When considering renting out your house, it's important to know what you're getting into. Becoming a landlord may pose some challenges, but this shouldn't stop you from seeking a tenant. With preparation and help from a few professionals, renting your house can provide the income you need to cover expenses, which is preferable to leaving your house sitting empty.
Get a Reality Check
Assess your readiness to be a landlord. In addition to handling your job and other responsibilities, you'll need to be prepared to handle requests from the tenant on an on-call basis and keep the property maintained.
Run the Numbers
Understand how cash flow works to avoid losing money on your house. Add up the cost of your mortgage, taxes and other operating expenses. Include an estimate for repairs and a percentage of monthly rent for vacancies. Then subtract these expenses from the amount you plan to charge for rent to determine your income from the property. For example, if your monthly income is $1,200 and your monthly expenses equal $1,100, you'll have a net income of $100.
It can be expensive to hire help, but choosing the right people mitigate problems down the road. For example, a knowledgeable attorney can prepare contracts and advise you about landlord-tenant laws in your state. Unless you're handy around the house, you'll likely need a handyman to help with repairs. Exterminators, plumbers and landscapers are among the other services you may need.
Prep Your House
A fresh coat of paint works wonders to brighten up rooms, as can replacing old carpets. While you don't want to go overboard with repairs and upgrades, it's important to ensure that wiring and plumbing are up to code, appliances are in working condition and smoke detectors are functioning properly.
A background check and references are a must when considering tenants. You'll need a prospective tenant’s name, address, and Social Security number to review his credit history, as well as information about evictions, lawsuits or criminal convictions. In most states, you can charge prospective tenants a fee -- usually $30 to $50 -- for ordering a report from a credit reporting agency or tenant screening service.
Consider a Property Manager
Keeping up with the demands of being a landlord may be more than you want to deal with, especially if you live far away from your house. A property manager can find tenants, prepare contracts and take care of the property. Management companies usually charge 8 percent to 10 percent of the annual gross rent.
Review Insurance Coverage
Once you begin renting out your home, it may no longer be covered under your homeowners insurance. Landlord's insurance may run you 15 percent to 20 percent more than a homeowners policy. The coverage won't be as broad as a homeowners policy, but it includes the house, other structures, your possessions and lost rental income if the home is damaged. Liability coverage is included, but an umbrella policy can offer even more protection if someone is injured on your property.
Remove Environmental Hazards
Homes built before 1978 may have lead paint, so it's important to test for lead before tenants move into your home. Other potential hazards include asbestos, radon gas, carbon monoxide and mold. Test for these substances and eradicate any problems before renting out your property.
Respond Quickly to Emergencies
Whether you are a DIY landlord or have a management company, keep up with tenant requests and emergencies. As a landlord, you're responsible for providing a safe dwelling, so it's in your best interest to keep up with repairs and other situations that arise.
Keep Good Records
Being organized allows you to keep track of all costs and repairs associated with renting out your home. Establish a filing system to keep track of paperwork. Even if you aren't interested in being a "professional" landlord, it's important to stay on top of financial issues concerning the property.