How to Rent Out Your House to Long-Term Tenants
Buying a second home or moving away for an extended period of time? Renting out your property for the long-term is different than running a short-term rental. Here’s what you need to know.
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How do you prepare your property for renting?
Before you rent out your place, make sure everything—from the plumbing down to the fire alarms—is in working order. Have a cleaning service come in and do a deep clean. You may even want to repaint walls to a neutral color, since many renters want to start with a blank slate.
Do homeowners’ associations (HOAs) matter?
If you’re renting out a condo you own, it’s important to get in touch with the building’s HOA before moving forward to make sure you’re actually allowed to use your unit as a rental or if there’s a waiting list.
“Most condo buildings have some type of cap on the amount of rentals they allow in the building,” says Ben Creamer, principal and managing broker at Downtown Apartment Company in Chicago. “That’s done from a finance standpoint, to protect the values of the property. If the property has more than 50 percent rentals, it can be a problem when trying to get a loan for someone who wants to buy in the building.”
In single-family homes, though, HOAs aren’t too much of a problem, says James Garry, a Minneapolis Redfin agent and long-time rental property owner. But you’ll probably still want to talk it over with any existing association, just in case. Also, some towns charge a fee to use your home as a rental, so check with your county’s office as well.
How do you find tenants?
To find tenants, go where tenants are looking. Craigslist, Zillow, and Facebook Marketplace are the top three spots people are searching for new apartments right now, Garry says. And don’t forget to put a sign in your yard for anyone who doesn’t use those sites.
How do you draw up a lease?
Blank lease templates are available online and from real estate and rental associations for purchase. The content varies in each one, though, so you want to read through it and make sure everything complies with local laws—which Creamer says can change every year.
How do you set an appropriate rent cost?
Determining what rent to charge is similar to finding real estate comps. Look around on Craigslist or Zillow to see what similar rentals in your area are going for, and base it on that.
What are typical lease terms?
Typically, leases last one year. There’s generally a security deposit equal to one month’s rent, or a move-in fee that’s nonrefundable. You’ll also want to include information on late payment fees, bounced check fees, what utilities are covered, pet deposits or pet rent, no-smoking clauses, who handles lawn care and snow removal, and whether a tenant is allowed to sublet.
What type of insurance should you get?
Talk to your homeowner’s insurance company about what insurance you need. It’s possible (but not likely) that your standard insurance policy covers renting out your home. But most of the time, you’ll need to get a separate landlord policy to cover the property and the tenants. Your tenants should also be encouraged to get renters’ insurance, which will help protect you from liability.
“The last thing you want is to have homeowners insurance but you haven’t let your insurance company know you’re renting it out to someone else, and something happens and you aren’t covered,” Creamer says.
Do you need a property manager?
Getting a property manager really boils down to personal choice and how much time you want to spend on the rental. If you have an easygoing tenant, you probably won’t be spending too much time with them on issues after they move in. But problem tenants can suck up a ton of it with complaints and requests. A property manager can handle all of that for you—but remember that there’s a cost associated.
“A property manager is going to charge you a monthly fee plus a month’s rent,” Garry says, noting that they’ll handle finding tenants, collecting rent, and putting together tax reports. “If you’re going to be out of state or not near your rental property, a property manager can come in handy because they’re boots-on-the-ground local and have the resources. But I know plenty of out-of-state landlords that do it on their own.”