Stepping into the world of real estate investing and rental property management is a far-off dream for many entrepreneurial people.
Now that you’re ready to pursue this dream, the chances are high that you’re a bit overwhelmed by everything that there is to take care of.
And that’s completely normal, but there’s no need to fumble through everything in your first few months! Instead, take some time to learn from those that are already experienced in rental properties and what it takes to manage them.
Our guide gathers together some of the best information so that you can make more informed decisions in the early stages of your real estate career. Why make mistakes when you can make progress instead? Heeding lessons gained through experience in our simple guide will make your life easier in the coming months.
Let us show you seven of the most important steps that you need to focus on when learning how to rent a property for the first time.
A Table of Contents for How To Rent Out a Property
- Is Renting Right For You?
- Step 1: Property Preparation
- Step 2: Staging & Advertising
- Step 3: Finding The Right Tenants
- Step 4: Lease According To The Local Laws
- Step 5: Pre Move-In Checklist
- Step 6: Management – DIY or Third-Party
- Step 7: Move Out Inspections
Let’s get this straight: Renting out a property isn’t for everyone. Most people know that having rental income is a great way to make money, but many people also believe that rental income is passive income.
While investment income can be passive, rental income should not be considered to be passive income while you are the one choosing properties, organizing their rentals, and collecting the rent.
In fact, owning and managing multiple rental properties can be too much for many people!
As you work through the process of renting a property for the first time, keep this fact in mind: You may end up hating it.
Of course, we hope you love it as much as you have dreamed about, but there are other ways that you can get involved in real estate investment if directly renting out a property doesn’t work for you.
The first thing that you need to do when working through the stages of renting a property is to do a thorough inspection of the property that you plan to rent out. This assessment will help you plan for what needs to be done to the property before it can be rented.
Consider the following while doing your inspection:
- Is the house completely up to local codes?
- Are there any broken appliances that need to be serviced or replaced?
- Is the house in a good, functional condition?
- Is the house clean?
- Do the carpets or floors need to be replaced or cleaned?
- Could the rooms use new paint?
- Are the lighting fixtures and electrical outlets working properly?
If you wouldn’t be willing to move into the house tomorrow, the house is not ready to be rented. And before you start looking for a tenant for the property, it needs to be in appealing, livable condition.
Perhaps you were lucky enough to be in possession of a property that is already ready to be rented. If it is not yet ready, however, take the time now to bring it fully up to your standards. A tidy house in good condition is much easier to rent out, and you can charge more for the improvements that you made.
Once the house is ready, it’s time to move on to one of the most overlooked steps of how to rent out a property.
It’s time to stage and advertise!
Staging a Rental Property: Uncommonly Successful
Staging is not often done when advertising rental properties, but it can make a huge difference in the quality of tenants that you attract and the amount of rent that you can charge. Staging a property shows potential tenants the possibilities that they have in their future home.
Here’s what you can do to make the staging process affordable but effective:
- Rent out basic furniture and fixtures to showcase the different ways that the space in the home can be used effectively.
- Hire a professional photographer to take great pictures; use these in the advertisements.
- If you have it available, you can even use furniture that you own to stage the property!
- You do not have to stage every single piece of furniture that most people would have. The key is to show that the space is large enough and laid out in a way that will work.
Advertising: Go Beyond Basics
How much time you spend on advertising your rental property and where you advertise your rental property will have a direct effect on the total number of rental applications you receive.
And trust us, you want to receive as many applications as possible! The more applications that you have, the better chance you have of finding the ideal tenant.
- Online (zillow, craigslist, realtor.com etc)
- On community bulletin boards
- In local, appropriate Facebook groups
- With community newspapers or magazines
- On home rental websites
- In online ads
Placing ads is a direct way to speed up the rate at which potential tenants fall in love with your property and will ultimately lead to a more successful rental process overall.
One of the most – if not the most important – factor when renting a property for the first time is to pay attention to what tenant you choose. This tenant will make your first rental cycle either a dream or a nightmare, and your choices at this stage will help decide that fate.
You want to find great tenants who will respect your property, communicate with you, and pay their rent on time. But how do you go about finding and choosing the right tenants?
Have a Thorough Rental Application
First, you want to have a rental application that all potential tenants fill out that includes all of the following questions:
- Employment history
- Personal references
- Prior landlord information
- Credit score
- Background history information
In addition to these basic necessities, you will want to include information about the rent, pet rules, smoking rules, and other property-specific information on the application. Giving this information to potential tenants on the application will immediately filter out any tenants who do not fit your rental criteria.
It is important to remember that there are certain categories, such as race and religion, that you may not ask a potential tenant about. Read the Fair Housing laws for more information.
Important: Follow up on the application!
Once you narrow your potential tenants, make sure that you follow up on the employment history and references. Simply calling the names given and confirming that the information given to you is accurate can ensure you have good potential tenants lined up.
Get Help With Screening
Because tenant screening is a learned skill that can take going through many rental properties or through many years to get good at, it might be worth your money to hire some help.
There are a number of great tenant screening services out there. For a small fee, quality services like this one will run a thorough background and credit check about the potential tenant in question.
This information is presented to you in a streamlined fashion that helps you to get a more clear picture of who the tenant is, what they are like, and what kind of risk is associated with renting a property out to them. With this information in hand, you’ll be able to make a smarter choice.
Once you find the perfect tenant, both parties will need to review and sign a lease for the rental period. There are many examples of sample leases online, but you’ll want to make some important considerations before putting them to use.
First, you need to learn the local laws.
Every state and locality may have specific landlord and renter laws that affect what you must put in the lease and what you are not permitted to include in a lease. Because these laws are localized, we cannot cover them all here.
Instead, it’s good to talk to other local landlords, the local homeowner’s association, or a local real estate attorney to be sure that you are following all necessary rules.
Second, you’ll want to include…
There are a few things that new landlords often forget to include in their leases. These items should always be covered in detail:
- Rules about pets
- Rules about long-term guests
- Rules about ending the lease early
- Rules about the security deposit & its return
- Clear indication of who is responsible for what utilities
- Rules about smoking
Finally, review it together.
When it is time for both parties to sign off on the lease, you will want to make sure that you go over the terms together. This gives you both a chance to fix any mistakes or clarify anything that is not yet clear. Make sure to initial all changes so that they are legally binding as well.
Once the lease is signed and your first tenant is preparing to move in, you’ll want to complete a move-in checklist.
A move-in checklist is a document that tracks the condition of the property and any included furniture and appliances. This document is used in conjunction with a move-out checklist, and both must be signed by both you and the tenant.
In the days before the tenant moves in, do a rental walkthrough together. This gives you both a chance to find any last minute issues and confirm that the property is in good condition.
Once your tenant is happily moved onto the property, you don’t get to go on a semi-permanent vacation! In fact, your work continues.
Based on the specifics of your lease contract, you may be responsible for paying utility bills, mowing lawns, or doing weekly maintenance jobs. Additionally, you should be available should the tenant have house problems or emergencies.
Generally speaking, this list covers many of your responsibilities as a landlord:
- Collecting rent
- Paying mortgages and taxes on the property
- Hiring contractors to fix problems
- Doing small repairs
- Replacing appliances, if necessary
- Regular maintenance, if necessary
- Enforcing the lease terms
If you do not have the time or experience necessary to take on these responsibilities, you may want to consider hiring a third-party property management company. These companies can do all of these tasks or simply pick up the ones that you cannot handle.
As a first-time property manager, it can be beneficial to use a property management company while you learn the ropes and make local business connections that will help you handle this job solo in the future.
Tip: Keep Receipts!
Keep copies and receipts of every payment your client makes to you, and every repair that you pay for. These documents are important for record-keeping purposes, but they will also become important should you have to evict a tenant.
If your tenant decides not to extend their lease at the end of the contract period, it will be time for them to move out. Once they move out, you will want to do a final move-out inspection.
Similar to when you did the move-in inspection, it’s essential that you walk the property with the tenant and confirm the condition. If there are any damages beyond normal wear-and-tear, these should be noted on the checklist.
This is also a good time to make sure that there wasn’t anything left behind which will require you to pay for clean out services.
Once completed, you can give back the security deposit less the cost of any damages. Then, it’s time to start the entire rental cycle over again!
The Rental Cycle of Success
Following the rental cycle of how to rent a property will be overwhelming as you work through it the first few times. With time and patience, however, you’ll find that you are becoming a better landlord with each cycle.
Remember these important steps as you are learning how to rent out a property:
- Be sure to find reliable, good tenants
- Focus on being a good landlord during the rental period to prevent issues
- Always follow local laws on tenant screening and lease terms
- Hire help when needed
You have what it takes to be a success when it comes to renting property out for the first time, and for every time after that! All it takes is a commitment to success. Are you ready to succeed?