Renting out your home allows you to generate income while maintaining ownership of a property that you can use when it’s vacant. This guide shows you how to rent out your home effectively, following steps to determine rent, find tenants, properly structure a lease, and vet potential property management companies.
Earning additional income while away or renting out an unused space is easy using Airbnb. With more than 2.5 million people listing their properties on the site and renting out their homes or spaces within them, you have the potential to earn income that can bring financial rewards or at least far more financial flexibility.
There are five steps to follow regarding how to rent out your home.
1. Determine Rent & Security Deposit Amounts
Knowing the rental demand in your area is the first step in setting your price. Understanding how to list your home on Airbnb, VRBO, and other provider sites gives you an edge for marketing, handling rent payments and deposits online, and scheduling. In addition, you can compare your price and the required deposit to similar properties.
Some resources to determine fair market rent include:
- Airbnb & VRBO: If you are going to be doing a short-term rental, be sure to check to see what rates of local Airbnb or VRBO charge in your area for similar housing and accommodations
- Neighborhood rental signs: If you see “for rent” signs in your area, call the number listed and ask what the rent is as if you are interested yourself
- Craigslist: You’ll want to go to your local Craigslist and click the “apts / housing” section under the heading “housing”; after this, look for listings that have the same bedroom and bathroom count in similar condition that are also homes for rent in your neighborhood
- Zillow: Search your area, and then click under the “Rent” menu option where you can click on “Houses for rent,” among others; in this section note, the houses in your area for rent that are similar in size and condition to your own
- Hotpads: Plug your city into the search bar, and look at comparable listings in your area; note the condition and rents that resemble your own
- Newspapers: Many local newspapers have a rental section, so you’ll want to explore these listings; however, note that newspaper listings do not have images, so rents of a similar size might not be in the same condition as your own despite the description
Estimate a rental figure within the range of rents you’ve discovered in your local market but also factor in the condition of your property and how it compares to others as well as any additional amenities you might offer, such as an open pet policy or off-street parking.
People are willing to pay a bit more than average to have convenient parking or to bring a pet, in those cases, a higher price might be justified. Once you decide on your rent price, you can use a free service like Rentometer to double check and make sure you are in line with comparables.
Setting the Security Deposit Amount
A security deposit gives landlords assurance that rent will be paid, the property won’t be damaged, and the lease terms will be followed. While security deposits typically equal about a month’s rent, there are no hard and fast rules on deposits. Some states restrict what you can set for a security deposit.
Some things you should do to handle security deposits properly include:
- Put it in a separate bank account: Security deposits are not considered a fee, but a holding amount that can accrue interest and returned if not needed
- Give the tenant a receipt and keep a copy: Include the amount paid, the date, and have the tenant and landlord both sign it as an acknowledgment
- When the tenancy ends, get a forwarding address: Make the process seamless to be able to return the money quickly that was held on their behalf
- Include interest: Be aware that in some states, landlords have to return the security deposit with interest at the end of the tenancy
- Be timely when returning the deposit: Return the security deposit within 30 days, which is the standard for most states
- Always be transparent: If you have to dip into the security deposit for repairs at the end of the lease, attach a list of repairs, costs, and receipts
While it is always the hope that you rent your home to individuals who will care for it and treat it well, be sure no matter how nice your future tenants seem, you always follow a process. Your security deposits and how you proceed should always take the unexpected and worst-case scenarios into account. Be sure to follow the steps above to proceed, and the law will shine more brightly in your favor should unfortunate events occur.
2. Rent Out Your Home to Good Tenants
Most people who rent their own home do so on a short-term basis, often with sites like Airbnb, which is a great site to find tenants. We will discuss tools to find both short-term and long-term tenants. Finding good tenants could potentially protect your asset and may be the most important decision you make.
How to Rent Out Your Home with Short-term Tenants
Short-term rentals are often vacation rentals. Finding tenants and managing the process can be time-consuming if not streamlined. Below, we explore different ways to consider when thinking about how to rent your home with sites like Airbnb, as a general vacation rental, and corporate housing options.
List on Airbnb
Airbnb has the benefit of an existing platform in which you can manage availability, payments and give potential clients an easy booking ability. With Airbnb, you can read comments about your potential tenants from other landlords helping you get to know them, their payment history, and how they left the property.
Using a platform like Airbnb to rent out your home helps tenants get to know landlords as well. Tenants will leave reviews regarding details about the property, including cleanliness, the accuracy of the listing, and ease of working with the host.
Variables to consider with your Airbnb rental include:
- Hiring a service: If you are not present in the home or nearby, you will need to hire someone to do basic things like wash linens, clean up, and turn over the property; consider this in your profit margin
- Rapid turnover: If you are going to be away from your home for long periods, having the turnstile of individuals may be less appealing from a management perspective than one longer tenant
- Limited screening: Airbnb allows landlords limited screening potential, but you can require applicants to have “verified ID badges,” that they are who they say they are
- Hosting: Airbnb accommodations are rated by the users, some guest might expect a hosting experience that includes breakfast, information about the area, and other time demands that traditional vacation rentals do not
- HOA restrictions: Verify your neighborhood homeowners’ association (HOA) does not restrict short-term rentals
If you are on location or located nearby, Airbnb can be profitable and easy to manage. If you’re away for an extended period, you need to partner with a housekeeping service and provide check in and check out procedures. Some homeowners use lockboxes or keypads or pay someone to check in guest.
How to Rent Out Your Home as a Vacation Rental
General vacation rentals can be listed through services like VRBO. Their platform allows you to communicate with your tenant, send emails, see social media accounts if linked and read more about who you’re leasing to. With VRBO, you’ll need to upload your house rules, cancellation policy, and lease contract.
The contract should address things like:
- Minimum age of renter
- Parameters for smoking
- No parties of more than a certain amount of guests
- Quiet hours. If your home is in a residential area, this is considerate of your neighbors and avoids complaints
- Only people on the contract are allowed as overnight guests
- Financial consequences of breaking the contract; VRBO has a $300 security deposit
Realize that by having a contract some may pass on your booking. However, anyone unwilling to sign a contract prior to their arrival might be considered suspicious since they are common among vacation rentals.
How to Rent Out Your Home as Corporate Housing
Renting your house out as a corporate rental is another option for finding good tenants. Renters are often large corporations or government agencies looking for alternatives to hotels. Sites like Corporate Housing by Owner allow homeowners to list properties with calendars, photos, listing durations, and electronically executable contracts, starting at $339 per year.
Short-term housing is almost always best vetted and completed through existing listing websites, and not through traditional tenant finding channels like Craigslist. We recommend you use Airbnb and VRBO to list short-term rentals.
How to Rent Out Your Home to Long-term Tenants
Long-term tenants are considered those staying for more than six months. While all tenants can create significant headaches and property damage, the tenure of long-term tenants makes it especially important to make the right choice.
Here are the options for sourcing the best long-term tenants:
- Neighborhood Facebook groups: Members of Facebook groups often have family or friends in the area; posting to your neighborhood Facebook group gives you exposure to people who already love the area and have public social accountability
- Craigslist: Craigslist is the go-to for many people searching for rentals in the area from college students to those looking to relocate and will attract a broad range of applicants
- Zillow: As the largest real estate marketplace on the internet, Zillow tends to have a more established group searching for rentals that may also be searching for homes
- Signage: If you are in a location that gets a lot of foot traffic, you may think about using a sign in the window or front of your property; you will usually get local individuals or friends of individuals who already are established in the neighborhood you live
When advertising your property highlight the benefits that serve the type of client you see being the best fit for the property. For example, if you would like to have a commuter, emphasize the walkability to the train station. If you see a family being a wonderful fit for a larger home, highlight the school system nearby.
3. Screen Tenants Before You Rent Out Your Home
Screening your tenants can save you money, hassle, and prevent property damage. When vetting tenants, first conduct a brief phone screen followed by a more thorough screening by a reputable company to verify background elements like credit score and eviction history. Utilizing a site like Airbnb can simplify the process.
Airbnb Tenant Screening
Short-term rental companies like Airbnb offer some screening for landlords. They verify information like address and email, and their contracts allow for random background checks. Airbnb also allows hosts to post reviews on tenant’s profiles allowing other landlords to share information about a previous tenant.
If you are not using a service like Airbnb, you will need to conduct screening on your own. Start with a phone conversation, followed by meeting them at the property, then utilize a tenant screening service to verify the information on their application. Set standards for your application due diligence.
Here are some sample requirements to apply universally:
- Those who left their previous residence on good terms: You want a renter who will not cause problems in your neighborhood or with your property
- Those who have an income of three times the monthly rent, can verify income, and can pay the security and monthly rent upon move in: As a general rule of thumb, income should be about three times the monthly rent, they should be able to pay the security deposit and rent upon move in, and they should have work that is stable
- Compliance with your stated pet policy: Ask about pets, and you will be surprised how many ignore that you forbade them or assumed you would find their pet an exception; if you allow pets, ask about if there is any bite history
- Compliance with smoking policy: If you do not allow smoking in the property, be sure any potential tenant is willing to comply with this
- References from previous landlords: If they have rented before, they should provide phone numbers that you are authorized to call; be sure that these references go back the past 10 years, and are not just a landlord they may have had once for one month
- Ask about how many people will be living in the property: This will allow you to estimate if your property can meet that need by the rules of your local ordinances
- Do they have a solid credit history: Let the person know that you will be running an official credit check, ask where they stand, and if there is anything you should know before the rental begins
These are a few questions that prove very useful to at least prescreening your tenants to get a short list of individuals that you can then show the property to and get completed applications.
Showing the Property
Prospective guests who want to rent out your home may want to see the property before they rent it. You should show the property to prospective tenants, which will allow the potential tenant to see if they believe this is a place they’d like to move forward with. It also gives you face-to-face interaction with these individuals. For expediency, it’s best to set two scheduled times when you will be showing the property, and have all applicants agree to come during one of those times.
Setting two rigid showing times allows you not to play the game of running to the property multiple times for potential tenants that may change their mind or decide to look elsewhere and not show up. The two scheduled times can be a weekday evening after traditional working hours, and a weekend afternoon to capture the widest range of schedule availability.
When considering how to rent out your home, the rental application should contain information that will allow the landlord to conduct a thorough background search and screen potential tenants for their alignment with property expectations. A service like RentPrep can be very helpful in coordinating tenant applications and verifying information.
Having a thorough rental application that can still be filled out quickly is essential. Be sure to give them to potential tenants at the property tour, and set a deadline for their return date so that you can proceed in renting your home in a timely fashion. Two weeks is a reasonable time frame for rental applications to be returned to you.
Tenant Screening Service
Using a tenant screening service will save you time and money in the long run in helping to vet individuals to rent your home. After your tenants have filled out their applications, you should do two things: review the applications yourself and submit the information of promising candidates to a tenant screening service.
Reviewing the Information
When reviewing the information on the tenant application, it’s common to find inconsistencies with your initial phone screening in meeting your initial minimum criteria. When this occurs, it’s often prudent to place those applicants aside and move on.
Submitting Information to a Screening Service
Screening services make the final process of running checks easy. Running the background checks, bankruptcy searches, criminal history, and other elements can be incredibly time-consumptive and expensive. One service that does all of this and more is RentPrep. Starting at just $18.95 per report, it is a cost-effective way to get the job done and verify your tenant histories.
One thing I’ve done in previous rentals is to build in the cost of screening services into a “rental application fee.” There’s no need to get greedy with the fee cost but, for example, you can upgrade your RentPrep plan to the $34.95 per report Platinum plan to get the additional information and charge a $35 rental application fee, so it works out relatively even.
The RentPrep platinum plan includes items like employment verification, sex offender searches, and other features that the basic plan does not. You will never regret opting for a more thorough tenant screening.
4. Document the Lease to Rent Out Your Home
A lease protects the rights of both tenant and landlord and lays out the foundational terms that both parties are expected to adhere to during the rental period. Your lease should be state specific and legally reviewed. There are services like Airbnb that can assist with lease documentation and creating policies around cancellation and deposits.
Keep in mind, leases have very state specific criteria that often must be met, but they do not have to be expensive ventures. For example, you can customize a residential lease to include your state requirements on LegalZoom starting at just $29.
Think about the following elements when customizing your lease:
- Names of everyone who will be tenants: While it may seem silly to include both adults, for example, by doing this you make each legally liable should there be a failed payment
- Landlord entrance policy: Be sure to be respectful to tenants and offer a 24-hour notice policy unless cases of property emergency like fire or flooding
- Length of agreement: State if this a month-to-month lease or yearly with an option to renew
- Monthly rent, late fees & deposits: Be clear about the monetary expectations of both the tenant and your responsibilities as the landlord
- Pet and smoking policies: To be enforceable, both must be stated clearly
To learn more about these agreements see our article on residential lease agreements which includes a free template you can use. You should also consider including a walkthrough checklist and lead paint disclosure with your lease agreement.
Two important items you should be sure to include with your lease are a walkthrough checklist and a lead paint disclosure.
1. Walkthrough Checklist
A walkthrough checklist is proof of your property’s condition prior to the tenancy and is also the document that will be able to provide verification for damages should you have to use monies from the security deposit or take further legal action. An initial property walkthrough is always done with the future tenant present using a checklist.
Be sure to include a walkthrough checklist with that initial lease, and take plenty of photos at the time you do the final tour with your tenant to document the state of the property upon move-in. We offer a free checklist for you to use, and to gain initials from your tenant that verify the condition of the property.
2. Lead Paint Disclosure
If your home was built prior to 1978, the United States Environmental Protection Agency requires that you provide a pamphlet disclosing that there may be lead paint in your home and how tenants can protect themselves. Even if your home has been repainted, remodeled, or renovated, you should still give this disclosure. Be sure to have tenants sign that they have received these pamphlets by downloading this form for signature in your records.
5. Use a Short-term Rental Service or Property Management Company to Rent Out Your Home
For a short-term rental, a service like Airbnb can alleviate management task related to finding and screening tenants, collecting money, keeping a calendar of available and booked dates and at the same time, keep you organized and informed. Airbnb charges 3% of the rental amount once your property is listed.
Utilizing a property management system to rent out their home is more turnkey. Property managers will find and screen your tenant, maintain the property, outsource housekeeping, collect rents, manage deposits, and even handle mortgage and utility payments. The fees can range from 10% to 20% of the rental amount.
How to List on Airbnb
Airbnb allows homeowners to list their space for free. You can list a single room or your entire house. Once a qualified guest reaches out to you, you can ask them questions. If they decide to book your space an automatic 3% commission goes to Airbnb for facilitating the transaction.
When you list with Airbnb procedures that you manage include:
- House rules
- Available dates
When to Choose a Property Management Company
Some homeowners can manage one property on their own while others may feel it’s worth hiring a property manager and paying the 8% to 10% fee. It’s estimated that managing a rental property takes two to 10 hours a month. Choosing to use a property management company may be determined by your available time and financial resources.
Here are some things that property managers typically do:
- Find and screen tenants
- Collect rents
- Manage deposits
- Resolve repair issues
- Handle mortgage payments
Property managers take care of the basics and allow you the freedom to live your life away from any tenant hassles. However, if you want someone who will drive past your property on a regular basis to do a visual check, they are usually not that vigilant. Most manage many properties.
Frequently Asked Questions (FAQs) About How to Rent Out Your Home
Hopefully, this step-by-step guide answers your questions on how to rent out your home. If not, here are some frequently asked questions that we’ve encountered. If you have additional questions about how to rent out your house, feel free to ask them in the FitSmallBusiness forum.
Do I Need a License to Rent My House?
When examining how to rent out your home, always be sure to check with your local department of housing to see if this requires a license in your area. If it does, the process is usually quite painless involving an application, fee, and general inspection.
How Can I Rent My House Fast?
Attempting to rent out your home on your own quickly without due diligence is a recipe for disaster. Be sure if you need to rent your property quickly that you contact a property management company that will assure that you proceed correctly by asking your questions, sourcing tenants, and doing the legwork for you.
Will Renters Destroy My House?
Sourcing the right tenants is crucial to preserving your asset, so it is worth taking the time and proceed through a more thorough screening process to get it right. While tenant screening may seem meticulous and ongoing, avoiding the tenant horror stories some experience makes them worthwhile.
The Bottom Line
Learning how to rent out your home is a process that can be simplified into a process of steps that protect your asset and give you peace of mind. Through the proper tenant sourcing, screening, lease agreements, and determining the right rental amounts, you can have relative assurance that you’ve done all you can do to make this venture successful.
To help with tenant screening, credit, and background checks, try RentPrep. With extensive reports on your potential tenants starting at just $18.95 per report, you can help find information that saves you hassle out of the gate. Build it into your application fee, and it becomes a free service you can’t imagine renting without.