How to Rent Out Your House

If you’ve never been a landlord before, it may seem overwhelming to rent out your home for the first time. However, we’ll show you in this article that it’s actually quite straightforward, with step-by-step advice on how to get started.

Remember, given the housing shortage and higher rates, it make make much more sense to hold your property and rent it out vs selling it at a potential loss. Especially if you’ve locked in a low mortgage rate in the past few years.

However, like any business, it requires a thorough understanding of the process. This guide aims to walk you through the steps of leasing your house for the first time.

Step 1: Building Your Professional Team

The initial step in the process of leasing your property is to assemble a team of professionals. While it’s possible to manage everything on your own, seeking professional assistance is often beneficial. This team could include a real estate agent, a professional photographer, a real estate lawyer, and a property manager. A real estate agent or property manager can help with marketing and leasing the property, including taking professional photos and drafting a lease agreement.

If you prefer to save on commission fees and manage the marketing aspect yourself, it’s advisable to invest in professional photography and have a lease agreement drafted by a real estate attorney. You can also utilize Hauseit’s Rental Listing Service to have a full-service listing agent market, show and rent out your property for just a 1 month fee.

Step 2: Comprehending Federal Housing Laws

Before you lease your property, it’s crucial to understand the federal laws that you, as a landlord, must abide by. These laws, which apply to landlords nationwide, govern the rental industry. For instance, The Fair Housing Act, established in 1968, protects tenants from landlord discrimination based on race, color, religion, family status, sex, or disability. It’s illegal for a landlord to deny a potential tenant based on any of these factors.

Pro Tip: It’s important to be very, very careful when crafting your listing description to not run afoul of fair housing laws. Since penalties can be so strict, you should go above and beyond in making sure your property description is just that, purely textual information about your property. Avoid including anything that could be construed as discriminatory or non-inclusive, such as language about school zones, specific religious institutions and even what types of people (i.e. even “couples” or “family friendly”) you think the area might be good for. Keep it to yourself!

Step 3: Understanding Local Rental Laws

In addition to federal laws, each state and many cities have their own rules regarding rental property management. These rules can vary depending on the type of rental property you own. For instance, the local laws governing the use of a small multi-family unit may significantly differ from those governing a single-family residence. Therefore, it’s important to check with your local housing authority and attorney to avoid potential fines for unintentionally breaking the rules.

Pro Tip: Local rent regulations can vary dramatically from region to region, from hyper tenant-friendly New York to more landlord friendly Florida. For example, the 2019 Rent Laws passed in New York prohibit landlords from charging more than a 1 month security deposit (i.e. you can only take the first month’s rent and a 1 month security deposit upfront).

Step 4: Determining the Rental Price For Your Property

The next step in the process is to set the rental price for your property. While you have the freedom to set any price, it’s advisable to base the price on current market conditions. This can be done by looking at comparable properties on the market or performing a comparative market analysis. Setting the right price is crucial as it ensures that the property will be rented quickly and won’t remain vacant for an extended period.

Step 5: Marketing Your Property

Once you have set a price for your property, the next step is to market it. There are numerous ways to do this, including listing on property websites like Zillow, running social media campaigns, distributing flyers, placing bandit signs, newspaper ads, and even simple word-of-mouth. If these methods don’t yield results, you can also pay your real estate agent to list the property on your local Multiple Listing Service (MLS).

Pro Tip: Utilize Hauseit’s Rental Listing Service to market your property on your local MLS and 100’s of sites, plus have one of our experienced agents manage the entire process for you for just a 1 month fee. NYC properties are listed on the REBNY RLS, Long Island & Hudson Valley homes are listed on the OneKey MLS, and South Florida properties are listed on the Miami MLS (aka Southeast Florida MLS).

Step 6: Selecting the Ideal Tenant

When it comes to accepting a tenant, there are two general industry standards. The first is that your prospective tenant’s income should be at least three times their monthly rent. The second is that their credit score should be above 600. Other factors to consider include a tenant’s previous payment history, job security, pets, and any record of prior evictions or criminal activity. You can also ask for character references, such as previous landlords and employers, to verify all given information.

Ultimately, the criteria will vary based on your risk tolerance, the offers you receive and the state of the market. There are also local norms to consider, for example in New York City it’s common for landlords to require prospective tenants to make at least 40x the monthly rent in annual income.

Pro Tip: Make sure to ask for two (2) landlord reference letters, from their two most recent landlords. This is important because if you only ask for one, their most recent landlord might be willing to say anything just to get their tenant to leave.

Step 7: Creating a Robust Lease Agreement

Leases are binding legal contracts once signed by all parties. You can find generic, state-specific leases on the internet by searching your state’s name with “residential lease” typed beside it. However, before blindly selecting a random contract, it’s important to set your own personal standards. For example, how many days late will you accept rent? Will there be a fee? What are the grounds for eviction? What house rules would you like to implement alongside the lease, if any? Are there assigned parking spaces? Who is responsible for paying utilities?

Pro Tip: Consult your attorney or Realtor if you haven’t done this before, as norms will vary by region. For example, in Florida most parties will use a standard Florida Realtor lease agreement that’s more fill-in-the-blank. In NYC you might see a REBNY lease agreement or a Blumberg lease agreement being used as a template.

Step 8: Automating Processes

Once the lease is signed and ready to go, it’s time to automate. From collecting monthly rental payments to wiring a home security system, anything that can be automated should be. Automation can also include maintenance requests, lawn care, pest control, and lease renewals. While these are all things you could easily take care of yourself, automating every part of your rental property will save you time, reduce frustration, and eventually allow you to scale your rental business – if that’s what you choose to do, of course.

Pro Tip: At the very least, you can automate rent collection via a free service like apartments.com which allows you to collect rent via ACH for free. You can also stipulate late fees and more. This will save you time from having to either collect checks from the mail or ask for Zelle payments each month.

Step 9: Securing Insurance

You’ll also want to have a good insurance policy when you rent your house out. Homeowners insurance, while important, is not always enough coverage once you begin renting out your property full-time. On the other hand, Landlord insurance protects homeowners who choose to allow tenants into their homes. Typically, one of these insurance policies will cover property damage, liability, and loss of income under certain catastrophic events. In some cases, you can also add water/flood, tornado,and personal property insurance to these policies to cover any extraneous events.

Pro Tip: It’s important to understand that landlord insurance is different from regular homeowners insurance. So if you have a regular H06 insurance policy for your condo unit for example, you’ll need to contact your insurance company and let them know that you’re now renting out the property. Rates may change, but it’s important to make sure you’ve disclosed this to your insurance company.

Conclusion: The Journey to Becoming a Landlord

Renting out a house for the first time can be challenging, but it can also be very profitable and rewarding. It’s an incredible way to start making passive income, giving you more financial independence. All you need to do is put in the initial effort to learn how to rent out your house and find a good tenant, and you’ll be set.