5 Big Mistakes to Avoid When Renting Out Your House

white and brown wooden house

Your home is a very intimate and personal space. Every room you walk into is filled with memories and emotions. And if you’re deciding to move into another property and rent out your current residence, you’re taking a vulnerable step. It can be exciting and daunting to welcome a renter into a space that’s so special to you and your family. The last thing you want to do is make mistakes that jeopardize your home or financial investment.

Here’s a list of five of the biggest mistakes new landlords often make when deciding to rent out their homes – as well as some tips for avoiding the same pitfalls.

Mistake 1: Not Understanding the Legal Requirements

One of the first things you should do is get familiar with the legal side of renting out property. Each state and city has its own laws regarding landlords and tenants. For example, you’ll need to know how much you can legally charge for a security deposit or what the rules are about entering a tenant’s apartment.

Failing to comply with these laws can lead to serious problems. You might find yourself fined, or even worse, in a legal battle with your tenants. To avoid this, do some state-specific research or hire a lawyer who specializes in real estate. (A couple hours of an attorney’s time can help you understand your responsibilities with security deposits while also ensuring your rental agreements are exactly as they should be.)

Mistake 2: Not Screening Tenants

It might be tempting to cut corners and quickly fill your rental to start earning rental income. However, not properly screening tenants can be a costly mistake. (Some landlords would argue it’s the biggest mistake you can make.)

A good tenant can make your experience as a landlord much easier, while a bad tenant might pay rent late, cause damage, or disrupt the neighborhood. In other words, bad tenants cause headaches on all fronts. Thorough screening won’t weed out every bad apple, but it will increase your chances of finding good tenants.

When screening, make sure to check potential tenants’ backgrounds thoroughly. This includes their credit history, criminal record, employment verification, and past rental references. These checks will help you gauge how reliable and trustworthy they are.

Mistake 3: Ignoring Property Maintenance

As a landlord, keeping the property in good condition is important for a few reasons.

  • For starters, it helps attract and retain good tenants.
  • Secondly, it’s also your legal responsibility. You can actually be sued for not keeping the property up to a certain condition.
  • Finally, neglecting maintenance can lead to bigger, more expensive repairs down the line. (It’s better to fix something now, before it causes collateral damage, than to wait for an entire system to completely break down.)

Regular maintenance includes checking that all appliances are working, the heating and cooling systems are in good order, and the property is safe and clean. If this sounds too time-consuming (or outside of your skillset), hire a property management company to do this for you. They can also manage just about everything else mentioned in this article.

Mistake 4: Underestimating Costs

Many new landlords think that the rent they charge will cover all their expenses, but this isn’t always the case. There are several costs associated with renting out a house that you might not have considered. Besides regular maintenance, there are property taxes, insurance, possibly homeowner association fees, and emergency repairs.

Make sure you understand all the potential costs and set your rent at a level that will cover these expenses while still yielding a profit. It’s also wise to keep a reserve fund for unexpected costs so you’re not caught off guard. (You want to eventually reach a point where you have at least three months’ worth of expenses in a cash reserve account for the property.)

Mistake 5: Poor Communication with Tenants

Good communication is key to a successful landlord-tenant relationship. Being unavailable or unresponsive can lead to frustration, which breeds all kinds of other negative emotions that compromise your relationship with tenants.

Make it easy for your tenants to reach you or your property manager, and make sure you respond to their concerns in a timely manner. You may find it helpful to set rules about how and when tenants can contact you. And if you’re unavailable for periods of time, you’ll need someone they can reach out to (like a property manager).

Set Yourself Up for Success

Renting out your house can be a great way to earn extra income and make use of property you’re not currently living in. However, as you can see, it comes with its own set of challenges. The good news is that you don’t have to make these same mistakes. By aligning yourself with a property manager who understands the ins and outs of renting homes like yours, you can have a more enjoyable (and financially lucrative) experience.