This content is provided courtesy of USAA.
See what real estate experts have to say about finding reliable, high-quality tenants.
If you own a house that you can't sell and are thinking of renting it out, finding good tenants who will take care of your home is challenging — but essential.
"Taking a smart businesslike approach in selecting renters is a must to protect your investment and save you money and aggravation," says June Walbert, a USAA CERTIFIED FINANCIAL PLANNER™ practitioner.
As you begin your hunt for the right renter for your home, use these 10 tips offered by real estate experts.
1. Understand the Laws
Research federal and state laws that cover tenants and landlords. The Fair Housing Act specifically outlines what constitutes illegal discrimination against qualified tenants. For example, you could base your decision on credit or criminal history but not on race, religion, national origin, gender, age or family status. "The Fair Housing Act also prevents discrimination against persons with disabilities," says Kathy Hertzog, president of Landlordassociation.org.
To ensure you conform to state and federal laws, go to the U.S. Department of Housing and Urban Development's website or consult a local attorney or legal information sites like nolo.com. Landlord organizations, such as Landlordassociation.org or the National Association of Independent Landlords, could be useful resources.
2. Know Where to Advertise
Start online, says Jayci Grana with the National Association of Residential Property Managers. At a fee of $50 to $100 for each listing, you can advertise property on sites like rentals.com or rentalhomesplus.com. Beware when using free sites like craigslist.org, warns Grana. These sites have become notorious for scammers who change the contact information on rental listings, take the rent money of potential tenants and then disappear.
To expand your approach, Hertzog suggests:
- Take out ads in the online and printed classified sections of local newspapers.
- Put fliers in area grocery stores and Laundromats.
- Contact human resource directors at local businesses to post ads in employee lunchrooms and new-employee information kits.
- Broadcast your rental to your friends on social networking sites, like Facebook and Twitter.
- Get referrals from family and friends.
"Screen everyone the same no matter where you find them, even those from family and friends," adds Hertzog.
In your listings and fliers, include a photo of your house and basic details, such as:
- Neighborhood where it's located.
- Number of rooms and bathrooms.
- Garage size.
- Special features like a swimming pool, fireplace or basement.
- Rent amount.
3. Clean Your House
Even before putting the word out or advertising, make sure your house is clean and ready to show. Remove clutter and take care of repairs.
Because many potential tenants in need of housing already have been looking, they could respond within hours of an ad posting. "A well-maintained house increases your chances of securing a responsible tenant," says Grana.
4. Use a Rental Application
"The rental application is the document used to collect personal information about the applicant and co-applicants so that you can perform background checks," says Hertzog.
Rental applications could request:
- Applicants' names
- Social Security numbers
- Previous addresses
- Driver's license numbers
- Income sources and amounts
- Children's names and ages
- Number of pets and their breeds
- Employer contacts and job title
- References (not family)
Depending on your state's laws, you may be able to charge a nonrefundable application fee of $25 to $40 to cover the cost of background checks. "If someone refuses to pay this fee, there's your first screening tool," says Hertzog.
In addition to the application, provide a rental policy sheet that clearly spells out the terms and conditions of the lease, such as pets, cosigners and renters insurance requirements.
5. Require Renters Insurance
During the application process before a lease is signed, let your potential tenants know you will request that they show proof of renters insurance on the move-in date. Renters insurance will cover the cost of the tenants' belongings as well as damage they could cause to your house. Consider purchasing landlord insurance to provide the coverage you need to protect your rental property.
6. Avoid Interviews
It may seem like common sense to conduct interviews as part of the screening process, but Grana advises against them. "That alone is opening you up for Fair Housing lawsuits. Also, the way people dress or act in person doesn't tell you how they could perform in a lease agreement," she explains.
7. Do Background Checks
"The only way you can determine whether they will be good tenants is based on their past history," says Grana.
Sites like creditinvestigators.com will research an applicant's employment, credit history, bankruptcies, evictions and criminal records. Fees for these reports run from $10 to $70 per adult screened. Make sure you or the company you hire calls the applicant's employer to verify their income.
8. Wait for the Check to Clear
To avoid problems with a personal check clearing the bank, ask for a deposit in the form of a cashier's check or money order. If you accept a personal check, don't stop marketing the house and taking backup applications until the check clears and a lease agreement is signed, urges Grana.
9. Use a Lease Agreement
A strong lease sets the terms and conditions for tenants living in the house. These include facts like who will live there, when rent is due, penalties for late rent and so on. A good lease spells out the policies and basis for eviction.
10. Don't Settle
Be picky. "Have high standards; don't settle out of desperation. You'll end up with a lower quality tenant who could cost you in the long run," says Grana.
For examples of rental applications, lease agreements and policy sheets, go to Google and type in "free legal forms." Before using the forms, make sure they meet your needs and state and federal requirements.
Protect Your Investment
Whether you are renting out your house, a vacation home or an investment property, rental property insurance is an important safeguard against the financial risk associated with tenants living on your property. If you are a renter your belongings are protected as well. Get free quotes.