How to Rent Out Your House: A Step-by-Step Guide

Renting out your house can be a smart financial move that provides consistent rental income and maximizes your earning potential in the real estate field. Not only can this generate significant cash flow, but it also allows you to leverage the value of your property over time.

In fact, according to recent studies, real estate investments have historically outperformed other asset classes [1] . However, while renting out your house can be lucrative, it’s important to approach this venture with careful planning. Below, we outline key steps to help you successfully rent your property.

Step 1 – Assess Your Situation (Decision-Making Stage)

First, you’ll need to answer questions about your current situation and the property you’ll be renting:

• Do you already own the property you plan to rent, or do you need to purchase it? If you want to buy a house to rent out, your timeline and costs will run significantly longer and higher than if you were to rent out a property you already own.
• Are you renting out a single room, a duplex, a family unit, an apartment, or an entire house? This decision will affect your renovation budget, if applicable, and potential profitability.
• Do you plan to rent out the space short-term or long-term? While both are potentially profitable, pros and cons exist for either option.

The pros and cons of short-term and long-term rentals include the following:

Step 2 – Set Your Budget for Rental Property Ownership

If you want to buy a house and rent it out, you’ll first have to set your budget and secure a loan if necessary. Two options for mortgages on a rental property include:

• Conventional loans: Conventional loans work well for residential rental properties. However, they’re not typically secured by a government entity. This kind of loan also usually requires higher down payments, credit score requirements, and mortgage rates if you’re using it to acquire a second home for rental purposes [2] .
• Second mortgages: With this kind of loan, you borrow against your first home to acquire the necessary funds to finance your second home, which you will rent out [3] .

Regardless of whether you already own property to rent out, set aside money for:

• Large-scale renovations (if needed)
• Maintenance and repairs
• Homeowner’s association (HOA) fees
• Marketing fees for initial and ongoing advertising

Step 3 – Secure Rental Property Insurance

Protect yourself and your investment by acquiring insurance with enough coverage for rental accidents and damage. For instance, before renting out your home, whether for a short-term Airbnb stay or a long-term lease, consult your insurance professional. Your standard homeowners policy may not cover rental-related losses, so it’s crucial to secure specialized insurance to protect against potential risks. [4]

Talk with an insurance agent and tell them the specifics of your situation and property. They will advise on what type and how much insurance you’ll need to operate with peace of mind.

Landlord insurance typically costs about 25% more than homeowners insurance [5] . It covers:

• Damage to the house from perils like natural disasters
• Damage to other structures on the property, like sheds
• Liability and medical protection if a tenant gets injured in the home
• Loss of rental income if damage prevents renting it out
• Any personal property you leave on the premises, like a lawn mower

Step 4 – Set a Competitive Rent Price

Charging the appropriate amount of rent is essential, as you may want to avoid underpricing or overpricing your rental. It helps you:

• Balance the need to attract tenants with the need to generate income.
• Cover your mortgage and other home expenses.
• Fill your rental with the right tenants.
• Receive timely rent payments.
• Maximize profits.

To determine the right amount to charge for rent, first research what other properties in your area are going for. Try to find properties that are as similar to yours as possible for an accurate comparison.

You may also have heard of the 2% rule, which tells landlords that monthly rent should amount to one or two percent of your property’s total value. You can quickly estimate this as a starting guideline. However, do not adhere hard and fast to this rule if nearby comparable rental houses typically charge a different amount.

Step 5 – Research Landlord-Tenant Laws

Various laws govern the tenant and landlord relationship on local, state, and federal levels. Rules for renting out a house cover topics like housing safety and discrimination to ensure fairness and avoid danger throughout the rental process. The Fair Housing Act is a federal law applicable to all landlords [6] , and it protects people looking to rent a home from discrimination based on factors like race, color, familial status, disability, religion, national origin, or sex (gender identity and sexual orientation).

Most areas also have an implied warranty of habitability, requiring a landlord to keep their property habitable or livable. If a property is deemed unsafe or unliveable according to the area’s specific building codes, a renter may legally stop paying rent until the situation is fixed.

Other topics you should research in your state laws include:

• Required licenses to be a landlord
• Building codes for renter health and safety
• Rent control
• Required rent payment grace periods
• Security deposit requirements
• Questions you can’t legally ask a rental applicant
• Required disclosures
• Notice of entry laws
• Rental property repair laws
• Eviction laws

Step 6 – Document the Space

You will want to gather all relevant information about your space before renting it. Before listing, make sure you know the square footage of the property and each room so you can answer potential tenants’ questions about the space.

List and take pictures of any existing damage so you know what was there before renters arrived. You should also ask your renters to document any pre-existing damage in a walkthrough shortly before or after moving in.

Step 7 – Prepare the Space for Viewing

At the outset, consider upgrading certain elements, such as fixtures, lighting, and flooring, to increase the property’s value. Even small changes can transform your rental listing from seeming outdated or dingy to appearing higher-quality and polished.

Lastly, stage the unit with nice appliances and decorations before you post it as available. Renters want nice, easy-to-use appliances that they can verify are in working condition prior to moving in. Newer appliances, stylish furniture, and updated decor will not only appeal better to potential renters viewing the space in person but will also make your space show better in online photos.

Step 8 – Advertise Your Property

Use rental sites to get as many eyes on your rental property as possible. Make sure you’re listing only on relevant websites for your particular unit. For example, post on sites like AirBnB or VRBO for short-term rentals and sites like Zillow or Realtor.com for long-term rentals.

Use high-quality photos and clear descriptions so people understand the space they’re renting. Make sure to show your property in its best light with staged furniture and decor, optimal lighting, and good angles.

Emphasize high-quality features like granite countertops, stainless steel appliances, vaulted ceilings, maple cabinets, and hardwood floors. However, never try to mislead potential renters. They’ll find out about any attempted deception as soon as they visit the property, and you’ll lose trust and receive bad reviews.

Promote your rental on popular online platforms and local newspapers. Consider working with a real estate agent or property management company for assistance, but be aware of associated fees.

Step 9 – Screen Prospective Tenants

Screening tenants ensures you’re renting out to the right people who will pay rent on time and not cause intentional damage to the unit. With a rental application, you will be able to collect the appropriate information to help you determine whether a renter will be a good fit. This information includes:

• Rental history (records of other places they’ve lived and paid rent) combined with eviction checks
• Employment records and proof of income
• Authorization for a criminal background check
• Authorization for a credit check
• References you can contact to learn about the tenant

Step 10 – Select a Tenant

Carefully evaluate all the information gathered from the rental applications and your overall impression of the applicants to select a tenant. Choose a tenant that you think will be likely to pay rent on time and cause the least overall issues.

Once you’ve found your tenant, send them the lease agreement you created earlier. Have them carefully review the agreement, and make yourself available to answer any questions they might have. After both you and the tenant sign the agreement, it becomes legally binding.

Inform your new tenant of possible move-in dates and keep in contact with them leading up to move-in day. Great communication throughout this process can start off the tenant-landlord relationship on a positive note.

Step 11 – Create and Sign a Lease Agreement

Lease agreements cover all the necessary terms for both you and your tenants to follow for successful rental relationships. A lease agreement template can serve as a starting point for writing a contract that limits your liability and covers all your bases.

Outline all the specific expectations you have so you and the renter can start on the same page. Answer questions like:

• How much will the monthly rent cost? How much are late fees, if any, and when are they charged?
• Can the tenant break the lease early?
• Which utilities are the tenant responsible for acquiring and paying? Which, if any, will you cover?
• Can the tenant make modifications to the home?
• Can the tenant have pets? If so, is there a pet deposit or any pet fees?
• What is the process for requesting a repair from you?
• Is the tenant responsible for outside yard maintenance?
• What does the tenant need to do to get their security deposit back after moving out?

Step 12 – Perform Ongoing Maintenance and Repairs

Ensuring your property remains safe and habitable is a key part of your duties as a landlord. Inspections are usually done seasonally, quarterly, or yearly. The details of when and how often inspections will occur should be covered in the lease agreement and follow all relevant laws for your area.

You can choose to do all repairs and maintenance yourself or hire a property management company to do them for you.

Summary

Renting out your property involves a detailed process that includes assessing your situation, preparing your property, and selecting the right tenants. By following the outlined steps and approaching each stage with diligence, you can transform your home into a valuable income-generating asset.

Whether you’re seeking a steady income or aiming to build a robust investment portfolio, renting out your house can be a powerful and profitable strategy when executed thoughtfully.

Frequently Asked Questions