Over 44.1 million households rent their homes in the United States. You may be looking to expand your financial portfolio or are interested in making passive income. Renting your home may be a great place to start if you’re financially able to commit.
However, in the state of Texas, there are certain requirements, laws, and regulations you’ll want to make sure you’re aware of first. Let’s take a look to prepare you as you start your venture towards renting your home.
1. Figure Out If Renting is Right For You
The truth is that renting isn’t right for everyone. Your situation might seem like a great investment opportunity, but the reality could be far from it. Some ideal situations in which renting might work for you include:
- You’ve tried selling your house, but are unable to in the market you’re in.
- Are temporarily out of town and intend on returning to your primary residence after a few months or a year.
- You have the financial capability of purchasing or renting another home for you to live in while looking for a renter to fill your current property.
2. Know Your Responsibilities as a Landlord
Becoming a landlord comes with its own set of responsibilities. First, you need to be aware of the Fair Housing Act and all laws which prohibit discrimination against anyone who applies to live in your residence. You also will need to ensure that the house provides a liveable premise for anyone who intends to reside there.
Other responsibilities include handling maintenance issues on time and providing a quiet environment free from disruption or excess noise. Plus, there are the additional needs of collecting monthly rent or handling evictions if need be.
If you’re uncertain that you’ll have the time or bandwidth to handle some of these items, a property management company in Houston could be a great alternative. You can reap the benefits of continuing to make passive income while alleviating yourself from the stress of handling legally compliant lease agreements or regular maintenance requests.
3. Finalize Your Budget
The best way to determine if you can make the financial investment is by taking a look at your current budget, future budget, savings, career status, and credit score. All of these will be determining factors for obtaining another loan if you’re intending on purchasing another house.
Lenders will want to ensure you have the capability of having two mortgages out simultaneously. If you already found someone to rent your property, have your documentation ready for any lenders you intend on speaking with.
If you’re planning to rent an apartment while someone else rents your house to help pay down your mortgage sooner, you’ll have a substantially easier time as you won’t have to go through the lending process.
4. Determine Your Rent Price
This is where things can get a little tricky. You may be inclined to charge substantially more than what your mortgage is. However, this can do a disservice when trying to find someone to fill the vacancy.
Do your research within your neighborhood. Learn about the market, demographics, and what other rentals similar to your home are going for. You also want to take into consideration what utilities and maintenance are included.
For instance, if lawn care and snow removal are included, you can tack on an additional fee to the monthly rental price. If you don’t intend on including water, sewage, or trash collection like most apartment buildings offer, you may need to lower the price to accommodate.
5. Decide on Security Deposits
Security deposits are meant for a tenant to pay before moving in to ensure they’ll follow through with the entire duration of the lease agreement. The money is legally required to be allocated on repairs and damages made by the tenant.
Otherwise, it’s your responsibility to return the full amount within 30 days of the tenant ending the lease and leaving the premises. In the state of Texas, landlords do not have a specified limit on how much they can charge as a security deposit.
It’s strongly recommended, especially if it’s your first time renting as a landlord, to require a security deposit. Keep this amount in a separate bank account to ensure it isn’t spent and can be returned to the tenant upon move-out.
6. Find Ideal Tenants
Since renting out your house allows you to start working on building your investment without any additional expenses, it’s important to have tenants set up for your property before moving out. This alleviates any vacancies you’d have to pay for.
Start your search by posting the house on various listing sites. You can also add this to Facebook Marketplace, Craigslist, or even by posting a rental sign outside of your property.
Once you have a few potential candidates lined up, you’ll want to do a diligent screening process. Things to look for can include:
- Credit Score
- Rental History
- Employment and income verification
- Criminal background checks
- References from previous landlords
- Total number of applicants for residency
- Pets included with move-in
This all might seem a little overwhelming because you’ll want to get it right from the very beginning. Green Residential offers tenant screening which can make the process of finding good quality tenants that much easier.
7. Draw Up the Paper Work
A legally binding lease agreement is required to protect both the landlord and tenant. It’s easy to find a lease for free online where you simply fill in the blanks with your required fields. However, we strongly recommend avoiding this.
There are certain requirements the state of Texas legally requires. It’s best to work with an attorney or a property management company to provide you with the best legal agreements to keep you and your property safe.
If you’re considering turning your primary residence into a rental property, you have the opportunity to pay off your mortgage and even make money in the process.
Do your due diligence before you make any agreement to have a new tenant move in. Several steps could go wrong if you’re too hasty and make a quick decision.
Green Residential offers a wide variety of property management services in Houston, Texas to make the process even easier. From tenant screenings and maintenance requests to legally binding documents, we’re here to help.
Get in contact with one of our professional team members at Green Residential today to get started.