Finding ways to diversify your income is always a good idea and with the median price of rent hovering near $2,000, renting your home is a great option. While the concept seems simple, there’s more to learning how to rent out your home than meets the eye.
You need to make sure you’re setting yourself up for success from the very beginning.
If you’re not sure where to start, don’t panic. Here’s what you need to do to rent your home out with ease.
Decide How Much of Your Home You Want to Rent Out
Before you put your home on the rental market, you’ll need to figure out how much of your house you want to rent out to tenants. Some homeowners choose to rent a single room while others rent their entire homes.
So, how can you tell which option is right for your needs? Think about your long-term goals.
Renting out a portion of your home will still give you extra money each month. However, you’ll get less than you would by renting out the entire property.
Renting out your entire home means you’ll be able to charge a higher rental rate each month, but you’ll have to find somewhere else to live. If you’re already planning on moving out, this may be a good choice.
Give Your House a Thorough Inspection
The key to attracting great tenants lies in making your home as nice as possible. Take the time to thoroughly inspect your home before offering it for rent.
Go room by room and look for areas that need improvement. This can be anything from touching up paint to replacing damaged light fixtures.
Make a plan to take care of those fixes before you put your home on the rental market. Try to take care of minor repair issues yourself and hire an experienced professional to take care of the issues you’re not comfortable fixing on your own.
Talk to Your Insurance Company
Most standard homeowners insurance policies only protect the property owner and their families. They won’t cover tenants or help pay for damage resulting from renting out your home.
Talk to your insurance company and let them know that you’re planning on becoming a landlord. They’ll be able to recommend appropriate coverage so your property will be protected.
Keep in mind that you’ll likely have to pay more for insurance once you start renting your home. Factor those costs into your rental rate, so you don’t have to pay for the coverage completely out of pocket.
Figure Out How Involved You Want to Be
When you rent out your house, you have a choice between being an active landlord or letting someone else manage your rental property.
If you have the free time to manage your rental, find tenants, handle upkeep, and market your property, being an active landlord can be a good option. However, if you don’t have enough time to manage everything to your satisfaction, you may want to hire a property management company.
Property management companies handle everything from marketing home rentals and screening tenants to rent collection and coordinating maintenance appointments.
While you’ll pay for their services, these companies allow you to become a passive landlord. You’ll still earn money from the rent collected each month, but you won’t have to put in the work of managing your rentals.
Set Your Rental Rate
Make sure the rental rate you set for your property is competitive. Price rent too low, and you risk low profits. Price rent too high, and you risk not being able to attract tenants.
Look at rental properties that are similar to yours and see what other landlords are charging. This can give you an idea of how much you’ll be able to charge without turning prospective tenants away because your rate is too high.
If you’re hiring a property management company, you can rely on them to help you set a fair rate.
Draw up a Lease Agreement
Lease agreements outline the terms and conditions tenants must satisfy if they agree to rent your home. You’ll need to create one before you start interviewing prospective renters.
The lease agreement should include the following:
- A place for the names of your tenants
- The address and a brief description of the rental property
- The length of the lease
- The rental rate
- Any specific rules the tenant needs to follow
- Your maintenance policy
- Your contact information
- Any safety disclosures required by your state
Look online for examples of rental agreements and model your own after those templates. Once you write your lease agreement, it’s a good idea to hire a real estate attorney to review it for accuracy.
Keep in mind that if you’re working with a property management company, they’ll likely handle this for you.
Screen Prospective Tenants
It’s always a good idea to carefully screen any tenants you’re considering renting to. Run a background check on each tenant over the age of 18 and pay attention to any felonies, misdemeanors, or evictions that might come up.
Make sure your tenants have stable jobs and take the time to check any references they provide. This way, you’ll get a feel for the types of tenants they are and can weed out any potentially destructive or irresponsible renters from consideration.
Now You Know How to Rent Out Your Home
Figuring out how to rent out your home doesn’t have to be a challenge. As long as you follow these proven steps, you’ll be able to find the right tenants to lease your property.
Keep in mind that you’ll need to treat your rental properties as a business if you want your business to thrive. Check out the latest posts in our Business category for tips to help you set your new venture up for success.
