The 3 Steps to Take Before Renting Out Your House
You need extra income; you have extra space. Solution? Renting out your additional living area on either a short-term or long-term lease. While the money-making opportunity might seem like a no-brainer, there are definitely some considerations to run through and steps to take before diving into the real estate deep end.
Everything from legal paperwork to compliance with code, tenant screening processes and determining the price to list your rental at, will require thoughtful deliberation. That’s why we’ve put together this guide on the steps you need to take before renting out your house—so your new source of income can come seamlessly and stress-free!
- First thing’s first: deciding what type of rental experience to offer
Are you going to offer monthly or yearly leases to long-term tenants? Or do you intend to market your home as a short-term vacation rental? In either case, will you live on-site at the same time as your renter or will you purchase another home and reserve the property as an exclusive real estate investment?
If you’re just getting started with property investments, then you might need some form of financing to make your first purchase. Short term hard money loans are great for fast fix-and-flip projects, while specific rental property loans for Airbnb might offer better terms tailored to your unique needs.
Find the financing structure that works best for your real estate goals and be sure to always—always—reread the fine print, doing your best to avoid pre-payment penalties and junk fees. When shopping around for mortgages, consider your different options such as VA, FHA, or Jumbo loans and more.
Alternatively, if you do plan on living in the home that you intend to rent out, you’ll still probably want to make a few investments such as a separate entry or second bathroom to make the living area more comfortable and less awkward when shared with a tenant.
Establish which areas are common spaces—such as the kitchen, living room, and backyard—as well as which areas are off-limits, like your private bedroom. If you’re hosting through Couchsurfing or similar sites, let your guest know how available you will or will not be during their time in town.
- Make sure you’re up to code
When it comes to renting out your home, it’s imperative that you abide by the law—every step of the way. Most states in addition to many cities impose strict requirements for rental properties that protect a tenant’s right to a livable place. The responsibilities landlords are held to vary state by state, but common examples include:
- Mandatory heating units
- Reasonable protection from criminal intrusion
- Absence of danger from asbestos, lead, and mold
In addition to providing a livable home that’s up to all health and safety codes, landlords are responsible for performing routine maintenance, keeping all electrical, plumbing, and ventilating systems in proper condition, ensuring the basic structural elements of the building (floors, stairs, walls, ceiling, roof) are intact.
Promptly responding to your tenants’ maintenance requests is a job you can’t take lightly; if you’re not up to the task, hire a trustworthy property management company who can handle all the odd jobs and necessary duties without your involvement. These companies can also facilitate rent collection, meaning you can sit back and enjoy a passive source of income without much involvement.
Those who are going the short-term vacation rental route should have a regular maid service on retainer so the property gets placed back into pristine condition before the next batch of renters arrive.
- Research your market in and out
Renters in New York will be looking for entirely different characteristics in a property to lease than, say, renters in California would be looking for (the need for air conditioning, accessibility to public transportation, etc.).
In order to make your rental property as profitable as possible, you need to research your market thoroughly and check out other rental listings that are similar to yours in terms of size, location, and amenities to come up with a fair listing price. You don’t want to be too expensive than the next guy down the road, but you don’t want to just give it away either.
No one ever said that investing in real estate is easy, but most would agree that it’s definitely worth it when done correctly!