Renting out your home can be an excellent way to generate extra income, but don’t just list your property on Airbnb without doing your research first.
In fact, depending on your goals and needs, you may not even want to handle it yourself at all.
From making sure you’re covered legally to considering working with property management companies in different states, here are seven things you need to know before putting up your home for rent.
1. Check Your State and Local Laws
Before you do anything, it’s important to make sure that you’re in compliance with all state and local laws. Depending on where your property is located, there may be specific regulations around short-term rentals that you need to be aware of.
For example, in Denver, Colorado, short-term rentals are only allowed in certain zoning districts and you must obtain a license from the city.
In addition, there may also be homeowner association rules that you need to take into account. Are you sure that your HOA allows short-term rentals? If not, you could be risking fines or even eviction from your own home.
2. Consider the Added Costs
While renting out your home can certainly be profitable, there are also some additional costs that you need to take into account.
For example, you’ll likely need to purchase insurance that covers both damage to your property and liability in case someone is injured while staying at your home.
You also need to factor in the cost of any necessary repairs or upgrades that you make in order to make your home more appealing to renters. Other common costs include marketing, cleaning, and anything else that’s required to get your property rental-ready.
3. Decide If You Want to Handle it Yourself
One of the biggest decisions you’ll need to make is whether or not you want to handle the rental process yourself or work with a property management company.
If you decide to go it alone, be prepared for a lot of work. In addition to marketing your property and screening tenants, you’ll also need to handle all the day-to-day tasks like collecting rent, dealing with maintenance issues, and handling any legal issues that may come up.
If you’re not interested in taking on that level of responsibility, working with a property management company is a practical option.
They will handle all the details for you, from finding tenants to dealing with repairs, so you can just sit back and collect the rent checks.
Of course, you’ll need to pay them a percentage of the rental income, but it may be worth it for the peace of mind.
4. Screen Your Tenants Carefully
Whether you’re handling the rental process yourself or working with a property management company, you need to be careful and methodical about screening your tenants.
After all, you’re entrusting your home to complete strangers, so you need to make sure they can be trusted.
This means running a credit check, verifying their employment status, and getting references from past landlords.
You want to make sure that you’re renting to responsible tenants who will take good care of your property and pay their rent on time.
5. Set Up a Lease Agreement
Once you’ve found the perfect tenant, it’s time to put together a lease agreement. This document should outline all the important details of the rental arrangement, including the length of the lease, the monthly rent amount, and what is included in the rental (e.g., utilities, parking, etc.).
Be sure to have your lawyer review the lease agreement before you sign it to make sure that it protects your interests, the tenants, and your property.
6. Be Prepared for Repairs and Maintenance Issues
Even if your tenants are taking good care of your property, there will inevitably be some repairs and maintenance issues that come up from time to time.
It’s important to have a system in place for dealing with these issues in a timely and efficient manner. For example, you’ll need to decide who is responsible for dealing with repair requests, how repairs will be paid for, and what the procedures are for handling maintenance issues.
7. Know When to Call in the Professionals
There’s no shame in admitting that you need help when it comes to renting out your home.
If you’re feeling overwhelmed, consider working with a property management company or hiring a lawyer to assist you with the legal aspects of the rental process.
By taking some of the burdens off of your shoulders, you can focus on making your rental property successful instead of getting bogged down in the details.
Wrapping It Up
Renting out your home can be a smart way to supplement your income and venture into the world of real estate investing.
However, always start with realistic expectations, both in how much work is required on your part and how much money you can realistically expect to make.