If you’re ready to buy a bigger and better home, keeping your current house and renting it out can be a great option and a potentially profitable venture. That said, there is a lot more to becoming a landlord than just finding tenants and collecting the monthly rent checks.
If you’re curious about the rental process, keep reading to learn what the process entails and what new responsibilities you’ll be taking on as a landlord to see if it’s worth investing your time, energy, and resources.
Consider the costs
While yes, renting out your property can be another income stream. You must also factor in costs you’ll have as the landlord, including property taxes, insurance, maintenance, repairs, and upgrades. Also, factor in the time and energy you’re investing in learning how to become a landlord and keeping up with all the duties. If, after all those expenses, you stand to generate a good amount of profit, that’s great. But, if you’re only profiting a small amount, it’s up to you to decide if it’s worth holding onto the property.
Decide how much rent you’ll charge
Once you’ve tallied up all your costs and expenses, you’ll have a better idea of how much you’ll need to charge for rent to generate a profit. However, that’s not the only thing to consider when deciding on the magic number. To attract tenants, the rent should also be competitive. Research how much comparable rentals are going for in your area to give you an idea of the average rates.
Study the laws
As a landlord, you must also educate yourself on federal, state, and local landlord and tenant laws. This is crucial. Skipping this step can get you in trouble later. There are often laws regarding security deposits, property access protocols, lease-end notices, and more. Do your research first before moving onto the next steps in the rental process.
Set your policies
Since you are the landlord, you also decide what policies and rules tenants must follow when living on your property. Policies can include whether or not you allow pets and if there are any additional fees involved for pets, what the process and penalties are for ending a lease early, and other things like parking, quiet hours, or renters insurance requirements, if any.
Create a management plan
Once your tenants move in, your duties as a landlord don’t end there. That’s why it’s important to have a plan in place for how you will manage the property. For example, if there is an emergency maintenance request, who should the tenants call and who will fix the issue? And who will check in on the property periodically? You can take care of these things yourself or outsource them to a property management company or another person, but keep in mind that those added expenses would minimize your profit. Whatever option you decide, have a solid plan to ensure a smooth experience for both you and your tenants.
Would you prefer to let our leasing experts handle it for you?
We have an in-house leasing team, dedicated to helping property owners:
- Prepare homes for the rental market
- Promote rental property via Pardee’s website, MLS, and popular home search platforms
- Find and vet qualified tenants
- Draw up lease agreements
- Refer recommended vendors such as handymen, painters, housekeepers, etc.
- Plus, facilitate the entire process from start to finish
Write a lease
You’ve researched the laws, came up with your property policies, and locked in your property management plan. Now, the next step is to get it all down on paper and create a lease. As a starting point, Google is your best friend for finding sample lease templates, which can help give you an idea of what to include in the lease. But, for your final draft, it’s always best to consult a lawyer to ensure that everything is law-friendly and adequately protects both parties.
Start marketing your rental
Once you’ve got all the legal things taken care of, it’s time to start marketing your rental to potential tenants. Similar to selling a house, investing in professional photography and some light staging is always a plus and will ensure you’re showcasing your rental in the best possible light, making it enticing for renters. Then list the rental on sites like Trulia or HotPads, making sure to include a detailed description of the space and instructions on how to get in contact for more information. Other offline marketing strategies you can use include telling people in your personal network (friends, family, colleagues, etc.) and putting a “for rent” sign outside the home for passersby to see.
Meet and screen potential tenants
Meeting potential tenants in person is not only a chance for them to see the rental for themselves but also an opportunity for you to get to know them as well and see if they’re a good fit. If the tenants are ready to advance to the next step, have them fill out an application so you can run background and credit checks. There are often fees associated with those things, so be sure to charge an application fee (usually $30-$50 or more depending on the area) to cover the charges. Many property management apps feature built-in screening tools. As part of the screening process, you can also ask for previous landlords as references and confirm their employment with pay stubs or by calling their employer to ensure they’ll be reliable tenants.
Sign the lease
Once the tenant screening checks out, it’s time to seal the deal by signing the lease. Because leases can be long and a bit overwhelming to digest all at once, be sure to take your time explaining each section to the tenants and have them sign and initial each section as you go. Before handing over the keys, document the space by taking photos. If there are any damages at the end of the lease, the images prove that the damage wasn’t there before. And speaking of damages, if there aren’t any damages at the end of the lease, you are responsible for refunding the security deposit, so be sure to save it in a separate savings account. And voila! You’re officially a landlord.