Landlording & Rental Properties

How to Rent Your House: The Definitive Step-by-Step Guide

Expertise: Landlording & Rental Properties, Personal Development, Real Estate News & Commentary, Business Management, Flipping Houses, Mortgages & Creative Financing, Real Estate Deal Analysis & Advice, Real Estate Wholesaling, Personal Finance, Real Estate Marketing, AskBP, Real Estate Investing Basics
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Chances are you’ve heard horror stories from accidental landlords about costly evictions, destroyed rentals, and "tenants from hell.” You might know a dozen reasons why you shouldn’t rent out your property. Plus, you may not even understand how to rent your house… but still, you might simply need to turn your home into a rental property. Perhaps you…

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  • Tried selling—but the investment property market is weak
  • Have been temporarily transferred out of the area for work
  • Owe more than your house is worth, but can cover the mortgage with rental income
  • Realized the incredible wealth-building opportunities that a rental property can provide for your financial future.

Yes, the bad stories receive the most press and attention. But here’s the facts: Every day, millions of landlords rent out houses to good tenants. With proper planning and preparation, you can minimize the hassles and turn your home into a profitable venture.

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Should You Rent Your House Out?

The first question to ask yourself is: Should you rent or sell your home? I’d like to make the case for why you should rent out your house. Here’s why.

  • Your primary home, while a necessity in life, is not typically an asset or investment. An asset makes you money. A liability costs you money. By renting out your home, you transform a liability into an asset.
  • You can hold onto your property while rental income pays down your mortgage. Over time, rental property values (hopefully) will climb and build your wealth. If you can rent out your house for more than your monthly expenses, you will also experience additional monthly cash flow. That’s the goal for all potential landlords—and what we at BiggerPockets want to help you achieve.
  • Start your investment career with no additional costs. Renting your property could be the first step in a tried-and-true method for building wealth. Many real estate investors start this way—renting out their homes as they upgrade to bigger or better houses. This may also help fund your retirement, as you may end up owning multiple properties “free and clear” by the time you are ready to retire, providing monthly rental income or a lump sum if you sell.
  • Retain the possibility of returning to that home. This is especially helpful if you’ve been forced to move quickly because of a temporary job relocation.

Related: 4 Reasons Your Home Probably Won’t Make a Good Rental

Finding Rental Tenants

When it comes to attracting tenants to rent your house, marketing is key. You will want to reach as many potential tenants as possible so you have the largest pool to choose from. The following are three easy ways for marketing a property:

  • Craigslist: This is one of the internet’s largest resources and easiest places to find tenants. Perhaps the best part? Craigslist is free—unless you are in a few select cities. (Pro tip: Don’t list the address here, though. Just give a general vicinity for safety purposes.) You can also place your ad in other online rental submission sites, like Trulia, Zillow, or PadMapper.
  • Yard signs: One of the oldest but most successful ways to market your rental is with a simple “For Rent” sign in the yard. The biggest drawback to a sign, however, is instant notification of a vacant house to anyone driving by.

Pre-screening rental applicants

When you receive a call or message from a prospective rental tenant, always pre-screen before meeting in person. The easiest way to do this is by setting rental criteria and explaining that criteria over the phone. My criteria prior to a typical rental application process looks like this:

  • Gross monthly income must equal approximately three times or more the monthly rent
  • Favorable credit score
  • Employment—with acceptable proof (i.e., pay stubs) of the required monthly income
  • Good references from all previous landlords
  • Agree to the total number of occupants allowed (e.g., two per bedroom per state law).

You can read this list over the phone to the prospective rental tenant and ask them if they meet these qualifications. If they don’t, don’t rent the home to them, waste your time screening them further, or even book a showing.

Related: Tenant Screening: The Ultimate Guide

Should You Use a Property Manager?

Should you manage the property yourself or hire a property manager to look after it? Generally, a property manager will charge roughly 10 percent of the monthly rent plus 50 percent of the first month's rent when a new tenant moves in.

good-tenants

In exchange for this fee, a property manager will typically:

  • Advertise for finding new tenants
  • Process rental applications
  • Sign the rental lease
  • Collect the monthly rent
  • Keep track of the financials
  • Schedule maintenance repairs
  • Issue legal notices
  • Enforce rental policies
  • Understand and navigate landlord-tenant laws
  • File evictions.

Related: What Does a Property Manager Do?

How Much Should You Charge For Rent?

You can’t arbitrarily decide what rent you want to charge—the market makes that decision. Your job is to determine the fair market rent for your house by doing research. Generally, your house will rent for about the same amount as other rental properties with a similar location, size, and condition. Start by searching for similar properties on Craigslist and Zillow.

For the most detailed information about a property’s fair market rent, input the address into BP Insight’s Rent Estimator. We’ll provide data for that property and properties like it. This tool looks for the most similar properties in your area and estimates the rent for your property based on those comps.

Also consider:

  • Driving around and looking for “For Rent” signs
  • Calling property management companies
  • Asking other local landlords
  • Browsing local newspapers.

Related: How Much to Charge for Rent in 2020: A Landlord’s Guide

What about the security deposit?

A security deposit is a sum of money paid by a tenant to ensure they fulfill the terms of their lease. Remember, though—this is a deposit, not a fee. This money should be held in a separate bank account and returned to the rental tenant when they move out, less any damages that need to be repaired.

Many states restrict the amount you can charge, so make sure to check to find any local limitations. I typically charge the equivalent of the monthly rent for a security deposit, though I may charge more than that if the rental tenant has anything in their background that worries me (more on this in a while).

Rental Application Process

Always give an application to each prospective renter who is interested in your rental home, even if you are not interested. After all, you don’t want to be seen as discriminatory. The actual rental application should include a variety of information—at a minimum:

  • Names of all potential renters
  • Date of birth
  • Social security number
  • Phone number
  • Alternate phone number
  • Previous addresses (last five years)
  • Current employer (name, hire date, income, contact info)
  • Past employers (name, hire date, income, contact info)
  • Emergency contact information
  • Release of information statement
  • Signature for all rental tenants.

Always—I repeat, always—require an application fee. This should cover the cost of the background check. However, before bothering with the components of screening that cost you money, first scan the rental application to ensure candidates meet your initial criteria.

Conducting Background and Credit Checks

There are various tenant screening sources you can use to run a background or credit check on a rental tenant. Many property management apps offer built-in screening tools, too.

Before digging into the screening data, you need to decide what kind of background or credit score you’ll allow. That’s largely dependent on your location and the strength of your real estate market. The things to look closely are:

  • Felonies
  • Prior evictions filed
  • Prior evictions carried out
  • Bankruptcy
  • Judgments
  • Other criminal or bad financial history.

Businessman talking on mobile phone and making notes. Man sitting at his office desk working on graphs and charts and discussing on phone.

Verifying income and checking credit history

Your rental application should include a “release of information” signature, which allows you to check up on their claims. Start with their job. The rental application should include the name and phone number of their current employer, so call and speak with the manager, owner, or human resources manager. (Many times, you will be required to fax over the release-of-information signature.)

Then, the important questions to ask are:

  • How much do the renters currently earn?
  • How long have the renters worked there?
  • Is this job considered temporary?

Next, call their previous landlords for at least the past five years. Be sure to do the renters’ pre-screening (i.e., background check and credit check) to see if any other addresses appear that might indicate they conveniently “forgot” to include a landlord that they rented from.

When talking with previous landlords, consider asking the following questions:

  • How long did the rental tenant rent from you?
  • What was their monthly rent?
  • Did the rental tenant give proper notice when vacating?
  • Was the rental tenant refunded their security deposit?
  • Would you rent to this rental tenant again?

Related: 12 Must-Ask Landlord Reference Check Questions

Accepting or denying a rental applicant

To avoid discrimination complaints, always process rental applications on a first-come, first-served basis. Process each rental application until you discover the applicant does not qualify.

When you deny a rental applicant, it is important that you clearly document your reasons for why you are denying the renter to avoid discrimination complaints. Always inform the rental tenant with written notice.

When you find a rental applicant who meets all your requirements, you can verbally let your future tenant know that they are approved.

Rental Lease Agreements

You can get a state-specific lease agreement from BiggerPockets’ lawyer-reviewed lease library, which includes forms for all 50 states.

Most landlords choose a one-year lease in an effort to keep their tenants in the rental home as long as possible, minimizing turnover. While rental agreements generally vary in length and content, most leases contain the following information:

  • Names of rental tenants
  • Address of the rental property
  • Lease agreement term length
  • Monthly rent amount
  • Security deposit amount
  • Late fee definition, penalties, and fees
  • Landlord-tenant laws
  • A move-in condition report
  • Rental policies
  • Provisions for or against pets, utilities, smoking, and more

Signing the lease agreement

Go through the lease agreement ahead of time and mark all the areas that require a signature or initials with Post-It Notes or a highlighter. That way, nothing will be forgotten or missed. When you meet with the rental tenant, walk them through each provision in the lease, step-by-step, and ask them to sign as you go. This may be time-consuming, but it will help protect you months down the road when the tenant says, “I didn’t know that.”

Inspecting the Property Before Move-In

By this time, the monthly rent and security deposit have been paid and the lease agreement has been signed. It’s now important to do one final thing before handing over the keys to the renter: the move-in condition report. This is simply a paper that the tenant signs that documents, in detail, the condition of the rental property upon taking possession.

Allow the renter to take some time walking through the rental property and inspecting it. Encourage them to take notes of the condition of each room. Also consider taking photos or a video of the property before handing over the keys. This will be further evidence in the future when the rental tenant moves out.

In addition, consider requiring that renters carry renters insurance. Renters insurance is akin to homeowners insurance, but it will protect the renter’s stuff should the unfortunate happen, such as fire and theft.

The paperwork may be done, but your journey is just beginning. As a landlord, it is your responsibility to ensure monthly rent is paid on time, late fees are charged when needed, repairs are performed when required, and bookkeeping is kept up to date.

Good luck!

What other questions do you have about the process of renting out your property?

Let’s discuss below in the comments. 

Brandon Turner is an active real estate investor, entrepreneur, writer, and co-host of the BiggerPockets Podcast. He is a nationally recognized leader in the real estate education space and has tau...
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    Shawnee
    Replied over 2 years ago
    Loved how helpful this was. Your awsome 🙂
    John Weber
    Replied over 2 years ago
    First time renting out our house. My wife and I will be retiring and have thought about renting out our house to the Canadian Military. I should let know we live in Canada near military training area. We have spoke to the personal about renting the house. The people the army puts in the house are families from over sea. They rent from us and whether the house is vacant or not they paid the rent. They take care of any damage that occur during the time the of the lease. I am responsible for any maintenance of the house and property eg: blowing out sprinkler system before winter, having a technician and service the furnace and so on. What kind of information or advise can you provided for me on this type of renting. I have talk to people that have renting to the army and they have said it is a “good deal”. We all know what a good deal can mean at times, any information would be helpful. Thank you
    Joseph Edouard from Suffolk, Virginia
    Replied over 2 years ago
    Excellent article, Brandon . You have answered many of my questions. I had a really bad example five years ago. I wish I had read your article first. Thanks.
    Drake Wagner from Odessa, FL
    Replied over 2 years ago
    If you are having trouble finding a tenant that you are not having to evict the next day you can check us out at Rentahomefast.com or you can call at 8138028519 and we can find you the best tenants you could dream of. Mention this article and your first tenant is free
    Chatch Noiwan from Fairfax, VA
    Replied over 2 years ago
    Hi Brandon, The whole post, all 5000 words, is very helpful for a newbie like me. The following hints are ones I would have missed if not for the post: prospect pre screening questions, set time window for property showing and ask prospect to drive by first, pay attention to when the lease ends – watch out of holidays, collect full 1st month rent with certified funds and pro rates second month. Thank you.
    Jeffrey Wagner Rental Property Investor from Rochester, NY
    Replied about 2 years ago
    Hi Brandon, I was just notified today that our offer was accepted on a duplex. This is our first investment property. One side is rented M2M the other is empty so we can do some work prior to new tenants. I know there are things we have to do prior to closing but are very excited to get started. This article was a good read for me as I am already thinking about tenants, what to look for in them, how to background check them? Should it be a lease or M2M as the previous owner ran it? How to collect rent? We will be looking for new tenants for the empty side sometime in the first quarter of 2019. So many questions with so little time. Typically just add a little milk. Thanks for your post.
    Jarques Schottborgh
    Replied over 1 year ago
    This article is good but it didn’t mention anything about putting it in a LLC or a trust. That’s what I’m trying to learn.
    Quintian Muhammad
    Replied over 1 year ago
    If you have properties in Phoenix Arizona, I know of a great management company that can professionally rent or manage your rentals. In my opinion, that's the best approach to take. Thanks Quintian M. [email protected] Sell my House: www.areicllc.com
    Mairim Aguayo from Fort Myers, FL
    Replied about 1 year ago
    I appreciate this article very much. Currently, I am separated from my husband, and I am debating on selling or renting the house. The house and the mortgage is under my name, but I understand that under Florida law in case of divorce, property needs to be divided in half since the property was acquired within the marriage following the joint tenant community law. I have not decided on what to do with the house yet because I am not clear on the advantages or disadvantages of selling or rent it. I appreciate the information in this article, I am more educated now in case I decided to rent out my home, and become a landlord. Thanks.
    Amelia James
    Replied about 1 year ago
    such an informative piece..... loved it. I tried house for rent from here.
    Janice Freeman
    Replied about 1 year ago
    How do I go about renting my houses out to Insurance companies?
    Inessa Bliznetsova from Tarrytown, New York
    Replied about 1 year ago
    Thank you very much for this information! I am a late comer to this, very much behind member here, and need some advice. I am considering renting out the 2 family house I own and live in now with my adult son (units are 1 bedroom each). But I own it in my name, and I have concerns about liability to me personally should something happen in the house while it is rented. I assume house insurance would have to change - but even with this change, how do I protect my other assets from lawsuits? I assume I cannot just transfer my house to LLC in a cost-efficient manner? Any experience shared and advice is very much appreciated!
    Allen Tracy from Chatsworth, CA
    Replied 11 months ago
    I live in Los Angeles and I rent my home out for film shoots. I get about a month's worth of rent in one day. It definitely takes work but it can be really good money.
    Account Closed
    Replied 7 months ago
    Exceptional Article! I think the best described article for the rent for the house. It is step by step so I get all answers to my questions and is very informative at the same time.