Sometimes life events mean having to move. That doesn’t mean you have to sell your house.
There are many reasons why you should consider leasing your house instead of selling it.
Reasons such as: It may not be the right How do I rent out my hometime to sell, You may want to come back to your house after a period of time, By title, you don’t have the right to sell it…yet!
Leasing your house is a great way to receive rent money to use toward paying the mortgage on your house while you are living elsewhere.
I help people rent out their homes but if you have the time and inclination, I can show you how to rent your house out on your own. By following the guidelines in this post you should be able to rent out your home in a manner that is efficient and minimizes your risk.
How much rent can I get for my home?
One of the first things you will want to do is determine how much rent you can charge for leasing out your house. You can look at comparable rental properties on various websites to give you an idea. One such site is Rentometer. To get the most accurate picture of where rents are, and more importantly where they are going to, I do an analysis of the MLS data, along with reviewing Rentometer, Craigslist, and other online resources.
Next you need to consider how long you are willing to lease it out for. A minimum term should be 12 months. Typically after 12 months, a lease will become a month to month agreement.
Next, look at your property as a long term hotel stay for a customer. Your rental should be clean, and attractive to potential tenants. Aside from making sure your property looks attractive to maximize the rent you can get for it, you need to make sure your house is in a suitable condition for renting. This means no broken windows, toilets, plumbing, electrical, and door locks should all work.
Does your property comply with ordinances that mandate smoke and carbon monoxide detectors, water heater strapping/placement, and other guidelines? If not, make sure you address this before leasing out your property.
In the case of the City of Los Angeles, CA, for single family homes, apartments, and condominiums the requirements are currently the following: Smoke and Carbon Monoxide Detectors (battery operated) must be installed in hallways and bedrooms. Dual function detectors can be used. Water Heaters must be strapped down with two metal straps. You can get these a Home Depot for about $15. Plumbers tape is not permissible material for strapping.
What Does the Lease Include?
You will also need to think about what is included in the lease and what is not. What you will permit on your property and what you will not. These rules should be set initially and you should include these in your marketing efforts to make sure you attract applicants that can work with your lease restrictions. For example; Will the garage be included in the lease? Will you permit pets? If so, how many? What type of breed (dog), weight, etc. Are any utilities included in the rent? Which ones? Will you be responsible for the gardener or does the tenant have to manage that and pay for it?
Once you have figured out your rules for tenancy you will be ready to post your house for rent.
This is the typical flow of events in the rental process:
- Marketing Your Rental
- Scheduling Appointments
- Screening Applicants
- Choosing the Tenant from among the Applicants
- Preparing Lease Agreement
- Conducting Move-in Walk Through
- Collect Rent
- Marketing Your Home for Rent
Marketing your rental is where you let the world know your house is available to be rented. The first bit of marketing you need to do consists of buying a “House for Rent” sign at your local home improvement store. Make that two. Signs are very effective. The second thing to do is to take nice photos. Several shots of the outside and plenty on the inside.
The next item on the list is to post your listing on Craigslist and Westside Rentals. Finally, go to Zillow.com and create a rental listing for your property. Make sure your Internet listing contains as much information about your house and your lease “rules” as possible.
To summarize, your ad should include the following: photos, property address, lease term, rent amount, deposit amount, number of bedrooms, number of baths, square footage, whether its an upper or lower story, pets ok or not, who pays for what utilities, any other lease restrictions, any amenities such as laundry (inside unit or other), pool, park or school nearby, shopping, and of course your contact information.
Scheduling Appointments for Showing Your House
You should begin getting calls fairly soon. Try to schedule one or two days in the week where you have a rental open house. I suggest a two hour window on Saturday or Sunday. When the calls start coming in requesting a showing try to get your prospective applicants to come view the property on your Open House days. This will save you time and effort. During the showing of the property make sure you mention all rules and any lease restrictions. Better yet, have some printed flyers with a picture of the house, its amenities, lease restrictions, rules, and of course your contact information. Aside from flyers, you will want to make sure you have plenty of printed application packets to hand out to prospective applicants. The application packet should consist of a blank application and an accompanying document which explains the rules of the rental and lease restrictions. It should also list any additional documentation required of the applicant such as; copies of photo IDs, SSNs, and recent paystubs. We have an application packet that we can provide to you if you need one. Feel free to customize it. Just contact us and we will send it to you. I recommend charging $30 for every application you will process. Take these funds in the form of a certified or cashier’s check.
Remember that every adult that will be residing in the house should fill out an application, regardless of whether they have an income or not.
In learning how to rent your house out , you will need to learn a little bit about human behavior. This is the step where you should not take any shortcuts. Time well spent on finding the best qualified tenant for your house will usually pay off down the road with a better tenant and less problems. What should you do during the screening process? Run checks on the applicant’s background. These include; credit, criminal and past eviction history.
For these I recommend using Tenant Background Screening. The cost is $30 per person you screen. The screening process will also provide you with the applicant’s FICO score.
Next, you will need to contact their current employer. Many employers have a policy to provide limited information. Most will provide you with a starting date of employment and confirm that the person is still employed. You may not be able to get it but try asking if the company plans on keeping the employee for the foreseeable future. Some persons may be employed temporarily. If you have left messages for the employer and have not heard back, let the applicant know that you cannot process their application until you can get a hold of their employer. Maybe the applicant can get a hold of the employer and setup a time for you to speak with them. Make sure that YOU are the one that initiates the call to make sure you know that you are calling a specific place of employment and asking for a specific person. If the applicant is self-employed, ask for copies of their tax returns for the last two years to verify income. Get the last two month’s bank statements from all applicants whose income will be used toward rent payments.
How to Rent Your House Out and Fair Housing
It is important to keep in mind during the entire process that rental property is governed by Fair Housing rules at the Federal, State, and Local government levels. The important thing to keep in mind to comply with Fair Housing is that all applicants must be treated equally.
You cannot deny the opportunity for housing to any applicant because of race, nationality, language, religion, sex, handicap, marital status, sexual preference, etc. Giving the impression (even if erroneously) by asking questions such as “do you plan on having children” can be seen as an act of discrimination. Walk a fine line in all your dealings with prospective tenants.
Here are some questions you should NOT ask applicants:
1. Have you ever been arrested? –You can ask if the applicant has been convicted of a crime, but since all persons are presumed innocent unless convicted, your question should avoid using the word “arrest”.
2. What is your age?
3. Are you married? Single? Divorced?
4. Are you thinking about having children?
5. Questions regarding race, nationality and religion
6. Questions regarding any disability –It is up to the applicant to determine if the unit will be suitable, based on their disability
7. Will your family be visiting?
8. No questions about sexual orientation.
And here are some questions you SHOULD ask applicants: Though the application packet and forms will ask the most important questions required of the applicant, these questions asked over the phone or in person while showing the property can save time be screening out tenants that will not pass all the lease requirements, such as pet owners, criminal convictions, etc.
1. Why are you moving out of your current home?
2. How many people will be living in the unit?
3. Do you have any pets?
4. Have you ever been evicted?
5. How long have you been with your current employer?
6. Will you be able to provide all the required money at move in? This question helps ensure that applicant understands financial commitment which includes 1st month’s rent, security deposit, pet deposit (if any), renter’s insurance, and any other fees such as application fees for each adult.
7. Do you have any questions?
Choosing the Tenant From Among the Applicants
Once you’ve interviewed applicants and have all documentation in hand its time to choose the best qualified applicant as your tenant. Here is how I begin: Do the applicants have a 3 to 1 ratio of income to rent expense? This means that if your rental is $1,000 per month, than your tenant’s income should be at a minimum $3,000 per month. If this ratio is not met, do they have substantial savings which permit them to pre-pay a significant portion of the rent? Can they prepay 6 months of rent? If not, they would be disqualified for insufficient income. When telling an applicant that they did not get the rental, you can say that you had stronger qualified applicants that the rental went to.
How is the applicants FICO and credit score? Is the FICO 600 or less? This indicates some issues with the applicants financial history. Unless the applicant has a great reason for why their score is what it is, I would disqualify anybody not having at least a FICO of 650 or higher. The higher the better of course. Criminal History? Did the background search turn up a prior criminal conviction? If yes, then I also disqualify the applicant at this point. Past Eviction? Did the background search turn up a prior landlord eviction for the applicant? Again, this should automatically disqualify the applicant. You don’t need see if this person will be a repeat offender. Employment How long has the applicant been employed? Two months? Not good, however if the applicant can provide a contract that says they’ve been contracted for x number of years, then that changes the equation. Use your judgement in this case. Past Landlord Speak to any past landlords, and find out about the applicant’s history of making timely payments and if they were a cooperative tenant. If there’s indication of late payments or uncooperative nature, I disqualify immediately.
Preparing the Lease Agreement
Now that you’ve selected the applicant that will become tenant, and they’ve accepted, its time to put together the lease agreement. Make sure that all lease restrictions and conditions are included in the lease. Pet policy, who will pay for what utility, initial rent, security deposit amount, etc. If you need a lease agreement, we have a great comprehensive agreement in Word format, that we will be more than happy to share with you. Just contact us and let us know you need a copy.
Conducting the Move In Walk Through Inspection
You’re almost there. You’ve executed the lease, have received the security deposit and initial rent funds. Its time to meet the tenant at the property, hand the keys, provide instructions, and do the Walk Through Inspection. This inspection is key to making sure the tenant and landlord are on the same page about the property’s condition at the initiation of the lease. This is very important because when the lease ends and the tenant moves out, both parties will have to agree on the condition after the wear and tear that will occur during the current tenancy. The condition of the property at the end of the lease will dictate how much of the security deposit can be kept by the landlord to be used toward repairs. Disagreements about security deposit utilization are some of the most common landlord vs tenant issues that exist. Remember that the return of the security deposit funds must occur within 21 days after the tenant leaves the property. There is a steep penalty for not meeting this deadline. If you need a Move In, Move Out Walk Through Inspection form, please email me for a copy.
In your lease terms and conditions, which should be part of the lease, you will write in the manner in which you prefer to receive rent. Maybe you want a check mailed to a specific address, or want tor receive the funds electronically into your bank account. The important thing about rent collection is that you stay on top of any delays. Leases will typically contain a grace period which can be a day or two after the rent is due. If the tenant pays the rent during the grace period the landlord will waive the late fee. The late fee should be addressed in the lease of course. Failure to pay the rent during the grace period, should initiate a phone call, email, or visit to the tenant. Better yet all three and do it during the grace period. Your contact with them should remind them of their lateness and also that they will incur a late fee. If your good faith efforts to collect rent don’t result in the tenant paying the rent you will have to issue the tenant a 3 day notice to pay or quit rent.
I hope this article has provided enough information to show you how to rent your house out on your own.
If you still have questions about how to rent your house out on your own, please contact us at (818) 437-3001 and we’ll be happy to assist you in any way we can.
Renting out homes is our specialty. If you would rather have a professional handle the entire lease process on your behalf we charge only $495 for the entire process. The fee is payable only after the lease has been filled and you have received the security deposit and first month’s rent. Want more information? Read more here.