Tips for Renting Out Your Home for the First Time

So you followed our tips for buying a vacation home and bought your magnificent home away from home. Congrats! You’ve also decided to rent it when you’re slugging through the 9 to 5. Great! …now what? Don’t worry, we can help there, too. You’ll be rolling in the rental income dough in no time.

1. Know the laws. Some cities, counties, HOAs, and sometimes even mortgages can be very specific about renting and whether or not it is allowed. Sometimes you need an official permit to rent your home, including fees, inspections, and even letters to the neighbors. The requirements vary widely from location to location. Reviewing these laws should be the very first thing you do, as it could help shape your rental agreement, insurance purchases, or even nix the entire idea. No matter how you ultimately decide to handle renting out your home, make sure it’s legal.

2. Ok, it’s legal. Now what? Check your insurance policy. It might not cover renters, in which case landlord insurance is a must. No matter how chill that couple from Portland seems, accidents happen. You don’t want to foot the whole bill if there’s damage. Some major online rental sites even offer protection through third-party insurance companies, which you can require in the rental agreement. The renter pays a one-time fee based on the necessary level of coverage, and – bam – you’re protected! It takes the place of security deposits, offering better coverage and streamlining the process for both renter and landlord.

3. Figure out your price. This can be tricky, as you’ll need to get a feel for the market in your area to make sure you don’t price yourself too high to attract renters or too low to cover your costs. Also keep in mind your rates will probably change with the seasons. If your area is standing room only in the summer, but a ghost town in the winter, your price will have to follow the thermometer and fall as it gets colder. See what people in your area are charging and start there.

4. Start keeping track of expenses to the penny. Let’s say your area requires a permit and inspection before you can rent. Sure, it was a pain in the neck at the time, but those fees are tax deductible. It’ll help offset the fact your rental income is taxable. Every deduction helps, so track each of your preparation expenses and keep careful records. You’ll thank yourself in April when it comes time to file your taxes. Not sure where to start? There are software programs designed to help with managing rental expenses.

5. When you were combing through the laws for renting in your area, you should have come across requirements for safety equipment in your region. Just like the permitting process, it varies widely on location, but you can guarantee you’ll need smoke detectors. While prepping the place, make sure the batteries are new and the detectors work. Also check fire extinguishers and carbon monoxide detectors.

6. Other prep work to put on your to-do list includes checking all the appliances are operational, ensuring the furniture is in good condition, fixing up the yard, and cleaning everything. Put fresh linens on the beds and stock the bathrooms with clean towels, soap, and other toiletries. Think what you would want in your home away from home, and do that.

7. Don’t go too far with that thought, though. You might want some irreplaceable family mementos in your home away from home, but it’s best to keep precious personal belongings in your primary home. If you would be heartbroken if your Aunt Matilda’s rug was ruined from a red wine spill or devastated if your signed Michael Jordan basketball was handed to the tenants’ kids to play HORSE on the community court, keep them somewhere safe. You can’t control what happens at your rental when you’re not there, so better safe than sorry. The same goes with linens. Don’t spend $100 on Egyptian cotton bath towels that could be used to dry off the family dog or wipe up an orange juice spill – or disappear in a suitcase. Stock the home with items that are good quality, but won’t break the bank to replace.

8. On to that rental agreement we keep talking about. Sure, you set your place up as a cute little getaway for couples looking for a quite retreat. Unfortunately, a frat rented your home instead and now it looks like a scene from Animal House. Or, those lovely newlyweds are your only tenants – but they invited 40 of their closest friends for a party you (and your home) won’t soon forget. Prevent disaster and protect yourself with a well-written rental agreement. Be sure to include the rental cost, minimum stay, maximum occupants, pet and smoking restrictions, and what will happen if there is damage to the property. Many rental websites have templates for rental agreements, but you might want to have a lawyer review your agreement for loopholes or missing restrictions before you rent the place. Murphy’s law states the one scenario you forget is the one that will happen.

9. Alright, so you’ve done all of the above. Bring on the tenants, right? Well, sort of. It’s best to screen your tenants carefully. Call the prospective renter and ask things like the purpose of the trip, how long they plan to stay, if they’ve rented before, and the number of tenants joining them. Ask for personal references, and maybe do your own inspection on social media. Some online rental sites also track tenant reviews, not just properties. Still unsure? Asking for a higher deposit (up to 20% of the rent) can help prescreen and protect you in the process.

10. If this all just seems too overwhelming, consider hiring a management company. Renting out your vacation home can easily become a second job, so if the work is too much and you can afford the management company fee (sometimes as much as 50% of the rental income) this could be the best solution. It takes all the worry and hassle out of renting, though make sure the manager you choose is well respected and has a history of managing rentals in your area.

Renting your vacation home can be a great way to rake in some extra cash to help offset its cost, or it can be the stuff of nightmares. Thankfully, if you do your homework from the start, you can protect yourself, your home, and your wallet from a dreaded renting disaster. That way, your biggest concern will be locking in your own vacation dates before prospective renters scoop them up!