How to rent out your house: A guide

Whether you’re looking to make some extra income or you’re interested in owning more rental property, renting out your house could be a first step in the right direction. While turning your home into an income stream may seem like an enticing strategy to build wealth, renting and becoming a landlord comes with many responsibilities. It’s essential to understand every aspect of this process before you start buying rental property and generating rental income.

We’ve compiled 12 steps to consider when renting your house to tenants. We’ll also explore the pros and cons of renting your home to help you determine whether managing a rental property is right for you.

How to rent out a house: 12 important steps

Before you list your house on the rental market, follow these steps to ensure you’re fully prepared to tackle this type of real estate investment.

1. Understand local and national landlord-tenant laws

Landlord-tenant laws can vary by state. Critical aspects of renting, such as security deposits, eviction notices and rental applications, are subject to state laws. Before you start the home rental process, reach out to your local housing authority to learn the landlord-tenant laws in your state.

You should also familiarize yourself with the Fair Housing Act and equal opportunity housing laws. These regulations help protect people from discrimination while attempting to rent or purchase a home.

2. Examine your property

Thoroughly examine your property inside and outside the home to identify any issues that may be problematic for new tenants. You may need to replace windows and doors, fix a broken dishwasher or implement extra security measures.

Your walk-through is the perfect opportunity to make sure your property meets all building codes. Building codes establish safety and livability standards for homes and their residents.

Consider keeping curb appeal and landscaping in mind when assessing your property. Curb appeal can leave a positive impression that may sway potential tenants to move forward with a lease agreement.

3. Look into landlord insurance

Landlord insurance protects you when your rental home is damaged. Whether the source of the damage is a tenant or a natural disaster, landlord insurance helps cover repairs. Landlord insurance can also protect you if someone gets hurt on your rental property.

A landlord insurance policy offers valuable protection but typically has a hefty price tag. While landlord insurance can be expensive, it may be worth it in the long run – especially if you plan on buying and managing multiple rental properties.

4. Determine your rental price

Another crucial step when preparing your home to rent is to set a fair price. The rental amount you settle on should be at least higher than your property expenses so you can make a solid profit when renting out your house.

When deciding how much to charge renters, research comparable rental properties in the area. Ideally, you should set a rental amount that aligns with comparable rental homes and remains competitive in the local rental market. Consider applying the 1% rule to estimate the minimum monthly rental price. You may also want to consult with a real estate agent who knows the local housing market.

5. Find a property manager

Whether you’re managing one or more rental properties, consider hiring a property manager. You can take on the role yourself but consider its demands before deciding. You’ll be on call any time of day or night to address anything that goes wrong with the house.

Being a property manager may be a good idea if you’re prepared to take tenant calls and have the skills to handle repairs. If you’re looking to take a more hands-off approach, hiring a property management company or property manager to address any issues in the rental home may make sense.

Hiring a property manager or company will add to your monthly expenses but can save you time and reduce stress. Compare the cost to the benefits when deciding who will manage your rental property. 

6. Write a lease agreement

A lease agreement is a contract between a landlord and a tenant that outlines the terms of renting the property. You must tailor the lease agreement to your specific rental property and outline any rules renters must follow.

Before you draft the lease agreement, consider your position on key rental terms, such as:

• Security deposits
• Lease length
• Rent payment
• Breaking leases
• Evictions
• Pets
• Parking
• Maintenance
• Renter access, such as to lawns, outbuildings, or pools

Detail all rental policies in the lease agreement so tenants understand the rules upfront for renting out your house. Be sure that everything in your lease aligns with state and local laws. You can draft a lease agreement from a template or work with a lawyer. An attorney can help ensure your lease agreement is well drafted and covers everything.

7. Decide how to collect rent

Another essential step in the rental process is deciding how you will collect rent from your tenants each month. It’s easier for tenants to make their rent payments on time when they can choose from easy payment options.

Having tenants mail or drop off paper checks may be easier for you, but consider the potential inconvenience to your tenants. Maybe they don’t have paper checks or the time to do this. Some landlords use mobile apps, like Venmo, PayPal and Cash App, to make rent payments more convenient for their tenants.

8. Advertise your rental

Another important step when renting out your house is advertising to prospective tenants. One way to publicize your rental property is by word of mouth. Reach out to any family, friends or co-workers looking for a place to live or know someone who needs a place to rent right now. You can also use online rental property listing services or post your listing on social media.

To create an effective online listing, include all the necessary information potential tenants would want to know about the property, such as the number of bedrooms and bathrooms, the rent price, the property’s age and condition and the amenities. You should also add high-quality photos to the listing to show off every corner of the rental.

9. Screen tenants

Once you’ve received interest from prospective tenants, it’s important to screen them to help ensure they’re qualified to rent out your house. Screening may involve a credit check, verifying credit scores, performing background checks, reviewing references from previous landlords and verifying employment and income.

A thorough screening process should help you determine whether a potential renter has a history of reliability and responsibility.

10. Perform all necessary inspections

The rental process may require a couple of inspections. One necessary inspection is a move-in inspection, where the landlord and tenant meet to assess the current state of the house. The inspection documents the home’s condition before the tenant moves in. Compare the move-in and move-out inspections to see whether the tenant is leaving your home in the same state – minus some wear and tear.

Landlords commonly perform routine property inspections to ensure it’s still in good condition. Anytime you’re coming over to inspect the property, give your tenants at least the amount of notice required by state and local laws.

11. Sign the lease agreement and collect the security deposit

Once all the necessary inspections are complete, it’s time to sign the lease agreement and collect the tenant’s security deposit. You’ll give your tenants keys to the rental property and discuss their move-in date. While there is no fixed move-in date, tenants usually move in on the first of the month or whenever rent is scheduled to be paid.

At this point, consider taking the opportunity to encourage your tenants to take out renters insurance. Like homeowners insurance, renters insurance protects tenants from various damages and claims. As the landlord, you can require your tenants to get renters insurance even though it’s not mandatory. In the same way, you may have to take out a landlord insurance policy if your mortgage lender requires it.

12. Maintain a good relationship with your tenants

Having a good relationship with your tenants can make a difference when renting out your house. Mutual respect may encourage them to pay rent on time and respect your property. Maintaining a friendly, open relationship is essential, especially when you’re trying to foster a safe and comfortable living environment for your tenants.

Pros and cons of renting out your house

You should carefully weigh the decision to rent out your house. We’ve compiled some advantages and disadvantages to take into account before committing to renting.

Pros

• Extra income: The biggest advantage of renting out your house is the opportunity to make additional income – which magnifies your returns if you have multiple investment properties.
• Property flexibility: Because you own the property, you can live in it when it isn’t rented to tenants. It’s common for rental property owners to live in and enjoy their property when it’s vacant.
• Tax deductions: Rental properties can provide several tax benefits. You may qualify to deduct expenses like mortgage interest, rental property depreciation, homeowners insurance, property taxes, various maintenance costs and wear and tear on your annual tax return.

Cons

• Time commitment: Being a landlord can be time-consuming, especially if you’re also the property manager. Being “on call” for your tenants can take a lot of time out of your day.
• Maintenance costs: As with any home, there are always maintenance costs. Fixing things can be expensive, especially if you need to hire contractors or professionals for repairs.
• Unreliable tenants: Thoroughly screen your tenants before you hand over the keys to the rental property. Otherwise, you may have to deal with issues ranging from property damage to eviction.

The bottom line: Know how to rent out your house properly

To help you decide whether you should rent out your house, consider the rewards, risks, your financial situation and whether you’re prepared to take on the responsibilities of a landlord. When preparing to rent out a house, there are several steps you should take before you put your home on the rental market. These 12 steps can help you generate income from your home and minimize future challenges and stress.

Ready to buy a house and start your real estate investing journey? Start the mortgage process today.