If you bought a property with the goal of becoming a landlord for the first time, there's a lot to learn before you post a “for rent” sign. This property essentially becomes your business. Like any business, you must manage it wisely and choose the right people — in this case, tenants.
The following tips can help you learn to navigate your new role as a landlord while maintaining your property and fulfilling your responsibilities.
Understand the laws
As a first-time landlord, you’ll first need to familiarize yourself with rental laws, including the federal Fair Housing Act, which bans discrimination based on race, color, national origin, religion, sex, family status, or disability.
States and cities have their own fair housing laws (some protecting more classes of people than the Fair Housing Act), and cities may have laws affecting other rental issues such as how much you can raise the rent each year, what the tenant can deduct from the rent if you don’t make specific repairs, and eviction rules.
Any tenant selection plan should comply with applicable laws, and be easy for any potential tenant to understand.
A good practice is to prescreen applicants on the phone to let them know the monthly rent and any rental rules you have, such as whether or not you allow pets. If they remain interested, schedule a tour, show them the home, have them fill out an application, and agree to a credit and background check.
Credit checks can tell you the applicant’s ability to pay financial obligations. A low credit score might not be an automatic disqualification, but can be a red flag. You want to make sure the tenant has a source of income to pay rent each month. Some landlords think the applicant’s monthly income should be at least three times the rent.
Other red flags may include applicants who have previously been evicted or have recent criminal history. It’s important to call an applicant's past landlords as references. If you don't feel comfortable with the information in a prospective tenant's credit report, you're under no obligation to rent to them. You may decide to ask for a larger security deposit in this case; it can be a way for tenants to show they're serious about their commitment. Being consistent in all of your practices can also help avoid confusion -- and discrimination claims.
Leases and responsibilities
Before renting out a house for the first time, know that you’re responsible for paying the property tax and repairing any appliances you provide, as well as repairing other parts of the house if needed. The lease should note this information and cover who is responsible for things like lawn maintenance and general upkeep. If it’s the landlord, consider offering discounts to tenants who care for the landscaping themselves, with the caveat that it must be done on a regular basis.
Prepare a lease for the renter to sign. You can find standard leases online or have an attorney draft one - in either case, an attorney's assistance can ensure the lease is valid. Customize it to add additional provisions you want, such as an extra security deposit if you allow pets. As a landlord, you should protect your property with landlord insurance and recommend that your tenants get renters insurance. These policies can protect you and your renters in case of any covered, unforeseen losses that may occur.