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My first few years of renting out part of my home went pretty good. There were a few snags along the way – but all in all, the venture was worth it. I got some of my mortgage paid for – and I had some good people to keep company with.
I was still living in the home when I got married just a year and a half ago. Due to economic and family reasons, we decided to purchase another house closer to the city and rent out my home. Needless to say, it was quite a change from just renting out parts of the home to friends and acquaintances!
I’d say I’m still relatively new to being a landlord, but what I’ve learned in the last year or so has been invaluable. If you are already renting out a property or just researching it, I hope a few of these ideas might guide you along your journey. And, please let me know if you have any other ideas that have helped you! I’d love to hear them.
- Screen your renters. This is a no-brainer – and it is well worth the time and money invested. If you can, do a credit check and contact their previous landlord and current employer. This will tell you a lot. Even if you do your due diligence in this area, things can happen – they might lose a job, illness, etc or just start being a deadbeat renter.
- Use a state approved lease. I recommend using your state bar associations lease. You can Google it and usually find something they have posted on their website for you to fill out and use. Make sure you have all this in writing and it is signed. You’ll need to have rules on paper in case a dispute occurs.
- Check-in/check-out list. On the first day your renter moves in, have a check-in sheet. Go through the house and note the condition of the rooms, carpet, walls and appliances. And, have them double-check or note things too. When the lease is up, bring this sheet out and go over the items with them. If there is a discrepancy, you will have reason for keeping part or all of the deposit and/or settling any disagreements.
- Deposits. There are varying schools of thought on this one. But I have leaned towards being a bit gracious here. I require one month’s rent (or just under that) + the first month’s rent on move-in. Many landlords require more than this. I’ve heard two months rent + first month’s rent.
- Finding renters. I have actually been blessed by finding decent renters on Craigslist. Some of you may be cringing at that fact – but I believe most folks are pretty law-abiding people. There are some ducks out there – but you will find that out quickly when you first meet them. Other avenues are churches, community bulletin boards and referrals.
- Rent payments. I give my renters until the 5th of the month to pay the rent, otherwise, I impose a $25 late fee. I think setting some pretty strict boundaries and guidelines on rent and when its due will alleviate any confusion in this area. You need to be firm if rent is coming in late.
- Check-ups. I’m sure you’ve seen those hoarder shows. You don’t want that to happen to your property – so checking-up on the place (with proper notice) is crucial. I do it one to two times a year.
- Cash on-hand. Just like your home, repairs are likely to crop up. And, because of this, you’ll need cash on-hand. I still need work in this area – but since we have a newer home, it’s not as needy as an older one.
- Taxes. Keep track of your expenses related to your property when renting. This will help offset any profit you may see. Basically you want to show a break-even on your tax statement.
Owning and renting property is not as glamourous as it may seem (or not). There is a fair amount of work to it – and requires the ability to negotiate and communicate well. But renting is becoming more popular and it can show dividends if done right and with long-term vision.