What You Need to Know About Renting Out Your Own Home
Landlords aren’t just real estate investors who want to build a second income, although plenty of them are. Many people begin their life as a landlord because they have a home they can’t or don’t want to sell. The “simplest” solution is often to rent out their home. While this is something a lot of homeowners do, it’s anything but simple.
Once you become a landlord, your home might be your legal property, but it’s not your home in the same way it used to be. You can’t treat it the same way you used to, either. Here’s what you need to know when you decide to rent out your own home.
1. Get Different Insurance
When you lived in your home, you needed homeowners insurance. Now you’re going to need rental property insurance. This covers damage to the building and property, but not your tenant’s belongings. Some policies will help pay for other living arrangements for your tenants while the property is repaired.
Find an insurance agency who works with landlords to get the right information on the best policy for your property.
2. Don’t Just Show Up
Once tenants have signed a lease and moved in, you can no longer just show up whenever you want. Yes, you own the property, but it’s the tenants’ home. You’re legally required to give notice before you come by and you can’t enter without permission, except in very specific and limited circumstances.
If you show up at a random time or enter without permission, your tenants could call the police to report you. They might also have grounds to terminate the lease early without penalty.
3. Prepare to Reject Potential Tenants
Not every possible tenant is going to be a good fit. They might have a criminal record or not meet your income criteria. How will you know this information? With background checks and tenant screening. But this also means you may have to reject a potential tenant, even if you like them personally.
Never make the decision about race, gender, sexuality, religion, ethnicity, or any other protected class. It should always be based on the criteria outlined in your application -- income, credit, employment, criminal background, etc.
4. Make Time for Marketing and Showings
To find tenants and begin renting your home, you’re going to have to market your property and arrange for showings. There are dozens of websites that you can add your rental listing to, and you’ll need to take good pictures so potential tenants know what to expect. Next, you’ll need to make yourself available for showings. Your time won’t be your own for a while.
In a hot rental market, you might get dozens of inquiries and multiple applications. The moment you rent your property, you then need to remove it from all those websites.
5. No One Moves In Before the Lease is Signed
Your written lease (which you definitely need to have) is what tells you and your tenants what’s allowed, what isn’t allowed, and what the consequences of bad acts will be. Allowing a tenant to move in before the lease is signed can become a big headache if something happens to the property in that in-between time. Keep it simple and don’t hand over keys until all the paperwork is in order and security deposit and rent have been received.
Create a process for the lease signing and handing over the keys. Be firm with tenants who ask for special treatment, even if you know them well. Let them know the process protects everyone, including them.
6. Be Prepared to Evict a Tenant
Even the best screening processes can’t predict everything. On paper, a tenant can look like a safe bet and then you have to evict them. Be honest with yourself before you become a landlord that this may happen at some point. Stay current with eviction rules, regulations, and laws, so that if you’re in that situation, you can act quickly and decisively.
The reasons for eviction should be outlined in the lease agreement so there’s no confusion. While the process may seem daunting, don’t procrastinate. Doing so only causes you to lose more money and have more problems later.
Does all of this sound daunting? Are you wondering what you’re getting yourself into? One decision you make can help you with every aspect of being a landlord -- working with a property management company. The right office will help you set your rent price and security deposit, help you find and screen tenants, keep you legal, and help you with the eviction process. At ERA American Real Estate, we’ve helped countless homeowners become landlords. We can help you, too!