There are many reasons you may wish to rent out your property. For example, you may have inherited a house but have no plans to live in it. Perhaps you’re moving into a larger home, but wish to rent your current house for supplemental, passive income. On the other hand, you may have invested in a great rental property but feel unsure where to begin in finding and maintaining great tenants. For many, renting out their house can be a great way to earn extra income.

Whatever your reasons, knowing how to rent your house before jumping in headfirst is essential. From preparing your home for renters, to familiarizing yourself with rental laws, there’s much to learn before transitioning from homeowner to landlord.

Here’s a complete guide to renting out your house, including tips to maximize rental income while minimizing the work you’ll have to do.

How to Rent Your House Successfully: 7 Essential Steps

1. Research local laws

There are a few critical things to do before renting out your house. First, ensure your home is up to code and safe. Both state and local governments have a set of building codes in place that set minimum safety standards for housing conditions and are mandatory for landlords to abide by. Depending on your property's location, these codes may cover maintenance, sanitation, electrical, and fire safety. Research your local and state regulations and make necessary updates.

After this, the easiest way to guarantee your house is up to code is to get a home inspection. Ensuring your property is rental-ready and up to code can save you thousands of compliance fines. Make sure you have a professional walk through the house and give you their seal of approval.

2. Determine a competitive price

When determining how to rent your house, you must conduct market research and choose how to set your rental prices. First, evaluate different neighborhoods in your area. Next, identify how your neighborhood compares. For example, is your house near a good elementary school? Is it close to supermarkets and parks? Or is it further away from these kinds of amenities? These are factors to consider when setting your monthly rent.

Still wondering, “How much can I rent my house for?” You can look at rental websites and compare how other property owners are listing their rental properties.

3. Create an advertising plan

Gone are the days when renting your house meant all you had to do was to put a sign in your yard. Today, you’ll likely have to find residents by posting your property on rental websites. Many websites offer free listing services, though you may find paid postings. Facebook Marketplace, Rentals.com, and Zillow are all good options.

You can list your property on various websites to ensure you get a good cross-section of applicants. Advertising and marketing can be challenging for the new landlord. Keep reading for more specific rental advertising and marketing tips.

4. Screen and meet prospective tenants

After successful advertising, marketing, and maybe even a few in-person showings, you’ll have a stack of applications to sort through. Screening tenants can be a time consuming and difficult process. Sifting through applications and meeting prospective tenants can become a full time job.

Common courtesy and the Federal Fair Housing Act dictate that you must treat all prospective tenants equally. But, some factors will make some applicants more promising than others.

• Financial Information. Most importantly, you want a tenant who is financially responsible and has a good credit score.
  First, you should run a credit check on your applicants and ensure they have a relatively good credit score. In their credit report, you’ll also see their income-to-debt ratio. If their monthly debt payments are too high, even if they have a high income and a good credit score, you may be unable to rely on them to pay their rent on time. Next, you’ll want to collect proof of income. This can include copies of their pay stubs.
  
• Criminal History. After checking credit and income, you should perform a criminal background check. Some states prohibit landlords from discriminating against renters with criminal convictions. Be sure to look up your local renter and landlord laws.
  
• Know Your Rights (and Theirs Too). Once you’ve picked your perfect resident, you can begin developing your lease. First, however, you should familiarize yourself with local, state, and national landlord and tenant laws. Landlord-tenant laws exist to protect both renters and landlords. These laws dictate how landlords and tenants interact, what rights both parties hold, and what both parties are obligated to do. For example, every landlord has the right to charge a security deposit. However, how landlords store that money depends on state and local laws. So before drafting your lease, you must know the ins and outs of your state’s unique and federal rental laws.

5. Investigate insurance

As a safety precaution, you should also require (or at least encourage) all renters to have insurance. You should detail this information in your lease. Renters insurance covers personal property theft or damage for your residents. Additionally, renters insurance includes liability insurance, so if they have visitors over and someone gets hurt, your tenant will be covered in case they get sued for damages.

Most importantly, your tenant’s insurance will pay for their temporary relocation if your home becomes uninhabitable due to a natural disaster or other catastrophes. While you can focus on repairing your house, your resident will have somewhere to live and won’t have to break their lease with you. Ultimately, this saves you the headache of finding a new tenant, and you won’t lose money as your property sits empty while being repaired.

Additionally, consider securing landlord insurance. Landlord insurance provides a safety net by offering coverage beyond what standard homeowners' insurance typically includes. It protects against potential financial losses resulting from rental property-related risks.

Purchasing this specialized insurance safeguards your investment and mitigates various risks, including property damage, liability claims, and potential loss of rental income. Landlord insurance typically covers structural damage, legal fees, and even certain medical expenses in case of tenant injuries on the property.

6. Develop a lease agreement

A lease, or rental agreement, sets up expectations for your tenants and informs them of property rules. Make your lease highly detailed to avoid any misunderstandings or conflicts in the future. Your lease can either be a fixed-term lease (a lease with a set end date) or a month-to-month lease, which automatically renews until either the tenant or landlord decides to end the rental agreement.

Many online resources exist to help you draft a lease, or you can hire a real estate attorney to help you through the process. However, every lease should include some basic information, including:

• Landlord’s name and contact information
• The address of the home
• All tenant names and contact information
• A list of included appliances in the house
• All utilities and services provided by the landlord
• All utilities and services the tenant is required to pay for
• Circumstances in which the tenant or landlord can terminate the lease early
• The rental amount, due date, and rent payment method
• Whether a security deposit is required, its value, and how it will be managed at the end of a lease
• Tenant parking information
• Permissions in a Lease Agreement

Your lease should also detail any special permissions and services. For example, you must describe whether you plan to allow tenants to keep pets on the property. If you plan to allow pets, you must include a section on pet deposits and rent.

7. Implement a management and maintenance strategy

Once the lease is signed and tenants are moved in, a landlord’s work has only just begun. Next, it’s time to manage and maintain your real estate investment. Landlords should expect to conduct regular inspections, repairs, and upgrades to ensure the property remains in good condition and retains its value.

Establishing a system for handling tenant requests and promptly addressing any issues is also essential. Consider hiring a property manager to help on the maintenance front, especially if you have another full-time job.

If you've owned income property for any length of time, you know that managing a rental can be financially rewarding. At the same time, you've also likely discovered that property management requires a large commitment of time and effort.

Do I Need a Property Manager to Rent My Home or Investment Property?

As a property owner, you may wonder what the important benefits of hiring a property manager are. While self-management can be a viable option for some, it has limitations, especially for those with multiple properties or busy schedules. Let's consider the factors that can help you determine the need for a property manager.

Time commitment and effort are essential aspects of property management. Managing a property requires handling tenant inquiries, addressing maintenance issues, and collecting rent on time. If you have limited time or find it challenging to handle these tasks, a property manager can take the burden off your shoulders and help you efficiently manage your property.

Personal circumstances can also play a significant role in determining the need for a property manager. It may be difficult to oversee day-to-day operations effectively if you have multiple properties, live far away from your rental property, or have another full-time job. A property manager brings expertise and experience to the table, ensuring your property is well-maintained and tenants are satisfied without you having to lift a finger.

10 Benefits of Hiring a Property Manager 

Hiring a property manager offers many benefits to make your investment more successful and profitable. Let's explore a few of them below.

1. Setting the right rental rates

While looking through the internet to see what other landlords are charging for similar properties is a fine way to ballpark your rent price, a good property management company will conduct a thorough market study in order to set a rental price for your property, ensuring that you achieve the perfect balance between maximizing monthly income and maintaining a low vacancy rate.

2. Collecting and depositing monthly rent payments on time

Securing payment from clients can be difficult, not to mention awkward. Property management companies have efficient, tried-and-true systems in place to effectively collect rent and maintain on-time payments. You'll find this particularly important if you have a limited number of properties, and collecting payments on time is crucial to maintaining your cash flow.

3. Marketing and advertising your property

Through long experience, a property manager will know exactly where to market your property and how to craft compelling advertising materials—a significant advantage when it comes to filling your properties quickly and avoiding long vacancies.

4. Finding the right tenants

Experienced property managers are experts at finding and screening tenants, and will take care of all the details, including securing all criminal background and security checks, running credit reports, verifying employment, and collecting previous landlord references on your potential tenants.

5. Managing tenants

In addition to finding good tenants, a property management company will manage all aspects of the tenant-landlord relationship. The property manager will handle both routine and emergency maintenance, take care of routine property inspections, and manage any situations where conflict resolution is required.

6. Managing vendor relationships

Property management companies have relationships with maintenance workers, tradesmen, contractors, suppliers, and vendors that it's almost impossible for an independent landlord to duplicate. Not only will your property manager get you the best work for the best price, they'll oversee any necessary maintenance requests and projects.

7. Keeping you in compliance with housing regulations and property laws

There are a multitude of applicable laws and regulations to abide by when renting and maintaining your rental property. These include local, state and federal regulations, as well as fair housing regulations. 

8. Enabling you to invest in geographically distant properties

If you manage your own properties, you're pretty much limited to investment opportunities within a tight radius of your own home. By hiring a property manager, you can take advantage of investment deals in any location you wish.

9. Maximizing the profitability of your time

By having a property manager take care of the day-to-day aspects of running your income property, you're free to spend your time identifying further investment opportunities or otherwise furthering your career.

10. Maximizing the profitability of your money

Most property managers charge a percentage of your property's monthly rental rate in exchange for their services. The rate typically runs anywhere from 8 - 12 percent, which is generally less than the money you save by hiring a professional to take care of your property.

Budget Considerations

The cost of hiring a property manager can vary based on factors such as the type of services included and the property's location. Typically, property managers charge a percentage of the monthly rental rate, usually ranging from 8% to 12%. While this expense should be factored into your budget, it's important to recognize the potential ROI that can be achieved through professional property management.

Maximizing ROI with Property Management

Hiring a property manager can contribute to a higher ROI for property owners. Their expertise in setting optimal rental rates, reducing vacancies, and completing day-to-day tasks efficiently can lead to increased rental income. Additionally, their knowledge of legal compliance can minimize the risk of costly lawsuits and penalties, further protecting your investment. A good company will make their value abundantly clear and worth the property management fees.

Tax Advantages of Hiring a Property Manager

When it comes to tax considerations, it's always a good idea to consult a certified public accountant (CPA) before making any decisions. Each individual's tax situation is unique, and professional advice ensures compliance with applicable tax laws and regulations. However, working with a property manager offers some possible tax advantages. 

Passive and Active Activity Rules

According to IRS regulations, rental property activities are generally considered passive unless the owner qualifies as a real estate professional or an "active investor" who "materially participates" in rental real estate. Passive losses from rental properties are typically limited in their deductibility, but they can offset passive income. However, it's crucial to consult with a CPA to understand the specifics of your situation.

Material Participation

Property owners can still be actively involved in their properties, even with a property manager. Demonstrating material participation in rental activities may be challenging when a property management company handles day-to-day operations. However, consulting with a CPA can shed light on what is required to meet the material participation criteria.

Keep in mind that tax rules and regulations are complex and subject to change. Relying solely on information on the Internet for tax advice is not recommended. Seek personalized advice from a CPA who can provide tailored guidance based on your unique circumstances and goals.