How To Rent Out A House: 9 Steps To Successful Property Management

In an uncertain market, safe investments are few and far between. Even though stock prices can nosedive overnight, real estate is one type of investment that’s always in vogue. Learning how to rent out a house is the best way to secure a reliable ROI.

Landlords can generate passive income and put empty homes to use by leasing property. So whether you're a first-time home buyer or an established property owner, learning how to rent out a house could earn you hundreds of thousands of dollars. The only problem? Leasing isn't as easy as it looks.

Leasing property involves meeting an array of legal standards. If a landlord's behavior isn't compliant with housing policy, they open themselves to civil and criminal charges. With that in mind, learning how to properly rent out a house is essential. Thankfully, anyone can learn the ins and outs of landlord leasing by following nine simple steps.

Step 1: Weigh The Financial Pros And Cons

While owners renting out homes tend to see a high ROI, no investment is a guarantee. Whether your rental turns a profit depends on how you balance the benefits and challenges of leasing. To decide if you want to lease a home, consider the following:

Pros:

• High income potential: Renting a single house can net thousands of dollars a month. Landlords with multiple properties can even make leasing their primary source of income.
• Landlord tax deductions: Even though income from rent is taxable, the government offers special deductions for property investments.
• Diversified investment portfolio: Instead of going all-in on the stock market, renting out homes creates a more varied investment portfolio. During recessions, this means some investments will remain stable.

Cons:

• Time-consuming: Owners managing multiple properties can work over 40 hours a week. Landlords who can't spare this time have to hire a property manager or may watch their investment depreciate.
• High expenses: Maintaining a property and handling repairs doesn't come cheap. Additionally, buying a house to lease is a huge upfront investment.
• Competitive market: U.S. homeownership rates are relatively low. In this climate, there are more landlords you have to compete against for tenants.

Step 2: Study Relevant Landlord-Tenant Laws

Anyone interested in learning how to become a landlord has to start with housing laws. These policies outline a landlord's obligations to tenants and the procedures they must follow when leasing. On top of local and state laws, landlords need to observe federal policies like the Fair Housing Act. These laws encompass topics such as:

• Property access
• Security deposits
• The notice period before ending a lease
• Housing discrimination
• Safety standards
• Rent increase caps 

Landlords who take the time to study housing policies won’t just avoid legal trouble, they’ll better understand the field they’re competing in. Like with all markets, preparation and research is the key to turning a profit.

Finally, rental laws apply based on a property’s location, not the landlord’s. So, if you want to learn how to rent out a house in another state, study that state’s laws.

Step 3: Create A Property Management Plan

No two landlords approach property management from the same angle, so consider how you'd like to handle maintenance and administration before renting a home. In general, landlords can either handle management themselves or outsource specific tasks.

With repairs, federal housing policies require fast service from landlords. While some are happy to drive out and make repairs, hired contractors are the most reliable solution. They're also necessary when a landlord lives far away from their property. Similarly, many homeowners hire property managers to field questions about finances and lease requirements.

Before taking on any tenants, homeowners should settle on a financially stable property management plan.

Step 4: Prepare Your Rental Property

Once you've covered most of the administrative work, ensure the property is tenant ready. This entails cleaning the home, making sure it's up to code and outfitting it with water and electricity. Improving your property’s style will also go a long way. Try sprucing up the curb appeal or repainting the interior.

Landlords should also consider throwing in extra amenities. Consider a rain-sheltered bike rack if your property is in a bike-friendly town. In hot or cold areas, AC and central heating will attract more interest. You can better understand tenants' needs by putting yourself in their position.

Step 5: Market Your Property

Once you're ready for a tenant to move in, put your property on the market. To cast the widest net, advertise your house on different online marketplaces and rental listing sites. Advertising on social media can also help with the search. Include the following in your listing:

• High-quality pictures of the unit
• A list of all amenities
• Information on the number of rooms in the house and its size
• The monthly rent 

The last point is the most important, since most renters search for units based on price. Many landlords decide their rate by asking, “How much can I rent my house for?” Instead of pushing for the maximum amount, try to match the market rate.

You can get a sense of standard rates by browsing rental ads, checking local real estate websites and contacting other landlords or property managers.

Step 6: Screen Interested Tenants

Once you've generated interest, schedule tours and interviews with your potential tenants. By getting to know each applicant, you'll get a sense of how responsible they are. You can also ask about their renting history, how many people they'll live with and if they intend to bring pets. Once you've picked the best candidate, run a few background checks:

• Reference checks: What do their past landlords and colleagues say about them?
• Credit report: Do they have responsible spending habits?
• Employment check: Do they have a job or source of income that will comfortably afford the monthly rent?
• Criminal record: Have they ever been convicted of a crime?
• Eviction history: Do they have any past evictions on their record? 

Although generating these reports will take time, they help ensure you pick the right tenant.

Step 7: Draft A Lease Agreement

Once you settle on the right candidate, send them your lease agreement. A good lease will break down all the essential terms of your rental. To ensure the lease complies with local, state and federal laws, hire a lawyer to review it. While this can be costly, you can reuse this template for other tenants and properties down the line.

The more specific and detailed your lease, the better. Be sure to include information like:

• The duration of the tenancy, and whether the lease is by month or year
• The exact rent amount and how the tenant should pay it
• Maintenance requirements for yourself and the tenant
• The security deposit amount and when you will repay it
• Times when you are free to enter the property
• Behavioral expectations for the tenant
• Any restrictions against smoking, pets or running a business out of the unit
• Any fees the tenant owes for subleasing
• Terms and conditions for defaulting on the lease

Step 8: Implement Maintenance And Collection Systems

Once the lease is signed and your tenant moves in, you can settle into a routine. Instead of direct payments, most owners collect rent through third-party apps or websites. And if you work with a property management company, they will likely ask you to collect payments through their website.

While staying on top of one tenant's maintenance requests is easy, juggling multiple properties isn't as streamlined. A third-party productivity tool or maintenance website will help you keep track of requests and costs. Losing track of this information can lead to wasted expenses or repercussions from ignored tenants.

Step 9: Manage Your Property

With everything else in order, you can focus on managing your investment. Document information like emails from tenants, maintenance receipts and tax forms. Additionally, purchasing landlord insurance will account for unexpected disasters. While different policies offer unique benefits, they always protect against property damage, legal liability and potential income loss.

Leasing A House FAQs

Although these nine steps cover your core bases, leasing poses many additional questions. Browse some of the most popular ones below.

Is Renting Out Your House Worth It?

Renting a house is worthwhile if you put work into your investment. Drafting a lease, settling on a property management plan, and screening tenants costs time and money. But once your home has tenants, the return on investment is significant.

Can I Rent a Single Room In My House?

Learning how to rent out a room in your house is fairly simple. In general, you have to meet the same financial and legal requirements as renting out an entire property. However, you'll also live under the same roof as your tenant. While renting a room speeds up mortgage payments, you'll have to put more emphasis on conflict resolution.

Can You Be a Landlord Without Owning the Property?

Yes, many property managers act as a landlord on behalf of a house's owner. Owners who hire property managers trade some of their income for less managerial responsibility. Property managers are common when owners lease their homes through a property management company.

In other cases, banks can give homeowners permission to rent out their houses as they pay off their mortgages. Every lender has its own policies, so be sure to ask them how long you have to live in a house before you can rent it out and if there are any extra fees involved. Additionally, some lenders require a mortgage refinance if you intend to start leasing.

Can I Rent Out My House Without Telling My Mortgage Lender?

No, mortgage recipients must tell their lender when they lease a property. Failure to discuss a lease with the lender may result in fees, increased insurance premiums or termination of the mortgage agreement. The risk never justifies the reward.

Can I Rent Out My First Home?

Renting out a first home or primary residence is common. Some buyers even purchase their first house for the express purpose of renting it. However, when you buy your first home, try to decide in advance if it makes a better investment property or primary residence.

If you turn your primary residence into a rental property, you’ll need different insurance. Make sure you talk to your insurance agent about the best policy for your situation.

The Bottom Line: How Easy Is It To Rent Out A House?

On the whole: not very easy. Renting a house isn’t the easy money some owners claim it is.

While owning rental houses can earn you thousands in passive income, it requires a significant upfront investment. Learning how to rent out your house can also take weeks or months of research. But in the end, owners who stick it out will see a dramatic return on investment.

By taking the time to follow every step of the process, you’ll find reliable tenants and avoid breaches in compliance. So, whether you’re looking to earn extra income or change career paths, learning how to rent out a house with Rocket Homes^SM will pay itself off.

Sources:

1. Nolo

2. U.S. Department of Housing and Urban Development