Renting out your house can open up a new stream of income and tax breaks. But it also adds another layer of responsibility. You’ll need to stay on top of repairs, maintenance and rent collection. But don’t fret. We’ll cover the top tips for renting out your house through this beginner’s guide. Because of complex tax laws facing landlords, it would also behoove you to work with a financial advisor to boost your chances of enjoying tax cuts and making a profit out of this business venture.
Can You Be a Landlord?
While it may sound lucrative to rent out your house or a portion of it, the extra money may not be worth the time and stress. You’d need to market your home and screen tenants as thoroughly as possible. You’d also need to handle repairs and maintenance or hire the right professionals to do it. On top of that, there’s always the chance that your tenants will not pay their rent, which can become a whole other headache if you have to evict them.
All of the above sound fine to you? Then read on. You likely have the motivation and fortitude to be a landlord.
How to Market Your Rental Home
In order to attract the right tenants, you’re going to need your sales skills to promote it. So take a good look at your home and take note of what makes it stand out. Does it have appliances like washers and dryers? Or are the floors hardwood? Make sure you make this clear in your listings.
RentalsOnline.com suggests highlighting the following if applicable in order to attract potential tenants:
- Stainless steel
- Vaulted ceilings
With that said, prepare your home for the new tenant. Make sure it’s as clean as it can be. And make sure everything works.
As you examine how rental income could play into your whole financial picture, don’t be deterred by the expenses you may incur in terms of financial advisor cost; make sure you are getting the expert advice you need.
Know Landlord Laws
Tenants have rights, such as the right to privacy and not being disturbed, and you have to respect them. There are also local zoning laws, state laws and federal laws that you need to abide by. For instance, at the federal level, you must disclose any lead-based paint hazards to tenants. The Fair Housing Act and the Fair Credit Reporting Act requires that you get permission before running a credit check, It also says that you must disclose which reporting agency you used and whether anything in the person’s credit report led to your turning them down.
You should read up on all the laws before even listing your house. Websites like Nolo provide information around landlord laws and rules. But to make sure you cover everything, your best bet is to consult a local real estate lawyer. The lawyer can also help you draw up a lease, which is another legal requirement.
Get Landlord Insurance
Landlord insurance typically breaks down into two categories: property and liability protection. Both are designed to protect you from financial losses. Most property insurance policies would cover you in the event the home falls victim to the elements like fire, lightning and wind.
Liability protection would cover you in the case a tenant gets hurt. For instance, if your tenant falls down the stairs and the court determines you were remiss in not properly maintaining those stairs, you could be held responsible for the medical bills. Based on your policy, your insurance may cover it. You usually don’t pay a deductible for a liability claim.
But depending on the area where your rental home is, you may want to take out additional policies to cover vandalism, burglary and other potential threats.
Screen Potential Tenants
This is probably one of the most important tasks you’d cover as a new landlord. You’ll have to find reliable people who will pay the rent and not bring down the house. A good way to start vetting a potential tenant is to check his or her credit history. You can acquire a credit report from one of the major agencies such as Equifax, Experian or TransUnion. Just make sure you follow the rules under the Fair Credit Reporting Act. In addition, you can check public records to find out your potential tenant’s criminal record if any.