In the current economic environment, many homeowners are considering renting out their home. Renting out your home may provide significant financial benefits, including a steady income and access to certain tax deductions. In addition, renting your home allows you to wait for the market to improve before selling your home.
Decide if you want to rent out your home. In addition to certain financial benefits, renting out your home also affords you the flexibility to move back into the home in the future. However, you may also be responsible for repair and maintenance issues and may have to deal with bad tenants who are destructive or fail to pay their rent timely. Consider these advantages and drawbacks before renting your home.
Determine an appropriate rental rate. Use various national and local Internet rental sites, check newspaper ads and read online classified ads to determine the prevailing rental price range in your market. Determine your annual cost to maintain the home. Include any mortgage payments, utilities, insurance, lawn care, maintenance, and other services. Calculate a rental rate that you can realistically charge and earn a profit after these costs have been deducted.
Screen your potential tenants. As an individual landlord, you are free to establish the criteria of your choice. However, the law requires that you apply the same criteria equally to all potential applicants. Past bankruptcies and poor credit histories may indicate a potential for financial mismanagement. If you pull a credit report, you must disclose this on your rental application and ask the potential tenant to sign an authorization. A previous bankruptcy need not result in an automatic denial of the rental application. While past credit difficulties may indicate poor financial health, they may also have been caused by medical expenses, divorce, or job loss. You can discuss these situations with the potential tenant. If the tenant’s financial situation has improved, you may ask for a larger security deposit. In addition to a credit report, you should also consider performing a criminal records check, employment verification, and contacting the two previous landlords to assess the applicant’s previous rental payment history.
Author a written lease with your tenant. After you have selected a tenant, secure a written lease that includes any deposits made, the regular rental amount and due date, assigns responsibility for utilities and maintenance, and specifies the beginning and ending lease dates. Certain states may require additional items to be addressed in the lease depending on state law.
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