Follow these steps to secure a stable tenant paying a competitive rent for your residential investment property.
How you rent out an investment property is an important piece of the property investment puzzle. Follow best rental practices as a landlord to get a better return on your investment with top-dollar rent. You also get peace of mind that you’ve rented to a tenant who pays on time, treats your property well, and stays long-term.
Know and follow the law
Your rental property is a business, and in the landlord-tenant business, you must follow all local, state, and federal laws. There are two important ones to know. The Fair Housing Act prohibits housing discrimination based on race, color, national origin, religion, sex, familial status, and disability. The Fair Credit Reporting Act stipulates the information you can collect, the way it can be collected, and how it can be used. State and local rules govern many things related to renting out your property. These may include setting rates for rent, increasing rent, evicting a tenant, charging extra fees, and making property disclosures.
Prep the property so it’s in working order and looks good too
A property needs to be safe and habitable. Providing doors and windows that lock and a functional heating system fall into this category. Checking that emergency systems such as fire alarms are operational helps to protect your home and your tenant. It’s advisable to do a full inspection before you rent the property.
A clean and visually appealing home makes for better rental listing photos and attracts qualified tenants. If you decide to do cosmetic renovations to add appeal, focus on low-cost improvements that offer a good return on your investment, like painting and upgrading light fixtures. During the pandemic, outdoor areas have become a must-have for many tenants. Boost interest by creating a budget-friendly outdoor oasis.
Be smart about pricing and listing your property
Your goal as a landlord is likely to get top dollar for your rental and attract a responsible tenant who will stay put and pay on time for years to come. You may choose to pay a management company to handle everything. But if you want to do it yourself, here’s how.
- Price your property right. To do this, you’ll want to survey the real estate landscape and see what nearby comparable units are renting for. Your price will depend on your market and the desirability of your unit. If you don’t need to rent it ASAP, it’s best to start at the top of your comps and be open to negotiation once you’ve found the right tenant.
- Point out your property’s perks in your listing. It could be location, school district, access to highways, or nearness to a university. Or, it could be your property’s amenities, such as central AC or an open floor plan, especially if other similar properties lack them.
- Be honest about any property quirks. If the kitchen is small, don’t call it spacious. If the home is on a busy street, be up front. Otherwise you’ll waste your time on people who won’t ultimately be interested.
- Remember that most renters search online by price. If you price your rental at $2,550, you might miss qualified renters who’ve set a cap at $2,500.
Be smart about listing your property.
Real estate is online for both buyers and renters. The two most popular online real estate platforms are Zillow and Trulia. You may also want to consider rental-only sites like Apartments.com and Rent.com. Post high quality photos of all rooms so prospective tenants know exactly what they’re getting. Sites such as Zillow allow you to create 3-D home tours from an iPhone. For a more local approach, post on NextDoor and neighborhood Facebook groups.
Run all the screenings
It’s critical to screen and run background checks on prospective tenants when taking a rental application so you can find a financially stable tenant. There are a number of services and applications that can do this for you. Do some quick internet research on the subject.
It’s also best to set your rental application criteria in advance, in writing, to avoid any appearance of bias. Criteria might be an applicant making 3x the monthly rent who has no pets or no eviction history. A rental application generally includes
- Identifying personal information, including full name, birthday, and social security number,
- Copy of driver’s license or passport
- Annual salary, plus proof of employment, wages, and financial security (W2s, tax returns, bank statements, etc.)
- Past two rental addresses with landlord contact information
- Personal references with contact information
- Vehicle make and license plate number
- Pet type and breed, if applicable
- Permission to run a consumer report, including credit history and background check. Some tenant screening checks look deeper for eviction and criminal records
Use an iron-clad lease agreement
You may want to work with a lawyer to draft a residential lease agreement that works with local, state, and federal regulations. A well-written lease fully protects you as a landlord and makes sure there are no misunderstandings. Important components include
- Tenant name(s) and any other occupants
- Terms of tenancy
- Amount of rent
- Date rent is due and late fees
- Security deposit details
- Responsibility for utilities and services
- Appliances supplied and maintained
- Property rules
- Renter’s insurance requirement
- Right of entry
Taking steps to familiarize yourself with landlord-tenant law and making sure your property is in good working order, clean, and photogenic puts you in the best position to command a premium rent and allows you to pick the ideal candidate for your rental.