Here’s What Homeowners Need to Know Before Renting Out the Properties

Property owners are increasingly recognizing the growing popularity of renting, as more people opt for the flexibility and lower upfront costs of renting over buying. Did you know that in 2022, approximately 100 million people in the United States were living in rental homes, highlighting a significant shift towards renting as a preferred housing option?

Whether you’ve moved into a new home, inherited a property, or are looking to turn an investment into a steady revenue stream, becoming a landlord comes with many opportunities. Before you decide to rent out your property, it’s important to understand that there are several responsibilities and decisions that need to be made.

From understanding local laws to setting the right rent price, these steps can help you avoid potential pitfalls and make your experience as a landlord smooth and profitable. Let’s go over some of the key things every homeowner should know before they start renting out their property:

Consider Hiring Real Estate Professionals

Managing a rental property can be time-consuming, especially if you have multiple properties or other commitments. While hiring professionals comes with a cost, their expertise can save you time and money in the long run. Hiring real estate professionals, like Nomadic Real Estate, can take a lot of the stress off your shoulders and streamline your process. They provide a hassle-free experience by handling all aspects of property management, ensuring that properties are well-maintained and tenants are satisfied.

Real estate professionals are especially useful if you don’t live near your rental property or prefer not to be involved in day-to-day management. They can also help navigate complex legal requirements and resolve tenant issues, giving you peace of mind that your property is in good hands.

Prepare Your Property

A well-prepared property attracts quality tenants and helps you avoid frequent maintenance issues. Before you list your property for rent, take time to make necessary repairs and upgrades. Fix any leaks, broken appliances, or safety hazards. A fresh coat of paint, clean carpets, and well-maintained landscaping can also make your property more appealing to potential renters.

A clean, well-kept property gives the impression that you are a responsible landlord who cares about the condition of the home. This, in turn, encourages tenants to take better care of the property. Investing in basic maintenance and improvements can lead to higher rent prices and longer-lasting tenant relationships.

Understand Local Laws & Regulations

Before renting out your property, it’s important to know the local laws and regulations that apply to landlords and tenants. Every city and state have different rules regarding rental properties, so it’s essential to be familiar with what applies in your area. These regulations cover a wide range of topics, including tenant rights, lease agreements, security deposits, and eviction processes.

For example, some areas have rent control laws that limit how much you can charge or increase rent over time. Others may have specific rules about notice periods for ending a lease or handling security deposits. Understanding these laws will help you avoid legal troubles and protect both you and your tenants. If you’re unsure about the legal aspects, consider consulting a local attorney who specializes in real estate or landlord-tenant law.

Determine Appropriate Rent Amount

Setting the right rent price is one of the most important steps when renting out your property. Charging too much can make it difficult to find tenants, while setting the rent too low can mean missing out on potential income. To find a competitive rent price, start by researching similar properties in your area. Look at what other landlords are charging for properties with comparable size, location, and features.

You can use online rental platforms to check current listings, or speak to local real estate agents who know the market well. Also, consider your property’s unique features, like recent upgrades or included utilities, which might justify a higher rent. Setting a fair price not only attracts more tenants but also helps you keep your property occupied, reducing the time it sits vacant.

Screen Tenants Thoroughly

One of the best ways to protect your property is by screening potential tenants carefully. A good tenant can make your experience as a landlord much easier, while a bad tenant can lead to missed rent payments, property damage, and legal issues. To find reliable tenants, conduct background checks that include credit history, rental history, and employment verification.

Request references from previous landlords to see if the applicant has a good track record of paying rent on time and taking care of their rental homes. Be clear about your criteria, such as minimum income requirements or a clean rental history, and stick to them during the screening process. This helps you find tenants who are more likely to pay rent on time and respect your property.

Draft a Solid Lease Agreement

A well-drafted lease agreement is essential for setting the terms of your rental and protecting your rights as a landlord. The lease should clearly outline the responsibilities of both parties, including rent amount, payment due dates, maintenance responsibilities, and rules regarding the property. It should also cover important details like the duration of the lease, renewal terms, and what happens if either party wants to end the agreement early.

Make sure your rental lease agreement complies with local laws and includes clauses that protect you, such as requiring tenants to maintain renter’s insurance or prohibiting illegal activities on the property. If you’re not sure how to create a solid lease, consider using a standard lease template or consulting a legal professional to draft one for you. A clear, comprehensive lease helps prevent misunderstandings and disputes, making the rental process smoother for everyone involved.

Understand Tax Implications

Renting out a property has tax implications that homeowners should be aware of. Rental income is generally considered taxable, so you’ll need to report it when you file your taxes. However, the good news is that you can often deduct many expenses related to your rental property, which can help offset some of the income.

Common deductible expenses include property management fees, repairs, maintenance, insurance, mortgage interest, and even depreciation. Keeping detailed records of all your expenses throughout the year will make tax time much easier. If you’re unsure about what you can and cannot deduct, consulting with a tax professional or accountant who specializes in rental properties can provide clarity and help you avoid any potential issues with the IRS.

Renting out a property can be a rewarding venture, but it requires careful planning and management. Taking these steps will not only help protect your investment but also create a positive experience for you and your tenants. Remember, being a successful landlord is about more than just collecting rent as it’s also about providing a safe, well-maintained home where tenants feel comfortable and respected. With the right approach, renting out your property can be a profitable and fulfilling endeavor.