Should I rent my house? There are some key things you should know before taking the leap. If you are considering whether to hire a property management company, please see our blog post about what you can expect from rental management services.
Top 7 things to know if I rent my house
1. Check Credit/Income
The best way to protect your rental property as an investment and not a liability is to request a copy of the tenant’s credit report and proof of income. Poor credit is a warning sign that they may be late making future monthly rental payments or worse, they may leave the property unexpectedly without paying rent. Likewise, a person without regular income or without adequate income to cover bills is not a good rental prospect.
2. Write a Formal Lease
A first time home renter should hire an attorney to review the lease for legal accuracy. A legally binding lease can save you the enormous hassle and expense of litigation with a problem tenant. Setting the terms of the tenancy in writing is helpful to both owner and renter and can even help you recover attorney’s fees in the event of an eviction.
3. Always Meet the Tenant in Person
It is important to get a good feeling of the person/family to whom you will be renting. Do you trust them to care for your home? Are they nice and reasonable people? You want to know these things in advance in case you end up in a tricky situation down the road.
4. Set Clear Expectations in Writing
This is especially important if you are renting a room and will be sharing some of your living space but it can be helpful in any circumstance. For example, is the renter responsible for yard work or cleaning windows and gutters? Will they be required to steam clean the carpet before they move out? Will there be a late fee assessed upon late payment of rent and if so on what date?
5. Clearly State What is Included in the Price of Rent
There is almost no limit to what things may or may not be included in the price of rent. Be clear up front if rent includes such things as cable television, internet access, water, sewer and garbage and in-home laundry.
6. Do a Background Check and Ask for References
It is very important to check for criminal history. Background checks can be done online for approximately $30, only take about 15 minutes and do not require the person’s permission. Request character references from former landlords, colleagues, employers and friends; what others have to say about the person could speak volumes.
7. Collect a Security Deposit
Before a tenant moves in you should collect the first month’s rent and a security deposit equal to one month’s rent or more if possible. A security deposit protects you against a renter leaving without paying rent or can be used toward any damage caused by the renter.
Change your homeowner’s insurance to rental home insurance which will cover damage to the building and provide liability protection. It is best to require that your renters purchase renter’s insurance to cover their belongings.
When filing taxes don’t forget that you can deduct your mortgage interest, depreciation, insurance premiums, legal/accounting expenses, real estate taxes, advertising costs to rent the house, rental management fees, utilities and travel to and from the property.
If you are only planning to rent your home for a limited time then keep in mind that you can qualify for up to $500,000 in tax-free profit when selling the property only if you have lived in it for two of the last five years. For more details, see IRS Publication 527, Residential Rental Property.
There are many factors to consider when renting out your home but with careful planning and renter selection you are more likely to have a positive experience. For more information on hiring a property management company, please contact the experienced representatives at Son-Rise Property Management today. We are happy to answer your questions!