Owning your own home can be a lifelong achievement for a new homeowner! You get to make it your own and build equity through homeownership.
One way to capitalize on that equity is to rent out your home. Whether it’s your primary residence or an investment property, the surge in popularity of short-term rentals over the past few years through online platforms like Airbnb and Vrbo, has made it easier than ever to tap into your home equity through renting it out.
Whether you’re a first-time property owner or an experienced investor, renting out your home can provide a steady stream of income and increase the value of your asset over time. However, becoming a landlord and successfully managing your rental property requires careful planning and a good understanding of the process.
In this beginner’s guide to property management, we’ll walk you through the essential steps to rent out your home successfully.
- 1. Prepare Your Property
- 2. Determine Rental Pricing
- 3. Marketing Your Property
- 4. Screen Prospective Tenants
- 5. Create a Lease Agreement for Long-Term Rentals
- 6. Maintenance and Repairs
- 7. Collect Rent and Manage Finances
- 8. Be a Responsible Landlord
- 9. Consider Property Management Services
- 10. Plan for the Future
1. Prepare Your Property
Before you start looking for tenants or open your home to short-term rentals, it’s essential to ensure your property is in good condition and ready for people to move in or to host guests.
Check out this checklist of things to do to ensure you’re move-in ready:
- Repairs and Maintenance: Fix any structural issues, plumbing or electrical problems, and cosmetic imperfections. A well-maintained property is more attractive to prospective tenants.
- Clean and Declutter: Make sure your property is clean and clutter-free. Consider repainting if needed, and ensure the landscaping is well-kept.
- Safety Features: Install or update safety features, such as smoke and carbon monoxide detectors, to meet legal requirements.
- Furnishing: Decide whether you’ll rent your property furnished or unfurnished. Furnishing can increase rental income but requires more upkeep. If you’re hosting a short-term rental, furniture will be a requirement.
- Legal Compliance: Familiarize yourself with local laws and regulations regarding rental properties. This includes understanding landlord-tenant laws, building codes, zoning regulations, and any short-term rental regulations, either imposed by your locality or HOA.
2. Determine Rental Pricing
Setting the right rental price is crucial. You should research your local rental market to understand what similar properties are charging for rent.
Some typical factors you should consider are the location, property size, amenities, and market demand. You may want to consult a real estate agent or use online tools to help determine a competitive rental price.
For short-term rentals, many marketplaces have built-in tools to help you set your pricing. Oftentimes, it will change with the seasons and the demand based on your local market. Online communities and forums dedicated to short-term rentals are also great places to get insight on pricing.
3. Marketing Your Property
To find suitable tenants, you’ll need to market your property effectively. Here are some methods to get you started for finding long-term renters:
- Online Listings: Create compelling online listings on rental platforms, including high-quality photos and detailed descriptions of the property.
- Yard Signs: If the property is a single-family home, you can place a “For Rent” sign in the yard to attract local renters.
- Networking: Spread the word through your social network, friends, and family.
Many of the same methods that work for long-term rentals can also work for short-term rentals. Here are some methods that can make short-term rentals, specifically.
- Short-Term Rental Platforms: Airbnb and Vrbo are two of the leading websites specifically for short-term rentals. Listing on these sites and maintaining a reputation for having a clean and well-maintained property can help your property be viewed by more potential renters.
- Seasonal Promotions: Offer special rates or incentives during peak tourist seasons or holidays to attract more guests.
- Local Attractions and Recommendations: Highlight nearby attractions, restaurants, and activities in your property description to showcase the convenience and unique experiences available to guests staying at your short-term rental.
4. Screen Prospective Tenants
Screening your tenants is a critical step to ensure you rent to reliable individuals, and that you protect your important investment. Here are some typical steps most homeowners take when renting to long-term tenants:
- Rental Applications: Require prospective tenants to fill out rental applications, including their rental history, employment, and references.
- Credit and Background Checks: You want reliable renters who will pay on time and not damage the property. You should run credit checks and background screenings to assess potential renters’ financial responsibility and criminal history.
- Interviews: Meet with potential tenants to get a sense of their personality and whether they’ll be a good fit for your property.
- Short-Term Rentals: Third-party rental services will take care of screening prospective renters for you. Airbnb, for example, requires guests to verify their ID with a photo and will check against criminal records in certain countries, including the United States.
5. Create a Lease Agreement for Long-Term Rentals
Once you’ve found suitable tenants, you’ll need to provide them with a comprehensive lease agreement.
Your lease should outline the terms and conditions of the rental, including the rental amount, due dates, any security deposit, and maintenance responsibilities that you’ll take on, as well as what the lessee would be responsible for. You should ensure that both you and the tenant understand and agree to the terms before signing.
Short-term rental sites, like Airbnb and Vrbo, will provide terms for the prospective renter to sign that will protect you, the property owner, from any potential damages or late cancellations. The terms will also include restrictions for how the renter can use the property, like not hosting large house parties.
6. Maintenance and Repairs
Throughout the rental period, you’ll be responsible for property maintenance and repairs. You should promptly address any issues that arise, as failing to do so can lead to dissatisfaction among tenants and potentially legal problems.
7. Collect Rent and Manage Finances
Of course, you’ll need to establish a reliable system for collecting rent.
Many long-term leasers utilize online rent payment platforms for the convenience of both parties. You’ll also need to keep accurate records of all financial transactions related to your rental property for tax purposes.
8. Be a Responsible Landlord
It’s always important to maintain open communication with your tenants and address their concerns promptly.
Being aware of your legal obligations as a landlord, including property inspections, security deposit management, and eviction procedures if necessary, will also set you up for success.
9. Consider Property Management Services
If managing your rental property becomes overwhelming or the property is far away from where you live, you may want to consider hiring a professional property management company. They can handle tenant screening, property maintenance, and other day-to-day tasks for a fee.
Many short-term rental owners now rely on third-party services to manage various aspects of their properties, including guest bookings, cleaning, maintenance, and marketing. These services provide valuable support, allowing hosts to focus on providing exceptional guest experiences while streamlining the operational aspects of their rental properties.
10. Plan for the Future
As a property owner, it’s essential to have a long-term strategy. Consider how your property fits into your overall financial goals, and be prepared to adapt your approach as your circumstances change.
Renting out your home can be a profitable venture when done right. By following these steps and staying informed about local regulations, you can become a successful landlord and enjoy the benefits of property ownership while generating passive income.
If you are ready to get started in real estate investment, reach out to one of our expert loan officers today!
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The included content is intended for informational purposes only and should not be relied upon as professional advice. Additional terms and conditions apply. Not all applicants will qualify. Consult with a finance professional for tax advice or a mortgage professional to address your mortgage questions or concerns. This is an advertisement. Prepared 09/28/2023.