Rent Your House: Tenant Screening, Landlord Laws, and More

Do you have investment property that you'd like to rent? Or are you traveling and need to rent your house while you're on the road? Whatever the reason, renting your home for part of the year, or for a longer period of time, generates great income. Because you are renting your home, as opposed to a property specifically designed for renting, you will want to be more careful with the terms you set in the lease.

Here are the steps I recommend—from hiring a rental agent to doing a credit check for tenant screening and understanding landlord laws—if you are getting ready to rent your house:

1. Consider hiring a rental agent. A rental agent will take down some information pertinent to your house, design an appropriate listing, advertise the rental, review any potential tenants (including running a credit check) that submit an application and present them to you. The rental agent will likely charge a fee, ranging from a half-month to a full-month fee for this service. A half-month fee represents one-half of one month's rent, while a full fee equals one month's rent. When and if your rental agent secures a suitable tenant to rent your house, this amount will be deducted from the amount you receive from the tenant at the signing of the lease.

   Rental agencies usually charge their fee one of three ways: charging only the landlord a full-month fee, charging only the tenant a full-month fee, or splitting the fee between the two (two half-month fees).

   Make sure you are clear on the fee structure before you sign any contracts or make any agreements to have the agent help you rent a house. If you decide against a rental agent, you may want to invest in property management software, which should include free rental forms, to help you stay organized. 

2. Rent a house by owner. There are many websites now where you can list your rental property, even if it’s a rent by owner situation. Some people rent their home as a vacation getaway. Others list their home to get a more long-term rental. There is usually a fee to list your rental property on such websites but your home may get higher visibility. You can list the features and amenities of your home and include enticing photos. Use caution with the type and amount of personal information you post online. Remember that you should still do a credit check of the applicants—even if you’re renting the house on your own.
3. Tenant screening: credit, employment, landlord verifications. If you have a rental agent, he or she will perform a credit check, call past references and verify employment and wages as part of the tenant screening process. After the tenant screening is complete, the rental agent will give the results of the credit check and other information to you and, based on that information, you can choose to accept or deny the applicants. If you do not have a rental agent, you can follow these tenant screening steps yourself, but you will need an agency to perform the credit check. During the tenant screening process, pay careful attention to the rental applicant's credit and employment history. If the potential tenant has poor credit or is not making enough to afford rent comfortably, you should consider finding a different tenant. In addition to reviewing the applicant's credit during the tenant screening process, also pay attention if the rental applicant's past landlord (not present) gives a poor recommendation. If that's the case, think twice before renting your home to this applicant.
4. Design a lease agreement. Design a lease agreement and have it reviewed by a real estate lawyer who is familiar with renting homes. The lease agreement should state the specific terms of the lease and have legal language in it that protects both you and the tenant. After getting a signed rental agreement, it is difficult to terminate such a contract unless it is spelled out clearly in the agreement. At a minimum, the lease agreement should include:
   
   • The length of lease. Once you have decided on a rental applicant, determine and state the duration of the lease. For example, the lease might state that the original agreement will automatically renew after the initial rental term is up and continue on a month-to-month basis thereafter. Be sure to include a provision for making changes such as a slight rent increase or for terminating the lease by either party.
   • Monthly rent. To decide what to charge for monthly rent, it is best to check newspaper ads for homes in your area that have a similar number of bedrooms, baths, garage, etc. It may be wise to go visit a few rentals that are similar to compare.

     Be sure to specify the monthly rental amount, the date of the month that you expect payment and any time frame or penalty fees associated with late payments. Check state rental property laws before charging penalty fees.

   • Furnished or un-furnished. Decide whether you want to rent the home including your furniture or not.
   • Pets or no pets. If you do not want pets in your rental home, make sure to include that information in the lease. If, on the other hand, you have a clause in the house rental agreement allowing pets, be sure you include a limit on the number and kinds of pets allowed in the house you're going to rent.
   • Utilities. Electric, heat, gas and water. Who pays? Are they included in the monthly rent or not?
   • Parking and plowing. List the number of parking spots that are included in the rental. Is snow plowing included or do tenants need to pay additional fees?
   • Security deposit. Even if the tenant has perfect credit, gainful employment, is a non-smoker and has no pets, get a security deposit before they rent the house. If the tenant can pay first and last month's rent as the security deposit, you are smart to take it. Make sure the lease agreement states how much of a deposit is required in addition to the rent, for what the deposit can be used and the time frame that the tenant can expect a refund after moving out. You can use the deposit to cover any unpaid rent and to perform needed repairs or cleaning that results from more than normal use; you may not use the tenant's security deposit to cover the costs of ordinary wear and tear.
   • Smoking or non. Be sure to state whether the tenant can smoke in the home or not.
   • Number of tenants or guests. If there is a limit on how many tenants can live in the home or a restriction on the number of allowable guests, be clear about this in the lease. If you rent to only two tenants, you don’t want to find four or six people living in your home.
   • How much notice is required. You will want the lease to state how many weeks or months notice is required by the tenant before they move out or how much notice you will provide to the tenant if you want to move back in to your home.
   • Maintenance and repairs. It is the tenant’s responsibility to notify the landlord of any needed repairs. The landlord, on the other hand, is responsible for keeping the rental property in a habitable condition. “Habitable” condition includes keeping the building structurally sound, providing adequate utilities (heat, water, electricity) and cleaning the rental unit in between various tenants. Twenty-four or forty-eight hours notice is generally required before entering a rental property unless you are making an emergency repair. And remember, repairs, including repainting, fixing a roof leak, and fixing a damaged floor, etc. qualify for a tax deduction, as long as you are restoring the rental property to the original condition it was in before the need for repair!
   • Design alterations. Can the tenant paint a room or hang some artwork? How much is allowed? Be sure to include details about this in the lease.
5. Move-in and move-out checklist. This important step is often overlooked. Walk through the home with the tenant when they move in. Note any existing damage in the home with specific descriptions. Do this again before the tenant moves out. The checklist helps to document the condition of the premises at the time the tenant moves in and again when they move out. This helps prevent misunderstandings and security deposit issues. Photos can be helpful as well. 
6. Inform your neighbors. If you are renting out a home that has been your long-term residence, be sure to inform your neighbors. Regardless of the length of the lease, neighbors may get confused when they see strangers using your garage, so send a letter or make a house call to prevent any problems. Consider keeping your neighbors in mind during the tenant screening process as well. If you plan to live at this residence later, you may want your neighbors to get along with the tenants.
7. Eviction. No landlord wants to believe they will need to evict a tenant one day and no tenant ever wants to be evicted from the house they are renting! You hope you prevent any causes for eviction by doing a proper credit check and tenant screening. It is best for both parties to have some knowledge about their rights during an eviction procedure. Eviction is a legal process used by a landlord to terminate a lease agreement. A landlord might evict a tenant if a tenant defaults on any item listed in the original lease agreement. Examples of a default include a tenant failing to pay the rent on time (often for a few months), a tenant conducting unlawful or criminal activities in the rental property or a tenant housing unauthorized people in the home. A landlord must provide written notice to the tenant denoting the default and, in some states, the tenant is required to answer back in writing explaining how they will fix the default. After this, a landlord can begin a more formal eviction procedure.

   Often there are scheduled court hearings for evictions. Other times, there may be reason for law enforcement officials to get involved to remove (evict) tenants from the rental property. Evictions are never pleasant and best avoided when at all possible. Some cities or states have employed the use of mediation rather then tying up the courts to settle landlord and tenant issues such as evictions. It is best to get all agreements in writing and check tenant and/or landlord histories before signing a lease in order to prevent ever having to go through an eviction process.

8. Tenant and landlord laws. And finally, make sure you research Landlord Tenant Acts in your state or city before you rent your house so you know what your rights are as the Landlord and what rights that the tenant has in your state. Make it a point to be informed about the (federal) Fair Housing Act (FHA); this law protects tenants by restricting landlords from discriminating based on race, religion, familial status, age, ethnic background, and national origin during the tenant screening process. The law also requires landlords renting a property to “make reasonable accessibility modifications” for disabled or elderly tenants.

   Some state and local housing and landlord laws go even further, prohibiting discrimination during tenant screening based on marital status (whether the tenant is single, married, unmarried and living together, divorced or single) or sexual orientation. Make sure you know the law before you get involved in this aspect of real estate. Make sure that the home you will be renting out meets all federal, state and local building codes.

Now you know how to rent your house. Remember that if you don’t feel comfortable doing tenant screening on your own, you can get a rental agent to help. They will help you process a credit check, go over landlord laws and other information about signing a lease and renting a house. Good luck finding a trustworthy rental applicant and making your house a rental.