Understanding the Law
The importance of this first rule cannot be overstated. Every state – and sometimes every county and municipality as well – has laws to regulate issues such as security deposits, evictions, and when you can enter the property after it has been rented by a tenant.
Tenants have specific written rights that can vary from place to place, and you could find yourself in court if you violate any of them. Your local housing authority might have printed summaries of the laws in the location where your home is situated, or they should be able to direct you to where you can access them.
You will also want to make sure you understand all potential areas of residential discrimination, both at the state level and as covered under federal fair housing law.
Tip: Be sure to take photos of your property in pristine condition before the tenants move in. These photos will protect you in the case of any disputes over damages that you may need to pursue in court, depending on your state’s laws regarding security deposits.
Screening Tenants
Potential landlords should gather certain information about a tenant before renting the home to a stranger. The best tool for this is a comprehensive rental application form.
Identify previous and current employers, and you certainly will want to know the identities of any previous landlords. Ask for contact information for everyone. Inform potential tenants that you will be contacting these individuals.
Request and check personal references. Overall, you should try to speak with at least three different people ranging from employers to previous landlords to personal contacts.
Assess the tenants’ income and their current monthly obligations, as well as their credit scores. Request social security numbers, and ensure tenants understand that these will be used to run their credit reports. Make sure they sign off on this in the application and ensure you stay within the guidelines of the Fair Credit Reporting Act.
You will likely also want to run a police report, and this may also require the tenant to be informed that you are doing so.
You will want to know the expected occupants, as well as the number and types of pets, if any.
Tip: Look at the tenant’s vehicle to determine whether it is clean and in good condition or run-down and neglected. This can be an indicator of how well the tenant will maintain your rental home.
Hiring a Property Management Company
You may want to consider hiring a professional management company if all of this seems time-consuming and overwhelming. Management companies typically charge between 8% to 12% of the monthly rent, with an average of around 10% for single-family homes, but they will do all the work.
The management company will advertise the home for rent and screen potential tenants. They will collect security deposits and rent in the future. They will negotiate lease agreements and sign leases and take eviction actions if necessary.
Most management companies will also conduct periodic inspections of the property and address repair issues. They will handle companion animals and the law. In fact, they will be familiar with all the laws that must be adhered to in your area, as well as any city fees that must be paid.
Tip: Your local real estate agent may be the best source for recommendations on property management companies.
Do Not Ignore Insurance
The current insurance policy of the owner likely will not cover you if you rent out your property. Now you will need rental home insurance, which primarily covers structural damage to the home, health care costs, and loss of rental income. Some policies may offer more.
Tip: You may also want to encourage tenants to purchase their own renter’s insurance to cover their personal belongings.
As of the time of this writing, Elizabeth Waintraub, CalBRE #00697006, is a co-broker at Lyon Real Estate in Sacramento, California.
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Source: https://www.thebalancemoney.com/how-to-rent-out-a-house-1798736
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