5 Steps To Renting Out Your Home

Prepare the Unit for Showing
As a landlord, it’s your responsibility to provide a safe and healthy home for your tenants. An updated or clean home will not only increase your likelihood of finding a tenant, but will also allow you to charge higher rent. Some suggestions to prepare the unit; fill any holes and put a fresh coat of paint on the walls, fireproof the place by installing smoke detectors and carbon monoxide detectors, have chimney cleaned, check doors, locks, and lighting and appliances for proper working order, fix any plumbing leaks, if water bill is in your name install low flow shower heads. As you go through home create a checklist to use when tenant moves in and out.

Getting your Paperwork in Order
You will need on hand a Tenant Application Form, Rental/Lease Agreement Form and Eviction Notice Form (hopefully will not need but better to have on hand). Make sure your mortgage company does not need to be notified you no longer reside in home and now is a rental. In addition, this could also apply to your Homeowner’s Insurance.

Make Sure the Place is Right
Research the rent rates in your area and place your ad. Utilize Zillow, Craigslist, and newspaper. Another consideration is an Application Fee, which you should always take with the application. You can charge whatever you like but the recommendation would be to call property management companies to find out what they are charging and charge a similar amount. Be sure to check with local and State agencies to make sure there aren’t any restrictions how much you can charge. The application fee covers the cost of the background check.

A security deposit is a sum of money paid by a tenant to ensure they fulfill the terms of their lease. This is a deposit not a fee. This money should be held in separate bank account and returned to the tenant when the tenant moves out, unless any damages need to be repaired.

Show to Prospective Tenants
Always pre-screen ahead of time when a prospective tenant phones. As a way of saving time for both you and the prospective tenant a rental criterion needs to be established and then explained over the phone. Bullet points for criteria are as follows:

The gross monthly income must equal approximately three times or more the monthly rent.
Applicants must have a favorable credit history
Applicants must be employed and be able to furnish acceptable proof of the required income.
Applicants must have good references from all previous landlords.
A limit per bedroom of the number of occupants. Usually State law dictates a 2 person limit.
Showing property can be streamlined by two avenues; give the address to them so they may drive by property. If they are interested tell them to call back and a showing of inside can be conducted. This eliminates the people who are disinterested because of the location, other avenue is if you more than one interested party a possible Open House. Set a day and time then inform tenants you will be available during that time to show property. Having multiple tenants look at property at same time can be awkward but this creates a sense of competition and scarcity which allows for more applications.

Selecting the Right Candidates
After pre-screening and showing property it is time to look at a background and credit check along with verifying all information tenants has provided. Depending on how many applications you received will determine how picky you may be and only accept highest qualified tenant. If you are struggling in application department a loosening of your standards slightly might be in order.

A lot of landlords look at the rental history and income in more regard than say the credit history, this depends, in particular, to the area. Certain areas have an abundance of foreclosures and those homeowners will be seeking to rent, doesn’t necessarily make them bad risk, one can lose a home for a multitude of reasons.

Things to look closely at on the background and credit checks are:

Prior felonies
Prior evictions filed
Prior evictions carried out
Bankruptcy
Judgments
Other criminal or bad financial history
It is vital you verify everything that the tenant writes on their applications. People will tell less than the truth when knowing they might not qualify. A “release of information” signature form from your prospective tenant to allow you to properly check up on their claims. Many times you will be required to fax over the release of information signature.

Important questions to ask employers:

How much do they currently make?
How long have they worked there?
Is this job considered temporary?

Call all the previous landlords for at least five years to verify information and ask the following questions:

How long did the tenant rent from you?
What was their monthly rent?
Did the tenant give proper notice when vacating?>
Did the tenant receive back their security deposit?
Would you rent to this tenant again?
Accepting or Denying an Applicant

After receiving their background check and verifying information listed on their application correct, you will have a good idea if they are an ideal fit as a tenant. If you receive multiple applications which qualify avoid discrimination complaints by processing applications on a first come first serve basis.

When you deny it is necessary for you to clearly spell out in writing why you are denying them. Keep copies of all records pertaining to the prospective tenant so you can back up your reasons for denial.

When you find an applicant which meets all requirements you can verbally let them know that they are approved. Since there is nothing stopping an applicant from finding another place while checks are being conducted it is important to require a deposit to hold the vacant property. This deposit is non-refundable and should be due within 24 hours of being accepted. This deposit will turn into their security deposit so it’s not an unexpected cost for the applicant. Simply let the approved applicant know that you cannot hold the property indefinitely so if they want to guarantee their position they will need to pay the deposit within 24 hours. Sometimes landlords will require this deposit when application is filled out and if they do not qualify deposit is simply returned. After collecting deposit be sure to sign two copies of a “deposit to hold agreement” that states what the deposit is for and what the terms are. Document should state; Applicant has until ‘such and such” date to sign a lease agreement and if not signed by that date, the deposit will be forfeited to the landlord. A copy goes to you and one to prospective tenant, which will serve as a receipt.

Rental Lease Agreement

Most landlords will have a tenant sign a one-year rental agreement to keep tenant in the house as long as possible and minimize turnover. Other option would be a month to month lease. Benefit to this option is being able to remove quicker an unruly or problematic tenant.

Most lease agreements contain the following information:

Names of tenants
Address of rental property
Lease term length
Rent amount
Security deposit amount
Late fee description
The move-in condition report
Provisions for or against pets, utilities, smoking and more
Depending on the State you live in you may also be required to provide certain State and Federal documents which also depends on when house was built and State laws. The pamphlet called “Protecting Your Family from Lead in the Home” is one such if your home was built prior to 1978.

Signing the Lease

It is best to have tenant meet you at the property to sign the lease agreement. If you go through the lease ahead of time and mark all pertinent areas signatures are required with a highlighter this alleviates probability of missing any areas. It may be time consuming but going through the lease step by step with tenant will help offset down the road the “I did not know that” remark.

Rent/Move-in Condition Report

A good time to accept the initial rent payment is when you reach that part in the lease agreement where it says how much the monthly rent is. Remember you have already accepted the Security Deposit when they signed “deposit to hold”, also it is good practice to have rent given in certified fund form only i.e. Cashier’s check or a Money Order.

Okay, the rent and security deposit has been paid and lease has been signed. One more thing before handing over the keys! The move-in condition report is simply a paper that the tenant will sign in which documents, in detail, the condition of the property. Let the tenant walk through property taking notes on anything that needs to be addressed i.e. stains on the carpet, holes in walls etc… Hopefully since you have updated and painted the property prior to renting out they will not find issues. Taking pictures or videos of the property before handing over keys is another way to produce further evidence in the future when tenant moves out if any issues arise. You must document, document, document. In addition, never let a tenant move in things before signing the lease and paying the rent. It could potentially be disastrous.

Congratulations, you are officially a landlord! Hopefully you are ready for the job, but if after reading this you realize there is more to it than perhaps you really want to take on, Tower Property Management is waiting for your phone call. Our professionals will take the bite out of renting and deal with all aspects of handling tenants. You may contact us at 951.686.3547.

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