How to rent your house

This subject already has many resources available. Here is our short primer on one of the first steps to financial freedom!

Who this applies to:

Take a look at your largest monthly expense, is it your housing costs?

Are you moving, and thinking of selling or renting your current home?

Do you despise paying rent?

Do you want to retire early?

Do you want to diversify your investments?

Is selling your house going to cost you more money than its worth?

The option usually exists to keep your current home and rent it out. This strategy is how many investors start their venture into real estate investing. Though it can be daunting, here is how we did it:

COLLECT your market data

First we made sure rental prices in our area supported a positive cashflow on the house:

• Zillow: Rent Zestimate
• Rent-o-meter.com
• Request a rental comparison (Rental comps) from a Real Estate Agent (REA) of Property Manager (PM)

Next find out what is common for houses like yours:

• Who pays utilities, you or the tenant: PM, Rental ads
• If the owner pays utilities: how much do you normally spend / month?

COLLECT data for your house

Find all of the data required to analyze your homes financials:

• Mortgage information: Balance, Rate, years left on the loan (use your statement)
• Property Taxes: Country website, or tax statement
• Insurance Premium: Insurance statement
• Current Value: REA, Zestimate, same model sales on Zillow.com, Redfin.com, Realtor.com, Trulia.com, etc
• Repairs needed? Get some quotes from local businesses

ANALYZE the property

This is not as simple as Rent – Mortgage = Cashflow. There are more expenses!

• Use the Rental Calculator on BiggerPockets (first 5 uses are free)
• Use our Rental Calculator!
• Find a friend who can help you crunch the numbers
• 

DECIDE if the four pillars of real estate wealth building are worth it for your home

• Positive cashflow is always a good sign
• Negative cashflow is usually asking for problems (betting on appreciation)

FIX (rent proof) your house

• Fix anything that is broken
• Ask a PM for a walkthrough to see what the house needs
• Going to paint? Label the cans for each room
• Going to replace flooring? Go with LVP instead of carpet
• Standard pre-sale cleaning

PROPERTY MANAGER?

Pros: Reduce stress, reduce time required, professional in the rental business

Cons: Cost 8-12% of rent, no one cares for your property like you do

• How to pick?
  • Ask for referrals, most REA will have a recommendation
• Read reviews for all PM’s in your area
• Give them a call and ask some questions
  • Costs: Monthly rent %, Finder’s fee? Maintenance fee? Baseline fee?
• Process: Walkthrough from start to receiving your first payment
• Maintenance: Who do they use?
• Leases: Review their standard lease
• Applications: What are their criteria?
• Communication: Online owner portal? Rental portal? Emails? Calls?

If you decide on using a PM, you are pretty much done!

• PM will schedule pictures
• PM will place the rental ad (check for accuracy)
  • Zillow, Trulia, Realtor.com, Hotpads, Apaarments.com, craigslist.com
• PM will screen applicants (add your requirements)
  • We recommend: 600+ credit score, no previous evictions, Income = 3xRent
• PM will get the tenants moved in
• PM will send you your monthly cashflow!

SELF MANAGE?

Pros: Save $, learn the business, more control

Cons: Time commitment, managing from a distance, new to the business, on call with your tenant

THE BEST RESOURCE FOR THIS IS THE BIGGER POCKETS BOOK ON MANAGING RENTAL PROPERTY

Below is a primer, I recommend buying/borrowing the above book if you decide to self-manage

• Find a lease: Biggerpockets.com, local Real Estate Lawyer, local PM, Staples / Officer Depot
  • Make your personal changes:
    • Lease term: usually 6mo – 1 year
  • Rent Price: from above analysis
  • Security Deposit: usually 1 months’ rent
  • Pets allowed? Here’s some data
  • We recommend running it by a lawyer if it hasn’t been already

• List your Rental online:
  • Zillow, Trulia, Realtor.com, Hotpads, Apaarments.com, craigslist.com
• Get some professional pictures taken
• Show your house:
  • Can schedule a group showing, individual appointments, or open houses
• Provide an application “How To” for qualifying tenants:
  • 600+ credit score
• Income = 3xRent
• No previous evictions
• Review your applications
  • Cozy.co
• Zillow Rental Manager
• Physical paper copies
• Approve your tenant
  • Cannot discriminate!
• Schedule a lease signing, collect your hold $ (applied to security deposit)
• Move-in
  • Once the Full Security Deposit and 1st months’ rent is collected give them the keys!
• Create a rental binder with useful info:
  • How to work the fireplace, sprinklers, remotes, etc
• What keys go to which doors
• Where the fire extinguisher is located
• Utility providers and websites
• Complete a move-in inspection
  • With tenants present
• Take pictures
• Provide a signed copy to the tenant
• Maintenance
  • We recommending having each of the following on call:
    • Handyman
  • Plumber
  • Electrician
  • HVAC technician
  • Schedule Bi-annual maintenance inspections
  • Collect your monthly rent!

BOOM… You’ve turned your liability into a cash producing asset. Easy day!