Many parts of the US are experiencing a shortage of rental homes now.
Perks of renting
To help you decide whether the advantages outweigh the challenges for you, let's look first at what you'll gain by keeping the house.
Statistically, it's accurate to say that your house will continue to appreciate. Real estate is historically one of your best investments, the only downsides being that it is not a liquid asset, and it does take maintenance.
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| If the prospect of staging your home seems daunting, renting it is one way to avoid staging and still realize profits. |
As the owner of a rental property, you'll have some tax benefits, like deductions for mortgage interest, depreciation, repairs, and maintenance. On the other hand, if you sell the house for more than what you paid for it, you could be subject to capital gains tax on some of the profits.
Your rental property will pay for itself if you plan right. The rental income should cover all expenses and then some. So, if the home is paid in full now, you should have an ongoing, positive cash flow.
And, consider this: You might decide in the future to move back to this house. People often return to a location because of employment, economics, or family.
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| A rental house is not always welcome in some neighborhoods. So, it's important to keep the property looking well-cared-for. |
Landlord dos and don'ts
Assuming you don't want to hire a rental property management company, there are some tactics you'll have to learn. There's no shortage of online advice. Here are some of my tips.
Make sure the rent covers all your expenses, including a buffer for vacancies. Add up your mortgage, taxes, insurance, maintenance (like lawn or pool service), and any HOA fees. Estimate the costs of routine pressure washing of the exterior, and unexpected repairs. If you are going to hire a rental agency, add that figure as well.
Never show the house when tenants are still living there. Do not suggest a rent-to-own arrangement.
Do not let tenants pay a security deposit in installments. If money is a problem now, money will probably be a problem again.
Do not pay for utilities like electricity and water usage.
Do not rent to relatives or close friends. My opinion: It's tricky to mix business with friendships or relatives. You should be friendly to your tenants, but do not become friends with them.
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| Posting a sign out front isn't always the best idea. It hints that the property is vacant and could be vandalized. Also, unless you advertise the price, you will get many dead-end inquiries. |
How to advertise
There's a slew of options when it's time to list your home for rent. You could start with TurboTenant, one that's popular with landlords with "small portfolios." Some of these platforms offer other services in addition to online advertising.
Sites like Zillow, Facebook Marketplace, Craigslist, and Apartments.com make it easy to compile the facts of your ad, by simply filling in the blanks.
Much like homebuyers, renters want to know the number of bedrooms and bathrooms, square footage, the cost, and the location of the house. But renters are usually more flexible because it's not a big investment and not as permanent.
Be sure to include a list of the special features your house has. Mention perks like water or mountain views, neighborhood parks or walking trails, a fenced backyard, solar-powered outdoor lighting, gas logs, a private patio, a tankless water heater, lawn care service, convenient public transportation, or a community pool.
Make sure prospective tenants know before you show them the property how much it will cost for them to move in, and when the property is available. Doing this can save you wasted trips. Also, ask them, "How many are in your household?" It's never a good sign, for example, when five adults and three children want to move into a two-bedroom house. You have the right to say the house is too small for that occupancy.
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| It's worth getting professional photos that will showcase your home in the best way. This picture lets people know more about the actual layout of the rooms. |
How to choose a tenant
I endorse having a thorough rental application, where you can gather information like employment history, former addresses and current landlord, and nearest relative, and reason for moving. You can purchase rental applications that you know ask only legally permissible questions. For example, you can't ask about marital status.
Make sure you know national, state, and local laws about fair housing. Check local ordinances about land usage. Having lived in the home, you probably already know most regulations, but rental properties can have restrictions of their own.
Several agencies will run credit checks and background checks. Rental management companies will take care of all the details of managing your property. Whether you manage your property yourself or pay a property manager will depend on your location, your tech skills, your budget, your timeline, and how you like to do business.
Management tips
If you plan to stay in the same area, you may decide to manage the property yourself, A good landlord has a roster of people who can do repairs and maintenance. As a current homeowner, you may already have reliable people for HVAC, plumbing, electrical work, and a general handyman. Perhaps you have skills yourself for minor repairs, yardwork, or painting.
If you're not working with a management company, encourage tenants to use an easy, safe way to pay rent, like direct deposit with Venmo, PayPal, or apps like CashAp or checks or money orders by mail.
Rather than a lease, I suggest a "rental agreement" that runs month to month. This arrangement gives you more leverage to evict a problem tenant. Either you or the tenant can give a month's notice and move on. An eviction can drag on for many months when you are receiving no money, and a tenant can act vindictively.
Let your insurance company know the home is a rental. Rental property insurance costs more, but your insurer may bundle it with your homeowner policy. You can shop around for companies that specialize in rental home insurance. Encourage renters to get insurance for their belongings.
Rent or Sell?
You can determine your rental market by looking online or driving around to check For Rent signs on properties that are similar to your house. You can ask advice from Realtors and rental management firms, but keep in mind that local Realtors may want to discourage you from renting instead of selling, and a rental management company may tilt the figures in favor of you renting the property.
The decision to keep or sell your house comes down to just a few questions. What is it worth on the market now? What will it be worth in the future? What will a tenant pay? Will the rent cover all expenses and more? Do you have the temperament, time, and knowledge to be a property manager? Once you've considered these questions, I know you'll make a decision that's right for you.
