How to Rent Out Your House: 9 Essential Steps for First-time Landlords
If you’re wondering how to rent out your house, it’s a lot like starting a business. You’ll be required to step into a new role as a landlord — prepare yourself for new legal responsibilities, budgeting for new expenses and marketing your place to potential tenants.
Below, we cover the nine key steps to follow as you rent out a house for the first time. We also offer tips on how to decide whether becoming a landlord is right for you, which include weighing the pros and cons of renting out your house.
A landlord is someone who owns real estate, but leases or rents the right to use that property to someone else. The relationship between landlords and tenants is highly regulated, in part because access to adequate housing is a human right.
Step 1. Learn the legal requirements
There are many laws, rules and responsibilities that come along with renting out a house. Because the law can dictate anything from how you screen tenants to when you can raise the rent, you’ll need to familiarize yourself with landlord-tenant law, including:
- Federal laws. Every landlord in the nation is required to comply with the Fair Housing Act, Fair Credit Reporting Act and Americans with Disabilities Act, for example.
- State laws. Every state has different housing laws, and it’s important to learn about yours — not only because breaking these laws can harm the viability of your rental income, but also because it can harm your tenants.
- Local laws. Most cities have local ordinances and regulations around tenancy, and many require you to get a business license or permit to legally rent your home.
Step 2. Evaluate your property and finances
- Repairs. Take some time to inspect your property and get estimates for any necessary repairs. Most laws related to safety and building code requirements are set at the state and local levels, so you may want to seek out the advice of a local contractor or real estate consultant.
- Operating costs. Create a budget for your property’s ongoing expenses to account for all of the essentials — like taxes, insurance and maintenance — and ensure they’ll be covered no matter what. Maintenance alone on a single-family home costs more than $10,000 per year on average, according to Thumbtack.
- Cash flow. Knowing your operating costs will also help you evaluate how much cash your rental generates each month. Ideally, the income covers your expenses.
- Savings. You may want to create a rental emergency fund that can cover three to six months’ of any mortgage payments you’re still making on the home, plus utility expenses. Even when tenants fail to make rent (or you’re just between tenants), you’re obligated to stay current on your loan payments and keep the utilities on.
You can calculate your cash flow on a rental property by subtracting your total expenses from your total income. However, both of these categories of expenses can be complex with a rental, which is why you may want to ask a real estate consultant to help you do a deeper dive.
For instance, your rental income could include a wide variety of fees, ranging from pet rent to parking or garbage fees. And your rental expenses might include property taxes, insurance, property management fees, HOA dues, general maintenance or landscaping.
You may also want to adjust for projected vacancy time (which is calculated based on the average time listings take to fill in your area) and the utilities you’ll pay for during that time.
Typical list-to-lease time: 40 days
Landlords were typically able to get a vacant rental leased within 40 days, according to RentCafe.
Typical rent increases: 6% to 10%
More than 8 in 10 (85%) landlords raised rents in 2024, with 31% implementing increases of 6% to 10%, according to Baselane.
Projected rent growth in 2025: +4.8%
Median rents are expected to be 4.8% higher in 2025 than in 2024, according to the U.S. Department of Housing and Urban Development (HUD).
Step 3. Decide how you want to manage the property
One of the biggest choices you’ll make as a landlord is whether you want to handle the day-to-day management of the rental yourself or hire a property management company to do it for you.
The main factors to consider are time, energy and cost. Managing the rental yourself maximizes your rental income, but it can quickly become labor intensive — especially if you don’t live near the property.
Property management companies can ease the pain by taking on most of the everyday labor, but unfortunately they don’t come cheap. You’ll typically pay 6% to 12% of your monthly rental income plus additional fees along the way. It’s common for property management companies to charge extra for events that may seem like business as usual, such as tenant placement, maintenance, lease renewals, vacancies and evictions.
Step 4. Get landlord insurance
You’re likely familiar with homeowners insurance, but this type of policy won’t cover many of the risks that come with renting to tenants. That’s why you should consider landlord insurance instead.
Landlord policies are typically around 25% more expensive than homeowners policies, which can feel expensive. But even though landlord insurance isn’t required, it can be an important way to safeguard yourself. Landlord insurance typically helps protect you from the costs of:
- Damage to the house
- Liability, should an accident or injury occur
- Loss of income, should the house become uninhabitable
Landlord insurance typically won’t cover:
- Damage to a tenant’s belongings
- Routine home repairs
Landlord insurance vs. homeowners insurance
| Coverage category | Landlord insurance | Homeowners insurance |
|---|---|---|
| Structural damage | Structural coverage, including damage from fires, natural disasters and crime | Structural coverage, including damage from fires, natural disasters and crime |
| Loss | Loss of rent coverage | Loss of use coverage |
| Liability | Liability related to negligence of responsibilities specific to being a landlord, as well as for accidents, injuries or property damage | Liability related to accidents, injuries or property damage that occurs on the property |
| Personal property | Only property directly related to your role as a landlord is covered (e.g., maintenance equipment like lawnmowers or snow blowers) | The owner-occupier’s personal property is covered |
Step 5. Set your rent
It’s important to do market research to determine a reasonable price (also known as “market rent”) for your rental. Much like a real estate agent does when pricing a house using a comparative market analysis (CMA), you’ll typically use a rental market analysis (RMA) to look at similar properties in the area and what they’ve been charging. However, there are some special considerations when pricing rentals, such as whether:
- Utilities are included in the rent
- Adequate parking is available
- The lease is shorter or longer than average
How much can I rent my house for?
Common financial advice says that you should charge at least 1% of the home’s purchase price as monthly rent. The idea is that 1% should be enough to cover the operating costs of the rental, including any mortgage payments and maintenance costs.
This is just a rule of thumb that doesn’t take your local rental market’s specifics into account, though, and shouldn’t form the backbone of your investment decision. To be on the safe side, research rents in your area and run the numbers yourself to ensure that your rental income can cover your essential operating costs.
A good resource is HUD’s fair market rent (FMR) data released each year. Fair market rent is what HUD determines would be a fair price for moderate housing, based on the market in each area it covers. FMR can be a great reality check, letting you know when you may need to adjust your expectations.
Finally, be sure that the price you land on complies with any rent control laws in your area.
Step 6. Create your rental listing
The listing you create for your rental will be the first contact you have with potential tenants. Savvy landlords don’t underestimate the role their ad can play in the type and quality of tenants they attract. Every step of the way, consider who your target market is and what their needs, desires and expectations are.
What makes a good rental property listing?
- Essential information. Make sure you list the rent and any other fees you plan to charge, including pet and application fees. Unsurprisingly, renters hate being surprised by extra costs or fees.
- Good photography. Clear, detailed photographs can cut through the noise and grab the attention of potential tenants. Grainy or inadequate photos can cause prospective tenants to move on, and misleading photos can waste everyone’s time.
- The right contact information. Carefully consider how you want to handle interested parties who reach out. It can be frustrating to everyone when the process becomes phone tag, ignored emails or intrusive calls. Be clear about what works for you, then follow up diligently.
Step 7. Select tenants
You’re probably familiar with the general process: You’ll show the property to interested people, collect and review rental applications and eventually approve a new tenant. And while this may sound simple, it can be a minefield if you’re not familiar with federal and local laws that limit what you’re allowed to say in a listing, how you’ll need to gather and review applications and what information you’re required to share with applicants.
If you’re not familiar with the legal landscape around the rental application process in your area, you may want to consult with a local housing attorney or take a fair housing course specific to your area.
Here are some important obligations and restrictions you may not know about when it comes to rental applications and advertisements:
- Be consistent. You’ll have to provide the same application to all prospective tenants and follow identical screening procedures for everyone. Charge the same application fees, request the same documentation and conduct the same types of background checks for all applicants without exception. Otherwise, you could be accused of housing discrimination.
- Avoid prohibited questions and topics. You may not ask anyone about their race, religion, national origin, sex, familial status or disability status. These are protected characteristics under the law. Stick to relevant financial questions about income, employment, rental history and references.
- Handle accommodation requests properly. You’ll need to consider reasonable accommodation requests from applicants with disabilities, such as allowing service animals or making policy exceptions. Engage in an interactive process to determine what accommodations are reasonable and necessary.
- Provide applicants with required notices. If you use background or credit checks in your application process, anyone you deny because of that information must be notified of that fact. You’ll also need to provide them with the contact information of the company that provided the report.
Step 8. Sign a lease agreement
A lease is a must-have — not only because it finalizes your tenant’s obligation to pay rent to you, but also because it gives you an opportunity to set some ground rules.
In the lease you can place limits on things like how many people can live in the house, whether tenants can have pets and who’s responsible for mowing the lawn. You’ll also want to detail how you’ll handle lease violations, including late rent payments. This will make it easier to enforce later.
It’s wise to seek assistance in creating your first lease. If you can find a form specific to your state, that could be a good place to start. But, ultimately, you should have an attorney review your lease document to make sure that it’s legally enforceable and compliant with current regulations.
- Essential lease terms
- Required disclosures (e.g., lead paint, flood zones)
- Security deposit terms
- Pet policies
- Maintenance responsibilities
- Lease violation procedures
- Security deposit amount
Step 9. Claim your tax benefits
Don’t miss out on the tax benefits of renting out your house. Here are a few rental property mortgage tax deductions you should know about:
- Mortgage interest. Come tax time, you can deduct the mortgage interest you paid on loans secured by your rental property. Instead of using the home mortgage interest deduction to do it, you’ll list the cost as a business interest expense on the Schedule E (Form 1040) tax form.
- Insurance premiums paid in advance. If you pay insurance premiums for your rental property in advance, you can deduct all of the premiums that went toward coverage in that tax year.
- Transportation expenses. You can deduct travel expenses for any trips you make to manage your rental property, including mileage, meals and lodging when traveling out of town for property-related business.
- Repairs and maintenance. The full cost of repairs that keep your property in good operating condition — such as fixing leaks, painting or servicing HVAC systems — are also deductible.
- Depreciation of the house itself. You can depreciate the cost of purchasing or improving the building (not the land), which allows you to deduct some of the property’s cost each year. This is a significant deduction that can often offset most or all of your rental income for tax purposes while you still receive actual cash flow.
Pros and cons of renting out a house
Pros
- Ongoing income. A rental property with reliable tenants can provide consistent income that may even exceed your expenses.
- Property appreciation. You’ll benefit from both the tenant paying down your mortgage and any property value increases.
- Tax advantages. You can claim a wide variety of deductions that can significantly reduce your overall tax burden.
- Increased control. Unlike stocks or mutual funds, you directly control your investment. Your choices related to tenants and rent pricing can increase your property’s value and rental income.
Cons
- Labor intensive. You’ll likely be handling calls from tenants, coordinating repairs and collecting rent. Many real estate investors want passive income, but managing your own rental is far from passive.
- Vacancy risk. It’s normal for a rental to stand vacant at different times throughout its life span. This can cause frustration and anxiety if you want steady and reliable income.
- Ongoing costs. Landlords will need to prepare for maintenance, repairs, insurance, taxes and replacing big-ticket items like the roof or HVAC system. These expenses can take out months’ of rental income in one fell swoop.
- Potential liability. You’re responsible for maintaining habitability standards, following fair housing laws and ensuring tenant safety. Any slip-ups can mean lawsuits that could cost you tens of thousands in legal fees.
Is being a landlord right for me?
Whether being a landlord is right for you depends on your financial situation, lifestyle and priorities. Here are some questions to ask yourself as you try to decide whether renting out your house is truly the right move:
- How much time are you really willing to commit to running your rental? What’s the plan if the rental takes up more time than you have?
- Can you afford to cover ongoing maintenance costs?
- Do you have savings you can put into a rental emergency fund?
- How close do you live to the house you want to rent? Are you willing to travel regularly to maintain it and conduct other business?
- Do you understand the legal responsibilities and risks involved?
- Can you handle the stress and interpersonal challenges of dealing with tenants?
- Is this aligned with your long-term financial goals?
- Have you seriously considered other types of investing?
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