Renting your home is a great way to earn income on your property. However, while there are many perks of being a landlord, this role also comes with challenges, particularly when finding the right renters for your home. It’s true that it’s a landlords market in many parts of the country, but that doesn’t mean you should jump right into renting your space without taking the right steps.
It’s not as simple as slapping together an online add and choosing the first tenants who can pay your deposit. Failing to properly vet your tenants or take preventative measures poses a huge risk to your property. Most rental properties are owned by individual investors (74% of all owners) which means you’ll be on your own for taking charge of your own property. Here are clear steps for renting out your home successfully without any issues.
1. Know the Right Price
Before you begin casting your net to find applicants for your property, you need to decide how much you’ll charge for rent. The price of rent is on the rise in most places around the country, but that doesn’t mean you need to price out the majority of would-be renters with unrealistic rent.
The first step is to check how much rental properties are in your neighborhood. How much are people paying for properties of a similar size? You can charge more for “extras” like a large backyard, upgraded appliances, and included utilities, but that will be up to your individual property. You need to be realistic with what you’re planning to charge if you want to find tenants quickly.
2. Find a Responsible Tenant
Finding a responsible tenant isn’t always easy, especially if you’re new to being a landlord. On average, landlords screen two applicants per property. It’s best to be choosy. Casting a wider net with your advertisements will give you more flexibility when picking someone to live in your property.
The wrong tenant can trash your property, disrupt your neighbors, and be costly to evict. Because of all of these worries and more, you need to be very careful with who you choose. Here’s a clear process you should use for every candidate to make sure you’ve not only confirmed their ability to pay but also their past rental history.
- Application – Have an application form for every prospective tenant. This should include basic information like past landlords, employer, and income. This is when you’ll authorize credit and criminal history background checks with a social security number and signature.
- Credit Checks – Pull your applicant’s credit report with an agency like Equifax, Experian, or TransUnion. Be sure you follow the Fair Credit Reporting Act.
- Background Checks – It might sound like a lot of work, but a background check is a must. Visit your local county website for more information on background screenings.
- References – Finally, actually follow through on checking those references. You can talk to previous landlords and current employers to make sure your applicant is trustworthy.
3. Protect Yourself with a Lease
Never proceed with a rental without a formal, written lease. This protects both you and the tenant, and it will clearly state the responsibilities of both parties in adherence with your local housing laws. You can find blank leases for your state online. However, don’t hesitate to reach out to a lawyer who can help you with the specifics.
Leases should include the terms of the lease, such as whether this is an annual or month-to-month agreement. It should also include any security deposits and when rent will be due each month along with any late penalties. More importantly, you need to clearly state who’s responsible for repairs, maintenance, and care. Finally, draw up a list of rules of behavior.
Last but not least, protect your policy with insurance. This is not the same property insurance you have when you’re living in a home, but it will still protect you from damage. Most places require landlords to have rental home insurance, known as fire insurance. Encourage your renters to purchase their own rental insurance policy to protect their own belongings.
Rent Your Home with Confidence
The wrong tenant will cost you big. Legal fees alone for eviction can cost up to $1,000, not to mention the damage to your property. It’s always better to be proactive in the early stages by pricing your property appropriately, scouting for the right tenant, and protecting yourself legally.
These tips above will set you up for success when renting your property. Letting a stranger into your space isn’t easy. You’re placing a lot of trust in this individual. However, the right tenant will take care of your home and will be a reliable source of extra income.