Renting your home is like letting your teenager drive your car; you don’t know if it’s going to come back intact or with a wheel missing, fries between the seats, and a suspicious broken side view mirror.
Just as you can prepare your car for a potentially risky driver, you can prepare your home for a mysterious new tenant. Whether you’re wanting to rent your home for extra cash or because you’re looking to sell and the market is taking longer than you’d like, don’t go into home rental blind.
Before you go throwing your home into the renters’ market, Josh Villalobos with Chase International Property Management in Reno, NV has three things for you to consider:
- Your mortgage has to be current: Check your loan, which may have stipulations for renting. For example, an FHA loan requires you to occupy your home for one year before renting. If you’re buying a home strictly to rent, you’ll need to let your mortgage lender know.
- You need to have three months of expenses for the home in savings: This should include everything (e.g., mortgage, bills, maintenance) in case the house doesn't rent as quickly as you’d hoped or unexpected expenses come up.
- Consider a property management company: This is one job you may want to leave to the professionals. Property management companies take care of the hard part of renting a home for you. We’ll cover more in this article, but just trust us on this one.
If you’re still reading, we assume you’re ready to throw caution to the wind and let someone else live in the most expensive thing you own. Here’s what Josh recommends you do next.
Properly Prepare Your Home
You need to prep your home like it’s going to be featured on HGTV. Here’s a list of things to get done:
- Make the home livable by decluttering and removing any valuables.
- Put a fresh layer of paint on the walls.
- Check/replace heating and air conditioning filters.
- Clean windows.
- Fix anything that is broken.
- Check that all appliances are working.
- Have the carpets professionally cleaned.
- Spray for pests.
Know How To Find a Good Tenant
In a perfect world, a tenant could rent your home, never do any damage, and you’d never have to think about the property again. Also, in a perfect world, you’d find a million dollars in unmarked bills in your freezer.
Josh stresses that renters often forget that even the best tenants can damage property. The key is clearly to find a good tenant, which is easier if you go through a property management company.
“Most owners miss a step or two in vetting prospective tenants. They can find great tenants, but they don’t have the resources to do a vetting process like a property management company would. It’s the biggest complaint we see from owners who hire us after trying to manage their own properties,” said Josh.
If you’re managing your own property, be sure to vet your tenants by requiring that you get all of the following:
- Rental history
- Three references
- Background check
- Credit check
If you like having things done for you—and let’s get real, who doesn’t?—then a property management company will cover this for you.
Understand Potential Red Flags
If you think you’re the only person to accidentally put a hole in the wall by dancing too hard to Beyoncé’s newest song, you’d be wrong. Accidents happen, and some people look great on paper but then totally suck in real life. When you rent out your home you’re risking property damage.
You’re also still the homeowner and responsible for any maintenance. Too bad if you thought renting your home was relinquishing all your homeownership responsibilities. You can protect your property through your lease and insurance (more on that to come), but accepting that your home may not look like it does when you leave it is a necessity
Lastly, and by far the least exciting part about renting your home, is the big E-world, eviction. Every state has their own procedure for evicting tenants. Educate yourself on yours.
Have a Good Lease and Insurance
If you’re going against our advice (it’s okay, some like to learn the hard way) and managing your own property, you’ll want to fully understand insurance and leases.
Insurance: Once you’re renting your home rather than occupying it, your homeowners insurance will turn into a renters’ policy. You may also want to consider requiring that your tenants have rental insurance.
Property lease: Your lease will save your butt if you get that less-than-ideal tenant who looked good on paper but then turns out to be an adult child who throws neighborhood bashes in your living room.
Johanna Bailey rents out two properties in Reno, NV and says it’s important to consider what the tenant will have to pay for and maintain. She recommends including the following in your lease:
- Whether you’ll allow pets, and if so, will you require a pet deposit.
- Yard maintenance.
- A list of the utilities that the tenant is responsible for.
- More than one lease signer, in case the first person on the lease disappears.
- A clause that gives you access to do quarterly/yearly maintenance checks.
Once again, Josh reminded us that when you work with a property management company, you don't have to worry about any of this, they take care of it for you. Whichever route you take, you’ll want a lawyer to look over your lease.
Decide To Go Solo or Get a Team
We’ve been exploring the pros and cons of having a property manager, but if you’re still thinking of flying solo, then let’s talk about the nitty gritty.
If you’re going to rent your home without a property manager, set boundaries.
“Most people that come to us after managing their own property are tired of the emergency calls,” said Josh. “Tenants will call you over every little thing, and if they know you live close by, they’ll stop by. Most owners don’t create a professional line between them and their tenants.”
If you don't have a property management company, your state will require you to live within a certain distance from your rental home.
You will not need a property management company if you plan on renting your home on sites like Airbnb or VRBO. But you do need to do your research and be sure you’re abiding by guidelines for short-term renting.
At the end of the day, using a property management company will generally be more convenient, and they have the resources to be sure you and your home are fully protected. But hey, to each their own.
Now that you’re the Mr./Mrs. Incredible of property management, you should be ready to take on the task of renting your home yourself or finding a company to do it for you. Being a superhero is fun, but be sure to follow the steps in this article to protect your home and yourself.