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What To Consider When Renting A House

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 5 minute read

Have you been thinking about renting out your spare house or vacant lot? You may earn money by renting out your home and it may even be a method to keep your home from being foreclosed upon. Any homeowner who wants to rent out their house may do so thanks to the many options now on the market.

There is a lot of potential reward in being a landlord, but there is also a lot of potential danger. Before deciding whether or not renting is the best option for you, it’s important to learn about the process.

Making the Decision to Rent Your House

The first thing you must do is determine the form of leasing agreement that best suits your needs:

  • Rent-to-Own. Rent-to-own might be the greatest option if you are currently renting instead of selling. In a rent-to-own arrangement, the tenant agrees to pay a certain amount each month in exchange for the option to purchase the property at the end of the rental term. Your rental rate might be greater than the going rate in most cases. At the end of the rental period, the renter has the option to buy the house and use the money they’ve already put toward the mortgage as a down payment. As a landlord, you may sell your house or keep the rent money, and as a tenant, you can avoid saving up for a large down payment.
  • Lodges for rent on vacation. Consider renting out your home on a short-term basis through a service like Vacation Rentals By Owner (Vrbo), Airbnb, or HomeAway if you live in a city or town that is often visited by tourists. It’s possible that renting out your home on a nightly, weekly, or monthly basis as a vacation rental might bring in a far higher income than operating the house as a regular rental property.
  • Subletting. Subletting using a website like Craigslist is an option if you need short-term tenants. If you’re not looking for a long-term commitment, you can sublease for a few days, weeks, or months.
  • Tenancy for an Extending Period of Time. A standard rental listing is your last ditch effort to rent out your home. This often entails signing a one-year lease with renters, while a six-month lease is an option if you don’t want to commit for quite as long.

Getting Ready to Rent Your Home

It’s time to begin the renting process once you’ve decided on the best sort of tenant for your home. To avoid making any blunders or getting into any legal or liability issues, there is a long list of things to complete before renting your home:

  1. Find out if renting is permitted by looking into local laws. Locate the zoning regulations of your municipality online. If you have a homeowners association, you should contact them as well. There may be rules in your community that prevent you from renting your home out on a weekly basis or limit the times of year in which you can do so. This is especially the case if your HOA or deed restrictions prohibit certain alterations to your house.
  2. Obtain in Touch with Your Insurance Firm. You need commercial insurance rather than a typical homeowners coverage if you intend to rent out your house. It’s also a good idea to beef up your liability insurance in case you ever have to defend yourself in court.
    Learn the going rate for rent in your neighborhood. If you want to fill your rental units, set the rent competitively with the market.
  3. Get the House in Rentable Condition by Cleaning It. It’s the landlord’s responsibility to make the rental unit secure for renters by removing their belongings, restoring any damage, and addressing any other issues that may arise. Consider whether you’d like to rent out your property with the furniture included. This could make the rental more marketable, but it also increases the danger of theft or damage to your property.
  4. Take the time to learn the laws that govern landlords and tenants. Check the websites of the Department of Consumer Affairs and the state attorney general for further details on local landlord and tenant legislation. When dealing with renters, you must understand your rights and responsibilities with regards to things like security deposits and lease agreements. You can’t refuse a family because they have kids, but you may limit the number of people living in the rental unit.
  5. Create a Contract for Lease. Even though you may find standard form lease agreements online (like the one provided by the Massachusetts Housing Consumer Education Center), you should still have a lawyer help you construct the agreement or at least review it to ensure that it adequately protects your interests. Rent, lease term, security deposit, late fees, and other regulations of occupancy (such as those pertaining to noise and pets) should all be laid out in full in your lease agreement.
  6. Use Your Room for Ads. Whether you’re renting out your property as a holiday rental, a rent-to-own, or a more permanent residence will determine where you should put up signs. In certain areas, posting an ad on Craigslist can even be done at no cost. In addition, you may check out the local classifieds. You may utilize a multiple listing service (MLS) to advertise a rent-to-own property, and vacation rental websites like HomeAway and Vrbo to rent out your primary residence.
    Get the Place Ready to Show Off! Tenants will want to see the space, so you’ll need to set aside some time to prepare it for showings.
  7. Tenant background checks and credit checks should be conducted. Potential tenants should have a credit check and references checked at the very least. This isn’t necessary for most short-term rentals, such those to vacationers, but you should still need full payment up front from your tenants.
  8. Seal the deal by signing the lease and collecting the initial payment. Renters, even those staying in holiday homes, should always be required to pay a security deposit. Both the first month’s and last month’s rent are usually expected to be paid up front.
  9. Put all utilities into the tenant’s name. While it’s possible to have utilities included into your monthly rent payment, it’s typically more cost-effective for the renter to pay for their own gas, electricity, water, etc. Disconnect the cable, Internet, and any other utilities unless you want to rent out your home as a vacation rental, in which case the utilities should remain on.

Keep in mind that as a landlord, you are responsible for fixing any issues that arise. Whether it’s maintenance issues or noise complaints from neighbors, you’ll have to deal with them at some point.

Bottom Line

If you want to rent out your home but don’t feel up to the task of managing it yourself, a property management company is an option to explore. While this does eat into your rental revenue, it also makes renting more of a passive source of money rather than a source of income that depends heavily on your time and effort.

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