How to Rent Out Your Home for the First Time
You have purchased a new home and have decided to rent out your current residence instead of selling it. As a new landlord, it is now your responsibility to manage your rental property and tenants, including preparing your property for your new renters.
By following the steps below, you will become an effective landlord with happy, qualified tenants.
Getting Your Home Ready for Your Renters
Although your home might appear ready for tenants, there are several areas that you need to inspect and possibly update to attract the best renters. Before you advertise your property, you must be certain that it is in the best condition in order to compete against other available rentals in your area.
Your property can be made more attractive to a potential tenant with a manicured lawn, flowering plants. a fresh coat of paint and updated light and plumbing fixtures. An investment in a few cosmetic changes can often pay off by bringing a higher rent.
Since you want your new tenants to be safe, you will need to address any matters that could pose a safety hazard, such as leaks, faulty appliances and defective HVAC systems (heating, ventilation and air conditioning). You’ll also want to make sure that the plumbing system and sprinklers are working properly.
Educate yourself on the local laws and codes for residential rentals, including the installation of smoke and carbon dioxide detectors. All exits must be accessible and properly marked in case of emergency. Close attention to these regulations will protect your tenants from injury and you from possible legal problems.
Deciding How Much Rent to Charge
The biggest challenge a new landlord faces is determining how much rent to charge. You’ll first want to do an online search for all of the available rental listings in your area for houses comparable to yours.
Carefully screen the comps for:
- Square footage
- Number of bedrooms and baths
- Recent upgrades
- Extra indoor features
- Outdoor amenities
- Lot size
- Age
- Condition, etc.
Also note how long they have been on the market and if there have been any price reductions. Once you know the competition, make a list of your home’s special features and its deficiencies for comparison.
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Several factors, such as the value of your house, location, and size, will impact your final rate, but rent price is generally determined by the market.
The 1% Rule is one way to establish how much rent to charge for a property. This simple rule recommends that you charge around 1% (or within 0.8-1.1%) of your home’s total market value as a monthly rent payment. For instance, a property valued at $400,000 would rent for $4,000 a month, or within a range of $3,200-$4,400.
The 1% Rule should be used as a starting point for estimating rent, as many factors can influence the best rent for your property’s location.
For homes worth significantly less than the median U.S. value, you will probably want to set a rental price closer to 1.1%. For homes worth more, 0.8% is perhaps a more realistic rent price.
If housing prices are up and the inventory is low, the demand for rentals also goes up. When housing prices are low, and there is more inventory, demand for rentals typically goes down.
Consider the housing market and the level of supply and demand in your area. If there is a high demand for rental homes, you can set the price a little higher, but if demand is low, a lower rental rate may make the home more appealing.
Additional Expenses to Budget For
When you are considering what rent you are going to charge, be sure to factor in the following common expenses that you will incur:
- Mortgage payments
- Insurance
- Landlord
- Property
- Earthquake or Flood
- Inspections
- Pest control
- Property management fees
- Mortgage payments
- Accountant or legal fees
You will also need to decide whether you will be paying utility charges and maintenance fees (gardener, pool service, etc.) or requiring your renter to be completely responsible for them.
Getting the Word Out
Now that your home is all spiffed up and you’ve decided how much you are going to charge for rent, it’s time to start looking for applicants to rent it. It’s an established fact these days that you can’t depend on a For Rent sign to attract potential tenants. You need to list your home online utilizing the most popular real estate sites in order to let renters know that your home is available.
“Photographs are just as—if not more—important than the text of any listing,” reports Forbes. “Recent surveys suggest that 75% of online shoppers make decisions to purchase a product based on a picture. The same is true for rental units: A property could be the perfect fit for a renter based on the listing body, but if the pictures aren’t good, they may click away.”
Forbes’ recommendation is to invest in a professional photographer with real estate experience. You’ll need high quality photography for your ads and social media.
Zillow, Apartments.com, Zumper and Trulia are popular sites for free ads with premium listings available for a fee. Although Craigslist is still popular, it would be safer to find out if your city or region has a local listing platform.
Since you want to reach the largest number of renters, you can access listing syndication on some property management software platforms.
It is not enough to depend on advertising to publicize your rental. Social media is an outstanding outlet to get the word out to a large number of potential tenants. Facebook Marketplace, TikTok, YouTube and Instagram are all excellent vehicles for video tours or walk-throughs.
How to Separate Good Tenants from the Bad
Once you have prepared your home and set the rent, it’s time to start sorting through your applicants to separate the promising tenants from the undesirable candidates. Our article, How to Separate Good Tenants from the Bad will walk you through the interview and screening processes to instruct you on how to choose the most appropriate candidate.
The American Apartment Owners Association (AAOA) assists landlords, property managers, real estate owners and brokers across the country with managing their properties. AAOA offers a variety of services to assist with new applicants including a tenant background check or tenant screening and state-specific landlord forms such as a rental application or rental agreement. The association also offers resources from educational webinars and landlord tenant law to approved providers for insurance and financing. Contact us today to learn more.
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