Decided to Rent Out Your Home – Now What?

Most of my clients are investment-minded, and I love the notion of keeping your current home as a rental when you move out of the area or buy a bigger home.Most of my clients are investment-minded, and I love the notion of keeping your current home as a rental when you move out of the area or buy a bigger home. But, how do you know if you’re making the right decision and if you’re ready to be a landlord? I give you all the information you need to consider in my four-part series, How to Be a Landlord.Part 1 of the series helped you decide if renting out your home was the best decision — Should You Rent Out or Sell Your Home?This week’s installment is part two of my four-part series.You’ve made the decision to rent out your home but you have lots to do before tenants actually move in! First you need to prepare yourself, any necessary paperwork, and your home. Next, you can focus on finding good tenants. Are you ready?Get OrganizedBefore you even search for a tenant get everything in order so you’re not winging it. If you’re not going to use a property management company then these are very important steps to take. (We’ll cover property management in my next article.)Remember, how you act and appear as a landlord will reflect on how your tenant will view you and your property.

• Decide what to charge for monthly rent. You can go online to sites such as Craigslist to see what similar homes are renting for in your neighborhood. At this point, you should have already figured out if renting will be a good investment for you or not. Remember that you will want to factor in about 25% each month for future maintenance and repairs.
• Come up with a set of tenant rules and policies. You want to start off any tenant relationship as professional as possible. Have a written policy of rules — how rental checks should be paid and when, how many people can live there, security deposit requirement, late fees on missed payments, or if you allow pets or not, property inspections, who to call if something breaks, etc. Stick to this policy!
• Have a rental application for tenants to fill out. Get name, current address, employment and rental history. You can find a template of one online. Include authorization to have criminal and credit screenings.
• Get your home in order. Now’s the time to fix anything that needs fixing, paint to refresh, clean and spruce up throughout. You want to attract stable tenants so your home should reflect what’s being offered in your neighborhood in terms of features and amenities if possible. Don’t go overboard with expensive upgrades though!
• Ensure your home is a safe environment. Install smoke detectors, a carbon monoxide detector, and provide a fire extinguisher. You want to make sure your home is up to code if it needs to be inspected before you rent it out.
• Familiarize yourself with local tenant laws and landlord requirements. You might want to contact a real estate attorney to clarify the laws, many of which favor tenants. You also may need their help with an eviction down the road. Even when searching for tenants keep in mind equal housing opportunity laws.
• Find out if there are any restrictions for renting out condos in your building. Some buildings restrict the number of rentals to ensure the value of the building. You might have to be put on a wait list.
• Get proper insurance for a rental property. You’ll now need “dwelling” insurance that will cover any property damage, and also a policy for liability if someone gets injured on your property. You may also want to consider a home warranty plan for out-of-pocket expenses.

Dealing with Potential TenantsThese steps are what will determine if your experience with tenants will be a positive experience or one full of horror stories. You need to protect yourself and your property before you agree to have someone live in your home.

• Find tenants through Craigslist, posting on Facebook, friends, air b and b, urbanigloo.com, rental.com or other reputable online services for rentals. You’ll need to take some good photos of your home and have your rental application and policy ready to hand out.
• Decide whether you will rent to family or friends. This could be a slippery slope so tread carefully. You don’t want to jeopardize any relationships so that’s why a written policy and professionalism are essential.
• Always run a credit and criminal background screening, which can cost $20-$30. This is very, very important no matter how good you feel about a tenant so have them sign an authorization for these screenings. Ask for references from previous landlords, past pay stub, and see if they have job stability for their employment history.

Have high standards but be realistic since very few people have a perfect credit score.  If you don’t want to pull a tenant’s credit, ask them to include a recent (30 days old at the most) credit report with their application.

• Determine if they have ever been evicted. This could be repeat behavior and you don’t want a serial abuser. Eviction records are public and can be found in court records. Credit reports also will indicate in the public records section if they have been sued for past rent.
• Make sure you have security deposit and first month’s rent BEFORE they move in. Once a tenant has moved into your home, it is harder to evict them because of tenant rights.
• Sign the lease. There are typical leases online for the state or city that you live in, so start there for an easy template.  Make sure you include clauses that are important to you.  For example, if you want your tenant to have the carpets cleaned upon their move out, now is the time to include that in the lease. 
• Tenant Walk-through. Upon your tenant’s move in, walk through the property together, noting in writing and/or with photos what marks, scratches, damage they are assuming. Kind of like when you rent a car, they note where tiny scratches or dents are, so do that as well. This way, you can be clear about the condition when it comes time to give back their security deposit. You’ll avoid any back and forth about what the condition was before they moved in. 

We are excited to bring you my four part How to Be a Landlord Series. Next week’s article, Should I Hire a Property Management Company?, will help you answer that question. Stay tuned!