If you’ve decided that you want to rent out your home or investment property, you may think that all you need to do is publish a listing and, voila! You’ve got a new tenant! Well… renting out your property may not be as simple as it seems. Before creating a listing online, there are a few things you need to consider.
Look into Rental Rates
Choosing an amount of rent that is both fair and competitive is important to securing a tenant. First, make sure to research how much landlords are charging per square foot in your area. This will help you get a rough estimate of what you should charge for your property based on its size and the number of rooms.
Next, consider the advantages and disadvantages of your property to adjust the rental price. Some key aspects to review include:
1. The condition of your rental. Are there any rooms that require renovation? Are there urgent repairs to be made?
The general condition of the property determines the overall opinion of the potential tenants. Therefore, rental units with improvements or those that have undergone repairs are more attractive and have significantly higher prices.
Often times, newly constructed rental properties are preferred by the tenants. Modern housing construction is distinguished by high quality, use of selected materials, and better functionality.
2. The location. Is the property near the city center or is it located on the outskirts? Is it close to schools or shopping? In the current market, the location has the most influence on a residential property’s market attractiveness and price.
Location is becoming more and more important for tenants. Being in proximity to reliable public transportation, parks, and public institutions like schools and universities make a property more desirable and are an incredible advantage when it comes to finding tenants.
3. The elevation of the property. Is your rental unit a top-floor apartment with a great view, or is it located on the lower floors where it is easier to access? Does your home have stairs? Tenants have different requirements and preferences, but make sure to accurately describe your property while emphasizing the perks.
By taking all these factors into account, you will be able to come up with a rent amount that is both competitive and fair.
Increase the Value Proposition
As a landlord, you must put yourself in the shoes of a potential tenant and think about what would make you want to pay a certain price for a rental, and what would cause you to pass. Consider investing money in improving the aspects of your rental unit that most tenants value. Focusing on improvements that appeal to a small demographic will likely not raise the value of your rental.
After you’ve carefully analyzed the condition of your property, you may want to address some of the disadvantages that it has or enhance some of its key selling points. For example, you may decide that the kitchen is in desperate need of improvement or the bathroom should be retiled. Research the investment to estimate the return on investment that you can expect- some renovations may not make financial sense to undertake.
Screen Possible Tenants
You wouldn’t invite a complete stranger to your house, would you? You can (and should) apply the same logic when it comes to renting out your rental unit. The more you know about your tenants, the better. Proper tenant screening lets you learn about your applicants’ financial, criminal, and rental history, helping you make a more informed decision and thus greatly increasing your chance of rental success.
Tenant screening reports will often help you notice any red flags in the applicant’s application. For example, you will know if they have been sued in the past by their landlord for past-due payments or if they have a long criminal record. Additional red flags could include a long track record of evictions, a low credit score, legal problems with previous landlords, damages, etc.
Having more information about your potential tenants lets you objectively evaluate and compare applicants. In addition, it guarantees that you are handing over legal possession of your property to qualified tenants that are likely to pay their rent on time and keep your property in good condition.
Create a Comprehensive Lease
Before renting out your property, you need to ensure that the lease you will sign with your new tenants covers everything that might come under dispute later down the line. In addition, you need to consider that as a landlord, you can be held accountable for everything not strictly outlined in the lease. Here are some things you should add to your lease:
1. Document the state of the furniture and the rooms of your rental thoroughly. This will ensure that you will be compensated if your tenants happen to leave your property in poor condition.
2. Include areas for the names of all of the occupants as well as an occupancy limit. This will help you prevent any unauthorized visitors from staying on your property.
3. Specify the amount of rent, acceptable payment methods, due dates, and late fees. For example, you likely do not want to receive rent payment in cryptocurrency.
4. Clearly state if you allow pets on the property and if you do, what types and sizes. For example, for smaller rentals, you may allow small pets like parrots, turtles, and fish that aren’t capable of damaging your furniture.
5. Make sure to specify who pays the utility bills as well as the repercussions for late payments.
After you have drafted the lease, make sure that it is signed by all parties.
Deciding to rent out a property is a major choice, and there are several factors that you should consider before finalizing your decision. Take the time to research the local rental market, potential improvements, and the return on the investment. While leasing out properties can be a great opportunity for some owners, it may not make sense for everyone.