Renting your home is different from being a parent or a roommate. That’s because of the power discrepancy between yourself and your tenant. That’s a dynamic you want to retain! Your tenant needs to be able to see you as a source of stable service in the same way you see them as a source of stable income. Follow these rules and that relationship will serve you both well!
1. Understand the Responsibility Involved
When you rent your home you end up with a built-in security system of sorts since people are less likely to break into or vandalizing a house with residents. You can also take advantage of tax incentives, generate income, and allow you to hold onto your home long enough that you can see it up in value.
At the same time, being a landlord is a lot of work! That’s why property managers are in such high demand. They collect rent, handle repairs, screen tenants, etc. so you won’t have to. Property management companies come at a price, however, of six to 12% of your collected rent. It’s a price that’s worth it!
2. Prepare Your Home for Renters
If it’s a seller’s market, then you’re unlikely to be able to rent your home without presenting it in tip-top shape. So, clean your abode, make sure all the appliances are in good condition, and if you’re renting out only a section of your home make sure that it’s properly separated from everything else.
3. Know the Law
You need to know the law not to protect your rights but to protect yourself from the law. From state to state, county to county, and sometimes even municipality to municipality, the laws can change. That means how you collect security deposits, evicitions, and when you can even enter a residency after a tenant has moved in can vary if you drive just a few miles away. The ways in which tenant’s rights are protected vary from location to location as well, so you take care not to commit a violation that lands you in court.
4. Marketing Your Home
To get a tenant you’ll have to properly advertise your home. RentalsOnline.com provides a list of words that will make your advertising copy pop: “granite,” “gourmet,”maple,“, “hardwood floors.” “stainless steel appliances,” “state-of-the-art,” “vaulted ceilings,”, etc.
Only use these terms to highlight the actual highlights of your home! Nothing’s worse than false advertising. So, play up your washer/dryer, central air, and your parking space so long as you have them!
Local newspapers and rental guides are no longer as useful as simply posting online. Even sharing your ads on Facebook and Craigslist can help you find a renter quickly! Of course, a property management company can handle this for you as well.
5. List with high-quality photos
The first way someone is likely to see your property is via a photo online. So, invest in high-quality photos so that potential tenants get a look good enough that it inspires an in-person visit. After all, if you can’t be bothered to provide good photos why should you be trusted to provide good accommodations?
6. Find a Good Tenant
You want money. The best way to make money is with a tenant who possesses all the signifiers of money. That means steady income, good credit, and no criminal background. Although some people make mistakes, so a criminal background shouldn’t rule out a potential tenant given the questionable nature of the criminal justice system and humanity’s potential to transform itself.
As soon as you can show your property start looking for tenants. That’s because time spent looking is time spent losing money! You’ll want to be very thorough, though, since you want someone who’s capable of both making payments on time as well as keeping your home in good condition. And if this is someone you’ll be sharing a wall with, you’ll want it to be someone who you’ll enjoy (or at least won’t mind) sharing a wall with.
Showing your property
Being a good landlord means being there for your tenant. If something needs fixing, you fix it quickly. If there are questions you have the answers. You follow the rules of the lease and don’t show up unannounced, violating the trust you’ve established with your occupant. Also, never forget to provide ample warning that a home improvement professional is on their way. Nothing’s worse than a surprise 6 am visit from a plumber!
7. Determine How Much Rent to Charge
By checking newspapers, online rental resources, and neighborhood signs, you should be able to get an idea of acceptable rent levels. Sure, rent may be less than your mortgage payments, but you’ll appreciate the stability just as much. And your best bet to have a reliable income stream is rent that’s comparable to the rest of the market.
8. Protect Your Rights with a Lease
A good lease complies with the most local of laws. It also makes it easy for you to avoid simple kerfluffles by alerting your tenants of their rights and expectations. This includes the lease terms; security deposit, rental due dates; and who’s responsible for rentals, repairs, and routine upkeep.
Tenant Names and Occupancy Terms
You may think it’s obvious to put your tenant’s name in the occupancy form . But if you put the wrong name you may end up limiting your legal recourse in the event of needing to collect back rent or taking legal action.
The lease terms make it clear what expectations your tenants are to meet while also protecting you in the event of any violations. Afterall, it’s easy to feign ignorance when there’s no paper trail to point to.
Rent, security deposits and late fees
If you want flexibility than month-to-month is the way to go, but if you go with an annual lease you’ll end up with more stability. Additionally, a lease should make clear what the security deposit is, when rent’s due, and the penalties for late payment.
Repairs and maintenance
The lease should make clear who’s responsible for what repairs. This covers everything from unit upkeep to landscaping.
Restrictions, restrictions, restrictions
Can you smoke, have pets, or play loud music after a certain hour? These are all questions the lease should answer!
9. Protect Your Property with Insurance
Homeowners’ insurance is different from rental home insurance. Homeowners insurance covers your home’s structure, damages your home may incur, and cover the belongings in your home. Rental home insurance, also known as fire insurance covers your home’s structure, legal costs, medical expenses, loss of rental income, and repairs. You should also encourage occupants to get their own insurance since, as the landlord, you’re not responsible for their belongings.
10. Hire a Property Management Company
As already mentioned, a property management company can charge between six and 12% of the rent to primarily provide two services: find your tenants and manage the property. It’s worth the price because collecting rent, charging late fees, repairs, and dealing with both vacancies and evictions is hard work! It’s not just physical labor, but emotional labor as well. And saving yourself from worry is priceless!
11. Prepare Properly for Evictions
If it comes to it, an eviction is going to require an attorney. You’ll have to go to court and, if you win, the sheriff will physically remove the occupant if they refuse to leave of their own accord. Legal fees for evictions can range between $300 and $1,000, but when you add other expenditures the cost may be as high as a month’s rent.
12. Don’t Allow Cats
A cat can do significant damage to your unit. Left to their own devices, cats can scratch up every inch of your space while soaking everything in urine. This paves the way for a costly renovation!
13. Don’t Ignore Extra Income Opportunities
Other than just renting your home or a portion thereof, you can also generate income through solar panels, billboards or cellphone towers, or using an unused shed as self-storage. Many people say, “Not in my backyard!” not realizing that NIMBY can also translate into, “Not in my bank account!”
14. Don’t Invest in Renovations That Won’t Produce Higher Rent
Tiles in the bathrooms, marble kitchen countertops, and crown molding in the den will make your property look nice, no doubt about it. But you also don’t need to do any of that because tenants will gladly fill your space without these additions. The only renovations you should be making are the renovations you need to be making. Everything else just eats into your profits.
15. Collect Rent Online
Snail mail is more like dino mail these days; it’s extinct. By collecting rent online you avoid the possibility of missing or late checks, you get a paper trail, and you don’t have to worry about bounced checks!
16. Be a Good Landlord
Being a good landlord means being there for your tenant. If something needs fixing, you fix it quickly. If there are questions you have the answers. You follow the rules of the lease and don’t show up unannounced, violating the trust you’ve established with your occupant. Also, never forget to provide ample warning that a home improvement professional is on their way. Nothing’s worse than a surprise 6 AM visit from a plumber!
17. Handing over the keys
Hand over the keys only after the lease has been signed and the rent has been paid. Everything must be clear to your tenant before moving in: how to pay the rent, how to request repairs, and everything else (including if cats are allowed)! This final step before allowing your occupant to move in will solidify the tone of your relationship.
By following all these rules, you should find yourself being the landlord you wish to see in the world. Your tenant will know everything they need to do in order to remain your tenant. So long as your tenant was thoroughly screened they should stay your tenant for as long as they need to. No hard feelings will get in the way of that, creating the best dynamic of all: a professional one.