Whether it's to generate income or to ensure that your property is occupied while you're away, there are many things to keep in mind when making your home available for rental for the first time. Choosing the wrong tenant could lead to a lengthy, costly eviction process, and the same problems you face as a homeowner (e.g., system or appliance malfunction) could negatively impact your renter's experience and damage future prospects.
One way to mitigate such issues is to invest in a home warranty, which we'll examine below in further detail.
1. Familiarize Yourself With Fair Housing Laws
Any first-time landlord should be familiar with federal, state, and local housing laws. This knowledge can help you avoid charges of discrimination based on race, gender, religion, or disability. It can also guide you through issues such as setting rental rates, accident liability, and tenant eviction.
Check out the US Department of Housing and Urban Development's overview of fair housing and related laws for more information about federal regulations that affect landlords. You may also want to consult an attorney who specializes in housing law.
2. Present Your Home Well
When making your home available to prospective tenants for the first time, you should present it in the best possible light. This means ensuring that the property is clean and that appliances and household systems (electricity, plumbing, heat, air conditioning) are well-maintained.
Consider the advantages of repainting, landscaping, and strategically placing furniture and décor to allow visitors to imagine what it might feel like to live there. This way, you will stand out in a competitive rental market and draw interest from more desirable tenants.
3. Carefully Evaluate Applicants
On the subject of prospective tenants, it is important to run a background check to confirm their employment status, past residency, and character references. Tenant screening can help you avoid property damage, missed rent payments, and costly eviction proceedings. Just as importantly, it will minimize stress on you as a landlord.
It should be noted that landlord misconduct and dubious eviction proceedings can make it difficult for otherwise responsible individuals to find new housing.
4. Price Your House Correctly
Assigning a rental value to your home is a balancing act. Some may overestimate rental rates because of a sentimental attachment to their homes, while others may undercut that value in a rush to lure tenants.
Overpricing can lead to long vacancy periods, just as undervaluing can put you in a financial bind. Don't base rent on your house's perceived value or your anticipated expenses, but on rental comps (other rental homes in your area).
5. Prepare a Lease Agreement
The key to any successful rental is a legally binding lease agreement, which is a written contract signed by the landlord and tenant that outlines each party's rights and responsibilities. It includes payment amounts and due dates, the rental period, maintenance expectations, and any conditions (pets, smoking, etc.).
Because it offers legal protection, first-time landlords may want to consult an attorney to ensure the document is valid.
6. Maintain Proper Records
A good bookkeeping system will help you avoid the dangers that sometimes befall inexperienced landlords. Keep written records of rental payments and any expenses related to the property. Store them on your home computer or in the Cloud.
Complete, detailed records will be vital in the case of a legal dispute.
7. Consider a Home Security System
Would-be tenants will see a reliable security system as a potential benefit to renting your property. It can also help you keep tabs on break-ins or other illicit activity in your home.
Unfortunately, bad actions are not limited to burglars or vandals. Tenants, their family, friends, or visitors may be just as guilty. Security companies will alert you of a security breach while protecting the renter's right to privacy.
8. Enhance Your Home's Property Value
Just as people undertake capital improvements to make their homes more valuable and attractive to future buyers, you can do the same to increase the rental rates of your property. Examples may include an additional bathroom or bedroom, a kitchen makeover, or the installation of a pool or spa.
But whether you hire a contractor or do it yourself, such projects can be risky. They require time and resources and should not be done without a home warranty to help you protect your investment.
9. Purchase a Home Warranty
A home warranty is a contract whereby a third-party provider agrees to repair or replace your home's appliances and systems for a limited period (usually one year). A warranty costs between $400 and $850 annually, plus a premium for each repair or replacement.
Whether you've had cover in the past, consider getting a home warranty from a reliable company such as Home Service Club or Select Home Warranty before renting out your home. It will help defray costs and defuse disputes. (Owning multiple properties only increases the chance that a warranty will come in handy.)
10. Protect Your HVAC System
Most home warranties will cover heating or AC units but not an integrated system. Seek out options for this contingency. HVAC systems can be expensive to repair or replace.
An Educated Landlord Is a Successful Landlord
The decision to rent out your home is a daunting one, but these tips should guide you toward being a successful landlord who has satisfied, desirable tenants. Research, due diligence, and sound financial choices may well make the difference between success and failure.