Tips for Renting Out Your Home or other Residential Real Estate
- Adam Garrett
- Jun 18, 2023
- 8 min read
Updated: Mar 13
In this article, I'll be going over my top tips for renting out your house or other residential real estate.
Make Sure That You're Able to Rent Out Your House
Many assume that they can rent out their house, but that's not always the case, whether due to restrictions based on your loan type, home buying program incentives, HOA/Condo restrictions, city/county restrictions, etc. For more details, go here.
Consider a Property Manager (i.e. I Use One for My Own Rental)
One of the 1st considerations in renting out your home is whether or not you should rent it out yourself or whether or not you should hire a property management company.
If you have a lot of time on your hands, don't have an above-median income per hour, are willing to spend many hours educating yourself in property management prior to engaging in it, & are willing to dedicate the time needed once engaged such as regular inspections, self-management can be a viable option, especially if you're local & already in a related industry like a contractor or especially a real estate agent.
If my primary income was lower and if I didn't foresee myself growing in my primary income, I would probably manage my rental property myself & would educate myself further in property management prior to doing so.
Research for Property Management Companies
Before contacting a potential property management company, do more than just looking at the number of good reviews they have on a place like Google Maps. Check their most recent listings, especially ones that look like the price range that you'd be renting in. Here are some of the things to check:
Do they consistently do great marketing on their listings?
How many pictures are there?
Are the pictures professional?
Among the pictures, are there many duplicate-looking photos (i.e. 5 pictures of the same <500 sq ft bedroom)?
Is there a virtual tour (& what type of virtual tour - Matterport is best)?
Are there aerials?
Are there area photos?
Where do they list directly (i.e. a service like Appfolio & the local primary MLS)? Are their listings showing up on Zillow, Rent.com, & Apartments.com? What about places that don't auto-populate from but where people are looking, like Craigslist, Facebook Marketplace/groups, places where people with Section 8 go (if you are considering that), & places where the military go?
Do their listings allow Zillow applications? (this 1 consideration can be a lot bigger deal than you would think)
What are their application fees? (lower is better)
How dynamic is their published selection criteria for tenants?
Does it vary by listing?
Does it mention additional options & reduced requirements with prepaid rent?
Does it reward at all those who have great credit & low DTI? Typically it won't, so I typically recommend providing some incentives yourself, i.e. $25 off per month for those with exclusively 740-799 credit scores pulled & $50 off per month for those with 800+ scores.
Interviewing Property Management Companies
When interviewing firms, be sure to interview at least 3 & ask firms about the following, in addition to going through anything that you weren't able to find from prior research:
What is their showing policy? Does someone need to apply and get approved before seeing the property (if so, I'd recommend ruling them out)?
Do they respond to prospective tenants on nights & weekends and show houses to prospective tenants outside of 9-5 M-F?
Do they have automated immediate responses to inquiries set up?
Their fees, including any monthly fees & any other fees (Initial listing fee, relisting fee, etc.)
What they cover & what they will handle
What marketing they will do (not simply based on what they typically do based on your research, but what they will do for you if there's anything more that they will do to get your business)
What their property inspection policy is, and if they'll give you a schedule of inspections planned at the initial time of the lease.
It's also ideal to check their most recent listings, especially ones that look like the price range that you'd be renting in.
If you won't be in town, be sure to ask them about if they're able to do video tours for their inspections.
Their lockbox policy (having dual electronic/non-electronic is best, though not typical, & while available in Hampton Roads & Greater Richmond, not available in all markets)
Beyond their published tenant criteria, do they do interviews with tenants?
How experienced are they?
What credit score type will they pull? An Experian version is more likely to have the most data vs Equifax or Transunion due to Experian RentBureau, "the industry's largest rental payment database".
Will pulling the credit of tenants impact their credit scores? (if so, they'll be less inclined to apply)
If You Get a Property Manager, Look for & Strike a Sale Provision in the Contract
It's not uncommon for property managers to include a provision in contracts that essentially tie you into working with their preferred agent if you ever sell close to the time of when you hire them. Look for that, and request that the property managers strike it. If they won't, look for another property management company. Who knows what else they'll do that's hidden in the contract where you won't notice until it's too late. If you find it too late, after you've signed, and there's no written provision for you to get out of it, and they refuse, consult an attorney.
See also this VAR article on sale clauses in property management contracts.
Time is Critical to Successful Property Management
Even if you have a property manager, you'll still need to spend time on your property for successful management. It's ideal to do some of your own property checks with at least 24 hr advanced notice rather than relying exclusively on the management firm.
If you don't have a property manager, you should be spending a much greater amount of time on your property. Many initial landlords doing it DIY don’t take seriously enough the business and incur substantially reduced profits if not losses because of it.
It's for this reason that I use a property manager myself even though I know much more than most owners about real estate & property management. I'm certainly involved with my property, including inspections & even a bit of problem resolution, but I still pay a property manager who only does property management and no sales since they know more than me specifically about property management. Also, I don't want my property to take too much of my time, and I want to lower my risks.
Risks with Property Management
I’ve seen homes completely trashed by tenants where the seller was unable to recoup anything but a small fraction of the losses.
I’ve seen homes completely trashed by tenants where the seller was unable to recoup anything but a small fraction of the losses. There's 1 person I know who had a minister trash his rental property while they were in another country doing missions. You never know just what someone will do, even if they seem like they're very trustworthy due to a position like in ministry.
I recall a listing of mine where the property had a property manager, but where the property manager had been derelict in their duties in my opinion. The property manager passed things to another property manager who also was derelict in their duties in my opinion. The owner also was too trusting of their property manager, never visiting the property for many years. When he finally went there, what he found was horrifying. Even after the owner spent thousands on clean-up and junk hauling from the tenants, the property was in such bad shape that one of the prospective buyers who made a viable offer considered tearing the brick house down and rebuilding it.
Keeping Records
Be sure to keep diligent records of communication between yourself and the tenant, as well as any receipts. Be sure to have pictures &/or video throughout the home before and after each tenant leaves.
Whether doing it DIY or using a property manager, ensure that you have a thorough property condition report itemizing the defects of the home. In the PCR that GRP uses, the REIN lease agreement provides the property manager/landlord up to 5 days after occupancy of the premises. Those 5 days reflect the VA law on the subject. The tenant has up to 5 days following receipt of the report to object to it (i.e. adding things to it). See REIN Lease section 8C of Page 7
Get Landlord Insurance, Require Tenant to Have Insurance, & Consider Rent Guarantee Insurance
Be sure that you shift from your standard insurance to landlord insurance if you purchase initially as an owner occupant. Depending on the landlord insurance that you have, landlord insurance can help at times with damage to the property by the tenant. Some insurance companies are much better than others when it comes to this issue, and a single company may have different package options so that you can be better protected.
Require that your tenant carries their own insurance. If they can't afford to cover damages, the right tenant insurance can at times help.
Consider also rent guarantee insurance if you have low $ reserves & a mortgage to pay especially, which helps if the tenant doesn't pay.
Some landlords even offer that a tenant can have damage insurance in lieu of a security deposit, but I typically wouldn't recommend it.
Have Funds & Other Safety Measures Available for Repairs, Late Payments, & Vacancy
It's best to have funds available for repairs, late payments, & vacancy, since every home will need maintenance, you're likely to encounter late payments at some point in a long-term rental (sooner rather than later if you're not careful), and some tenants can severely damage property, especially if not closely monitored. Even if you don't have it all in the bank, consider options like liquid investments (i.e. stock) that could be easily sold if needed. Even principal from a Roth IRA that you've had for over 5 years is a viable option in many cases, though please keep in mind that I am not a tax advisor and that I am not giving tax advice. It's also not a bad idea to have a home warranty or other warranties in place.
Related:
Education Prior to Your First Rental (110+ hrs if DIY (higher if >1 property, if low $ reserves to cover mistakes, or if high value property); 21+ hrs if hiring a property manager)
If looking to manage a property yourself & planning to rely heavily on its income in the future, do intensive research (i.e. >110 hrs/property (up to 300 hrs) before renting & ideally >200 hrs/property (up to 500 hrs) within the first year of renting) into tenant/landlord law in your state as well as how to successfully market and operate rental properties (i.e. tenant screening, inspections, maintenance, etc.) prior to engaging in the business of property management.
For more on this subject, including further tips, go to my article:
Related:
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