, flat rubber, or another type of roofing.
- Landscaping services: Landscaping services are often used for mowing lawns and trimming, as well as plowing snow in the winter time. Some handymen and landlords will also perform this work.
A good landlord repairs issues of complaint quickly. Set the precedent of being a responsive landlord to tenants about the elements that affect your asset and their enjoyment of it.
Drive By on a Monthly Basis
Driving by your property on a monthly basis can give you information that you would never know otherwise about the state in which you property is being maintained and its impact on the community. Talk to neighbors, examine the exterior, and address any complaints.
Absentee landlords who never visit properties often miss important elements that would have saved their asset. Even parking your car nearby and taking a walk past the property could cue you to things like loud music blaring from the house, far too many cars in the driveway, animals they shouldn’t have, or garbage strewn about.
To be a conscientious landlord, you shouldn’t simply be responsive to tenant complaints, but be proactive in how your property impacts both the tenants who live there and the neighborhood of which it is a part.
Always Show Respect
Your tenants have chosen to make your property their home, and deserve respect and privacy. Be sure to always give 48-hour notification of any interior unit visits, and treat your tenants’ needs, items, and living situation as you would want your own to be treated.
Showing respect to those you rent to also means handling problematic tenants swiftly. This can involve personal interventions or evictions. Current tenants will appreciate your diligence in addressing their needs, and the community will be thankful for a responsible landlord who manages their property well.
Frequently Asked Questions (FAQs) on How to Rent Your House
This guide should give you a primary outline on how to rent your house. These are some frequently asked questions we’ve encountered and the answers that might give you further insights.
What Is the Minimum Down Payment on an Investment Property?
Most banks and lenders will require a 20% to 25% down payment to finance a rental property. While you can acquire a personal residence for as low as 5% down (and lower in some cases), investment properties require more upfront investment by the owner of their personal money for lending institutions.
Can I Buy a Rental Property with Bad Credit?
While there are ways to do this through using a co-signer, saving an extraordinarily large down payment, and other methods, these are usually unwise choices. It is always recommended that prior to undertaking future financial risk, you remedy previous fiscal mistakes. It would be advisable to take the time and effort to repair your credit.
Is Buying Property a Good Investment?
It can be, but the qualities that make it a good or bad investment are largely contingent on the deal you negotiate, the property itself, and the market where it is located. Some people find property investment a worthwhile passive income stream and way of building wealth assets, while others lose money or find the venture not worth the difficulties.
The Bottom Line
Learning how to rent a house is a process that has general steps you can take, but requires time to master. Having systems in place that help you assess your property, prepare it for rent, determine fair market value, and source tenants are all essential parts of the process that will come more easily with repetition.
To help with easy tenant screening and background checks, check out RentPrep. With a starting price of only $18.95, you can build the cost of your screenings into your rental application fees for thorough screenings that take the stress and guesswork out of selecting tenants who will help preserve your property.