Renting out your home can be a great way to generate extra income. About 45% of households across the U.S. use rental income to supplement their regular incomes, and more than half of those renting out homes earn an average of $10,000 annually from their rental activity. This means that renting out your home can be a great way to make some extra money while still using the space as you need it.
But if you’re new to the world of being a landlord, it can also be a bit daunting. Here are a few tips to help you get started on the right foot.
1. Know your local laws and regulations.
Every area has different rules and regulations regarding renting out property. Make sure you’re familiar with how often you can raise the rent, minimum lease lengths, and required repairs/maintenance before you start finding tenants. You can typically find this information online, through your local government office, or by talking to other landlords in the area.
You can also look into rental insurance to ensure you’re protected if any unexpected issues arise. This can be especially important for protecting yourself from the costs of dealing with damage caused by tenants. Many rental insurance policies also provide liability coverage for any legal fees should you ever get sued by a tenant.
2. Understand your responsibilities as a landlord.
It’s important to understand that being a landlord is much more than simply collecting rent. You are responsible for providing tenants with safe, livable housing and ensuring that the property is kept up to professional standards. This includes ensuring all appliances are in good working order, fixing any issues with the plumbing or electrical systems, and handling all repairs.
Consider professional property management services if you want to delegate some of the work. These companies can typically handle tenant screening, collections, maintenance and repairs, and other landlord duties. They can even help you craft and enforce rental agreements that protect you as a landlord.
3. Screen your tenants carefully.
It’s essential to take the time to get to know potential tenants and make sure they will be a good fit for your property. Ask for references and check their credit scores. The last thing you want is to end up with someone who doesn’t pay rent on time or causes damage to your property. Most screening services allow you to set criteria for things like credit score, rental history, and income level so you can be sure you’re only considering tenants who are likely to be reliable.
Try to talk to each potential tenant in person and get a good sense of their personality. This can help you decide if they are someone you would be comfortable having as your tenant. But don’t let your personal feelings influence your decision; use objective criteria to ensure you’re making the right choice.
4. Set up a clear lease agreement.
Once you’ve found tenants you’re happy with, it’s time to create a lease agreement. This should spell out things like rent amount, due date, late fees, length of tenancy, and any rules or regulations regarding the property (e.g., no pets allowed, no smoking inside). Having a clear and legally binding agreement in place will help avoid any misunderstandings down the road.
A lawyer or rental analysis service can be helpful here, so you know your agreement is in line with local laws and regulations. Some states even have standard rental contracts already in place that you can use. Just make sure you read and understand the agreement before signing it.
5. Be prepared for repairs and maintenance.
As a landlord, you’ll be responsible for any repairs or maintenance issues during a tenant’s stay. Make sure you have enough set aside in an emergency fund to cover unexpected costs and have a list of reputable contractors on hand in case you need to call someone in for repairs. You should also have a process for responding to your tenants’ urgent repair requests.
Being proactive with maintenance can help prevent significant problems down the road. Have a professional come in regularly to check the major systems of your property, such as plumbing and electrical. This can help you catch potential issues early and save you a lot of time, money, and stress.
Renting out your home can be a great way to bring in some extra income—but only if you’re prepared for it! By following these tips, you can set yourself up for success as a landlord from the very beginning. Screen tenants carefully, know your local laws, and have a solid lease agreement in place—then sit back and collect those rental checks!