Everything You Need to Know to Rent Out Your House This Year
If you’ve been considering learning how to rent your house, you’re not alone—in 2024, almost two thirds of sellers considered renting their home instead of selling it. After all, it can provide a consistent stream of rental income and introduce you to the world of rental property management.
Becoming a landlord is no small task, though, and it’s something you should prepare for every step of the way. Managing a rental is more involved than simply collecting rent, and requires time and energy to advertise your unit, screen tenants, and upkeep the property.
That’s why we’re here with a ten-step guide for how to rent out your house. We’ll walk you through all the steps of turning your house into a rental unit and offer some advantages and disadvantages to renting your home to help you make a clear, informed decision.
10 Steps for How to Rent Out Your House
Below are the steps you should follow to learn how to rent out your house before you list it to potential tenants.
1. Study local landlord-tenant laws
The first thing you should do as a first-time landlord is take the time to research federal, state, and local laws surrounding the rental business. Every state has different laws, outlining laws such as how security deposits should be handled, the steps of the eviction process, and the rights of both you and your tenants. You should learn these before you even begin the search for your first tenants so you can ensure you’re compliant with the law at every step.
Landlord-tenant laws can be found in places like your state website or through platforms like Innago—we offer landlord-tenant law articles for all 50 states with state resources and downloads.
2. Determine a fair rent price
Choosing a rent price that’s right for your home can be difficult—how do you find a number that will be competitive enough to bring in income without being so overpriced that you end up with a vacant property?
When choosing a rent price, it’s a good idea to check your local rental market to see how much homes in your area with similar features are charging for monthly rent. You should also budget for monthly expenses like mortgage payments or property manager fees to ensure you’re not underpricing your unit. This way, you can ensure you stay competitive and generate consistent gross rental income without going above or below a reasonable monthly rent price.
3. Advertise the rental to potential tenants
If you want to attract potential tenants to your unit, they’ll need to know it’s available. That’s where advertising your listings comes in! By creating a clear, cohesive, and persuasive listing for your rental, you can fill units quickly and effectively.
To create a rental listing that will attract your ideal tenants, you’ll want to include clear, high quality photos of your rental, as well as describe the unit with persuasive and compelling language. Include important details such as the square footage, number of bedrooms and bathrooms, the rent price, and any included amenities.
It’s also important to be transparent about tenant screening requirements and any property-specific restrictions. If you require a minimum required credit score or don’t allow pets, it’s vital to tell prospective tenants upfront.
4. Screen each of your rental applicants
Once a tenant sends in an application, you may be looking to hand the keys over and begin collecting rental income as quickly as possible. However, before approving any tenants, it’s important to do thorough tenant screening to ensure you’ll be accepting someone reliable into your unit.
There are three main reports that landlords usually use to screen tenants: Credit, criminal, and eviction history. These reports can give you a general idea of a tenant’s likelihood to pay rent on time, abide by the laws while living in your rental, and follow the terms of your lease.
It’s important to remember that as a landlord, you’re required to follow anti-discrimination laws such as the Fair Housing Act. To avoid any legal disputes over tenant screening, use the same criteria to measure every potential tenant and speak with a lawyer for further clarity.
5. Approve or deny applications
The next step in learning how to rent out your house is approving or denying applications. Once you’ve gotten applications from potential renters, you’ll need to look through them and decide which applicant is the right tenant for your unit. Every landlord will have different criteria, but landlords typically search for tenants with attributes like steady income, good references from past landlords, and good credit history.
Tenants can be denied if they don’t meet your criteria for income thresholds, credit score minimums, or other requirements, but you’ll need to write a rejection letter to the tenant telling them why their application has been denied. Remember that there are specific legal regulations for acceptable reasons to deny tenants, so you must be positive that you’re compliant with landlord-tenant laws before sending rejections to tenants.
6. Draft your lease agreement
A lease agreement is the backbone of a good tenancy, so it’s important to look over every detail before your tenant signs. Not only does this ensure that you’re legally compliant with landlord-tenant laws, but it guarantees protection for both you and your tenant should issues or disputes arise down the line.
Be sure to include the lease term and monthly rent amount, late fee and security deposit details, expectations about maintenance responsibilities, and any other rules regarding parking, guests, pets, etc. If you’re unsure about the legality of your proposed policies, don’t be afraid to ask an attorney to look over your lease to check that you’re in compliance with federal, state, and local laws.
7. Get tenants onboarded
Once tenants have signed their lease agreement, you should onboard them through the first basic steps of renting your unit to help them get settled. This includes collecting the deposit, helping tenants learn how to pay their first month of rent, and asking them to complete and return their move-in checklist.
By opening a line of communication and walking tenants through learning your rental processes, the lease can start smoothly for both parties.
8. Set up your management processes
Speaking of rental processes, it’s important to set up your processes for managing your rental business. How will you manage maintenance tickets? How will you collect rent, late fees, deposits, and other payments? How will you communicate with tenants? How will you handle the lease renewal process?
There are many ways to go about setting up these responsibilities, no matter if you prefer pen and paper or property management software that keeps rental processes centralized. Whatever strategy you decide to put in place should be clearly communicated to tenants for a straightforward, easy rental experience.
9. Purchase landlord insurance
A key step to take when renting out your home is to purchase landlord insurance. This type of insurance is built for landlords like you who are renting out a home to tenants, and covers incidents such as lost rent due to emergencies, liabilities in the case of legal accusations, and physical damage to the property by tenants.
It’s important to note that landlord insurance does not cover renters or their belongings. In the case of an emergency like flooding or fire, renters should purchase their own tenant insurance.
10. Cultivate a positive landlord-tenant relationship
The final step in renting your home out to new tenants is to cultivate a positive landlord-tenant relationship. This can include responding quickly to maintenance requests and questions, respecting their privacy, and being a friendly resource throughout their stay in your unit.
By creating a strong relationship built on respect, you’re more likely to have tenants renew their leases and treat your rental kindly. This can mitigate long-term vacancies and lessen the potential for damages or complaints later on—and what landlord doesn’t want that?
Advantages and Disadvantages of Renting Out Your Home
After learning about the responsibilities that come with finding new tenants, you may be wondering, “is renting my house really a good idea?” While being a landlord can bring in extra income without much need for intervention, there are still some challenges that you should be prepared to handle. Below are some advantages and disadvantages to renting out your home.
Advantages
- Consistent income: Renting out your home can offer a consistent source of income that you can use to pay on your mortgage, maintain your property, or even invest in new real estate.
- Real estate experience: Becoming a landlord with your own property is a great way to gain hands-on real estate experience and knowledge, such as market trends, property management, and investment plans, that can prepare you for future goals or ventures.
- Accruing wealth: As property values increase over time, you’ll be able to accumulate wealth while simultaneously taking advantage of various rental tax deductions.
Disadvantages
- Time-intensive: While being a landlord can sometimes be passive once a tenant has moved in, there are times when the task of managing your property becomes extremely time-intensive (think maintenance, managing tenants, filling vacant units), especially when starting out. This can be stressful or overwhelming for new tenants.
- Unpredictable expenses: Damages, eviction cases, or long-term vacancies can add up to be large expenses and are often unpredictable.
- Regulation changes: Landlord-tenant laws don’t stay the same forever, and without an attorney, it can be difficult to keep up with changes made in already complex regulations for landlords.
Conclusion
Becoming a landlord can be a rewarding experience with ample opportunity for growth, but it’s not without its struggles and responsibilities. With this guide, you’ll be better informed about how to rent out your house and whether it’s the right decision for you so you can begin your real estate journey and build your portfolio—starting with your own home!
FAQs
Do I need a rental license to rent out my home?
In many cities and counties, a rental license is required to rent out your home. Local governments may require landlords to register their rental property or obtain a license before listing it, especially if you plan to list your home as a vacation home or short-term rental. Be sure to check with your city or county housing department to find out what’s required in your area.
How much should I charge for rent?
Your rental rate should depend on market factors, comparable properties, size, amenities, and condition. Research similar rentals in your neighborhood to determine a competitive rental rate. Online rental estimate tools can be helpful during this process, in addition to speaking with a local real estate agent can also help you price it appropriately.
Should I screen potential tenants?
Yes, tenant screening is a key step to protect your property and ensure on-time rent payments. Most landlords run background checks, credit reports, and verify income and rental history. Just be sure to follow Fair Housing laws during the process.
What should be in a rental agreement?
A rental agreement should clearly outline the rent amount, due date, lease term, security deposit, rules about pets, repairs, and more. It’s a legal contract, so make sure it complies with state laws and includes both your and the tenant’s responsibilities.
Do I need landlord insurance?
Yes, landlords need separate insurance because standard homeowners insurance typically doesn’t cover rental activities. Landlord insurance provides protection for property damage, liability, and loss of rental income. It’s a smart move before handing over the keys to a tenant.
How do I collect rent each month?
The easiest way to collect rent is to use property management software or online payment platforms that allow tenants to pay electronically. Software like Innago is convenient, secure, and free for landlords. You can also accept checks, but online systems are often faster and easier to track. Just be clear about your payment policy in the lease.
What happens if a tenant doesn’t pay rent?
If a tenant misses a payment, send a reminder or notice in writing first. If the issue isn’t resolved, you may need to start the eviction process according to your state’s laws. Always document communication and follow the legal steps carefully.
