How to Start Renting Out Your Home: 10 Steps

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Renting out your home is a great way to generate passive income and build long-term wealth, as rental properties can generate strong profits in multiple ways. Landlords earn cash flow, build equity in their property, and enjoy significant tax benefits—all while providing housing to their community. And luckily, it’s a proven business model that almost anyone can do. 

In this article, we’ll provide a step-by-step guide for deciding if renting out your home is right for you and, if it is, how you can set yourself up for success. 

1. Evaluate Whether Renting Is the Right Option for You

Renting out your home may sound like a great idea, but before jumping in, make sure it makes sense for your personal situation. 

Some questions you can ask yourself are: 

• Do I need the equity to finance a new place to live or another large expense? 
• Do I have time to manage a rental property? 
• Am I willing to find and work with tenants? 
• Can I ensure repairs and maintenance are done in a timely and safe manner?
• Can I handle some basic bookkeeping and reporting to ensure I maximize my returns and comply with all tax regulations?

Being a landlord isn’t hard per se, but it does take some effort and comes with responsibilities. Make sure you’re up for those responsibilities before listing your property for rent. 

2. Run the Numbers

If you’re ready to take on the exciting prospect of becoming a landlord, the next step is to run the numbers and make sure your property will turn a profit. It may have been your home when you lived in it, but once you rent out your property, it becomes an investment—and that investment should earn you money! 

Running the numbers on a rental property is relatively straightforward: Determine how much you can earn in rent and compare that to your total expenses. 

Determining what your property can rent for is pretty easy. Look for comparable properties on Redfin, or you can get a Rent Estimate for your specific property using the BiggerPockets Rent Estimator or Redfin’s rental calculator. You can also speak to your neighbors about what they pay for rent or consult with a local property manager. It usually helps to look at two or three different sources to make sure your estimate of rent is reasonable. 

Next, add up all your expenses. Hopefully, this should be easy for you, since you’ve lived in this home. Common expenses you’re probably familiar with include your mortgage, taxes, insurance, and repairs and maintenance. There are also a few expenses specific to landlords you’ll also want to consider, like vacancies and turnover expenses (the cost of sprucing up your home between tenants).

Lastly, subtract your expenses from your potential rental income and see where you land. If your income is more than your total expenses, that’s the goal! You’ll be generating passive cash flow by renting out your house—all while you pay down your mortgage, benefit from potential appreciation and enjoy significant tax benefits. 

If you need help assessing your home as a rental property, you can check out the BiggerPockets Rental Calculator. 

If you are ready to become a landlord and your property can turn a profit, that’s great! You’re well on your way to an exciting new financial opportunity and to join the millions of Americans who build wealth through renting properties. 

3. Understand Local Laws and Regulations

Before you list your home for rent, it’s important to understand the laws and regulations that govern rental properties. These laws typically exist at the state and local level, so make sure to thoroughly research the rules in your area. 

Key things to look for include: 

• Zoning laws 
• Rental regulations
• Tenant and landlord rights
• Whether your municipality requires rental permits or licensing 
• Fair housing laws 

These laws exist to ensure that both tenants and landlords are protected, and complying with them is a must. 

4. Prepare Your Home for Rent

Once you’re up to speed on local laws and regulations, it’s time to get your home ready to be shown and rented out. It can help to think of your future tenants as customers, and now is the time to think through how you’ll attract and keep those customers. 

The local regulations you just researched should give you some guidance on the required steps, but you’ll probably want to go above and beyond to make sure your home is as successful as possible as a rental. Consider the following: 

• Complete safety checks to make sure there are no hazards. For example, check to ensure monitoring features like smoke and carbon monoxide detectors are in place, fire extinguishers are readily available, and all of your utilities are working as expected. 
• Go through your house to make sure everything is in working order. Check your appliances, light fixtures, plumbing, and even small things like cabinets and drawers to ensure your home is in good working order for your tenants. 
• Clean everything really well. No one wants to move into a dirty house. 
• Consider property upgrades that will attract and retain tenants. Small things like a fresh coat of paint, new carpet, or some string lights can go a long way.

While your home may feel perfect just the way it is to you, doing some upfront work to turn your property into a rental is usually a good investment. It will help you land great tenants and often save you money and headaches over the long run. 

5. Look Into Landlord Insurance 

You (hopefully) have homeowners insurance for your home already, but landlords should consider some extra coverage before placing a tenant. 

First, double-check to ensure that your coverage allows your home to be rented out and that it has adequate coverage for fire, vandalism, disasters, and other common risks. Next, check to see if your insurance offers liability protection against injury claims from tenants or visitors. If it doesn’t, you’ll want that. 

Lastly, consider business interruption insurance. Unfortunately, things happen, and if, for some reason, your property becomes unrentable for a period of time, you’ll probably want your insurance to compensate you for lost rent on top of helping you pay for repairs. 

6. Market Your Property

Now for the exciting part: putting your home on the market. Finding a great tenant is a key part of being a landlord and something you should put some effort into. 

First and foremost, take good photographs! They don’t need to be professionally taken—but take this part seriously.  

Nothing turns off potential renters faster than blurry photos that don’t show your home positively. Your home is probably beautiful—do it justice and show it off with good pictures (or if you’re not good at this type of thing, ask a friend or family member). 

Once you have good pictures, advertise your listing on digital platforms like Redfin or on local forums, and don’t underestimate word of mouth. Make sure to include key facts like: 

• Date available
• Length of lease 
• Property description and details 
• How to set up a showing

When prospective tenants reach out to you with interest, make sure to reply in a timely and professional manner. Remember, this is a business, and you want to treat your customers well. You can schedule an open house to do bulk showings or schedule a convenient time to meet with all interested parties one-on-one—it’s up to you. 

Either way, ensure your home is in its best condition for showings. Tidy up, turn the lights on before people arrive, and be ready to answer any questions potential applicants may have. 

7. Screen Potential Tenants

Before any showings, you should determine how you’ll have potential tenants apply to rent your home. This is an important part of the rental property business, as it ensures you find a tenant who can meet the obligations of the lease and will take care of your property. 

Typically, the application process requires a credit check, background check (criminal history, eviction history, etc.), and calling references (like a current landlord or employer to verify income). There are many online services that can help you obtain this information about a tenant with the applicant’s permission. 

The information you receive in an application can be sensitive personal information, so follow all laws regarding its handling, treat it with respect, and don’t share it with anyone. 

While every landlord will have different criteria, most generally focus on a steady income that is well above the monthly rent and a good history as a renter. Remember, fair housing laws apply to all housing providers, and you need to ensure that your application and screening process adhere to all federal, state, and local laws. 

8. Create a Solid Lease Agreement

After you’ve found a great tenant to rent your home, it’s time to put pen to paper and sign a lease. While it may seem formal, having a strong lease is absolutely essential to renting out your home. It ensures both you and your tenant have a common understanding of obligations and responsibilities, and puts into place key protections for both parties. 

A lease agreement can contain tons of different information, but ensure these essential components are included: 

• Rent amount, how and when it’s paid, and implications for late payment
• Lease duration and renewal provisions
• Amount of the security deposit and process for its return
• Maintenance and repair responsibilities 

Although most municipalities don’t require a lawyer to write your lease, it’s a good idea to have something you know is legally sound. There are many laws that govern landlord/tenant relationships, and you want to be sure your lease takes them all into account. 

BiggerPockets offers leases for all 50 states that are updated annually to ensure compliance, or you can consult with your own attorney before drafting a lease. 

Make sure to give your tenants proper time to review the lease before signing, and make yourself available for any questions. Once everyone is comfortable with the lease, sign it, collect the security deposit, and plan for your new tenant to move in! 

9. Prepare for Ongoing Property Management

Your job as a landlord doesn’t end once your tenant moves in. While collecting rent is great and exciting, you need to pay ongoing attention to your rental property to ensure your tenants are happy and your business is profitable. 

Property management entails a broad spectrum of responsibilities, but most commonly includes collecting rent, coordinating maintenance and repairs, communicating with tenants, recordkeeping, and more. This may sound like a lot, but after a small learning curve, most people can learn to do this in just a few hours per month. 

Many homeowners choose to do property management themselves, while others opt for a professional manager. Both are fine choices—it just depends on your personal preferences. DIY property management will save you money (professional managers typically charge 8% to 12% of rent), but obviously requires a commitment of time. Professional managers can be great for homeowners who want to be hands-off with their rentals (they can even do the marketing/screening/lease signing mentioned), but come with reduced profits. 

Whichever option you choose—DIY or a professional property manager—it’s important to ensure you have the proper oversight and systems in place to make sure your home stays in great shape, your tenants are happy, and your business is as profitable as possible. 

10. Be a Responsible Landlord

Becoming a landlord is an exciting financial proposition, but it also comes with important responsibilities and obligations to your tenants. This includes: 

• Addressing tenant concerns promptly
• Timely communication
• Repairing anything that breaks
• Ensuring your property is safe 

While some people assume that the tenant/landlord relationship is often adversarial, that’s not the case. Most landlords and tenants get along well on the basis of mutual respect and understanding. Remember, your tenants are your customers, and you should do your best to give them a positive experience as a renter of your home. 

How to Start Renting Out Your Home: Final Thoughts

Renting out your home is an exciting proposition that can give your finances a big boost. Rental properties can earn passive cash flow, generate equity growth, and provide tax benefits—all without a huge amount of effort. It’s an amazing opportunity to leverage your existing home and a proven business model to generate passive income. Millions of Americans enjoy the benefits of renting out their homes, and you can, too, by following the 10 easy steps in this article. 

Remember that renting out your home isn’t just collecting a rent check. You need to carefully consider if you’re ready to take on the responsibilities of being a landlord: following all local laws and regulations, maintaining the quality and safety of your home, addressing tenant concerns and treating them with respect, and doing some basic administrative work as well. 

If you want to enjoy the many benefits of renting out your home and are ready to take on the responsibilities, you can follow the steps in this list to get started. You can also head over to BiggerPockets to access tons of resources on how to be a successful rental property owner and join a community of over 3 million people pursuing financial independence through real estate.