There are many reasons to rent out a home rather than sell it. Say you have a new professional opportunity in a different city but are not yet certain that you want to commit to a lifetime move, or the sales market is not as strong as you'd like. Those are times when renting out your property might be preferable to selling, among others.
Before you list your apartment or home as a rental, however, here are some things to consider. Going through this checklist, based on guidance from BiggerPockets, will help to ensure that you get what you want from the rental situation, rather than just a new headache.
5 Things to Think About
- What condition is your home in? Is your home ship-shape and ready to rent or are there critical repairs that you must make? A landlord guarantees the habitability of a home for rent so be prepared. Have the basics covered -- no safety hazards, good plumbing, no leaky roofs or broken windows.
- Who will manage the property? Will you be hiring a property manager or do you plan to handle tenant issues? A property manager can find tenants, sign leases, collect rent, schedule repairs, issues legal notices, and keep track of finances, among other things. Of course you will pay a fee for these services but if you're able to afford it, doing so can save you a lot of hassle.
- How much security do you need? Decide in advance -- based on the condition of your home, repairs you've made, and other factors important to you -- what amount of money constitutes a fair deposit. State laws can limit the amount requested and the typical sum is a month's rent ... but if there is reason to question your tenant's commitment or any other issue, you might make a bigger deposit a rental condition.
- Finding the right tenants. Rather than showing the home to everyone who takes an interest, you might pre-screen tenants for appropriate income, credit history, and references on the phone or by email. Some property managers suggest asking how many people the tenant expects to have in each bedroom, as this may impact wear and tear on the home. But remember, some people seem great on paper or in public but are destructive privately, and some people have messy lives but keep a neat home.
- Application, background and credit checks. Tenants who pass the pre-screen and express interest in your home should fill out an application with rental history and income information. Experts suggest charging a fee per adult (about $35-$50 per applicant). If everything is fine with the application, move on to background checks and credit checks to make sure everything does indeed check out.
Consult With Counsel
If this process sounds difficult or confusing or you want expert guidance before deciding whether to sell or rent, speak to a lawyer. An attorney can help you assess the market and your options and put you in touch with people who can help at every step. Get guidance.