Don’t Let Your Mortgage Be An Anchor: 7 Tips on Leasing Out Your Home
Updated: Dec 13, 2019
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As we plan our 1-year European Adventure, there’s a sort of tug-of-war for our attention between our life in the US and our trip abroad.
We have plenty of things to take care of at home before we can fly across the pond and spend a full year adventuring.
Check out our video below to hear more about our experience leasing.
...or keep scrolling if you'd prefer to read the more detailed blog version.
So far, we’ve booked accommodations for 3 months out of 12. But wait...what are we going to do about our house (and mortgage!) in the US? Why,...rent it of course!
We’ve owned our house for almost 8 years and intend to move back in once we return from our trip. Or maybe continue renting it out and buy a second property? Who knows… we have at least a year to figure that out!
Fortunately for us, we seem to have had a bit of beginner’s luck in the landlord arena…
Within days of posting our house for rent, we had multiple inquiries from what seemed to be quality tenants and a few showings scheduled.
Just yesterday (a few weeks after listing) we finalized all of the details with our future tenant for the full 12 months we’ll be away.
Below we share what we learned and our top tips for successfully leasing out a house in the US.
1. Determine the monthly rent amount
We worked backwards from our expenses to determine the minimum monthly rental amount we would be willing to accept. While many people earn significant profit from rental properties that they purchase at pennies on the dollar, this is our actual home and was purchased at fair market value. We simply want to cover our costs (with a small buffer to cover any surprises).
We included the following in our calculation:
We currently have a 15-year mortgage so this payment is arbitrarily high, but since we will still owe it each month, we included the full amount in our rent calculation. If you make extra payments in order to pay off your mortgage sooner, build that in as well (just don’t be surprised if market rent is lower).
Homeowners Association Fees
These are due quarterly in our neighborhood and are fairly inexpensive given the amenities in our neighborhood (pool, playground, clubhouse, etc.), so building them in didn’t inflate the rental price too much.
We included treating the lawn and mowing during the warmer months (roughly half of the year where we live). Eddie and I (correction: mostly Eddie) have spent a lot of time and energy improving the lawn and we don’t want all that effort to go to waste from tenants failing to maintain it as we would.
We have an annual maintenance plan through a local HVAC company to visit three times per year and perform preventive maintenance on the furnace, air conditioning unit, and plumbing. This has a small upfront expense, but can prevent a nightmare in the future. Highly suggested.
We will have someone local stop by the house once every couple of months to do things like change the air filter on the furnace and fill the water softener with salt (to this person...you know who you are...we are extremely grateful for your willingness to help out!)
After adding up the expenses listed above, we then added a 10% buffer for anything else that might come up. You may want to consider including more of a buffer if you are less risk tolerant or if you don’t have a significant balance in savings to pay for a major repair on the house. Luckily, we do have a solid financial cushion so we went with a relatively low buffer. To each their own.
2. Research comparable rental properties in your area
Next, we consulted Zillow, Trulia, Craigslist, and Facebook Marketplace for other houses for rent with similar characteristics. We focused primarily on the rent amount per square foot with the same general level of furnishings as ours. Our house has a lot of the original fixtures from when it was built in the 90’s, but we’ve also made several updates such as replacing the flooring and installing all new windows.
You should also seek out friends and family who have experience renting a home in your area. Explain that you’re looking to better understand the local market and what rent amount might be appropriate to charge. They’ll likely share the details of their past rental arrangements.
At this point, you may need to adjust the rental price you determined in Step 1. If the number we came up with had been double the price of comps in our area, we had to be realistic about whether we’d actually get that amount (likely not). The lesson here is that you have to balance Steps 1 and 2.
Ah yes….the legal requirements to leasing a home. You will need at least two items:
While we’re sure there are people with “hand shake” agreements, this...should..not..include..you! You should want to have the protection of an agreement signed by both parties that includes details such as:
Duration of lease
Permitted use of property
We started from a 10-page lease agreement which had been used a few years ago by some close friends of ours (to our favorite West Coast fam...thank you!). This made things significantly easier but there are plenty of templates available for free after a simple Google search. We recommend pulling several templates and piecing together a version which best fits your circumstances.
Also be sure to check local and state laws for rentals. Our research turned up a state law which requires the landlord to return the security deposit within 45 days of the end of the lease and the tenant moving out or provide an itemized list of damages and their estimated repair costs. While it wasn’t necessary to include this in the lease agreement since it’s already a law we have to abide by, we included it anyway just so everyone was on the same page as far as expectations.
A lease application is also necessary in order for you to run background and credit checks on a potential tenant. The application we used was two pages in length (significantly shorter than the lease agreement) and included information such as current and previous addresses, social security numbers, current employer, monthly take home pay, and references.
[Disclaimer: We are not lawyers. Be sure to consult a legal professional regarding legal documents. Moving on…]
4. Declutter and clean before taking photos
Leasing a house is much different than selling a house. However, you should still put in some effort to make it look as nice as possible before taking photos for the listing if you want to get the highest possible rent amount.
We went room by room and put away our personal belongings (making it easier for a tenant to picture their stuff in its place), cleaning, opening all of the blinds and curtains, and turning on all of the lights. We then took several photos of each room, each from a different angle. Keep in mind that it’s helpful to an applicant tenant to be able to understand the floor plan from your photos.
5. Post the rental listing online and schedule showings
Posting a rental to multiple sites will help ensure the most exposure to possible tenants.
We decided to post our rental listing on Facebook Marketplace and Craigslist, since both were free and familiar to us. We decided if we didn’t get any traction there, we would consider posting to paid sites. We found that even Rent.com charges to host a rental listing.
Honestly, we expected to get a better response to the Facebook Marketplace post (compared to Craigslist) since you can take a closer look at whatever information the person has decided to make public on his or her profile. But we were wrong. Two of the first serious inquiries we received were to our Craigslist post.
After messaging back-and-forth a couple of times with the two possible tenants from Craigslist, we scheduled showings on consecutive days. This was preferable since we already had the house clean and ready to go. Who wants to have to keep their house spotless for that long?
Keep in mind that almost anything is negotiable.
Would you be willing to leave some furniture in the house while it’s being leased?
Will you provide a discounted pet fee for 2nd, 3rd, and 4th pets?
Are you a germaphobe and prefer that the house be professionally detailed prior to the tenant moving in or out?
Don’t hesitate to include non-traditional things in your lease agreement if it would give you better piece of mind or even sweeten the deal from your perspective.
We were flexible on the exact start date of the lease and our tenant’s family is expecting a newborn the month after they move in. They ended up picking a date two days prior to the one we had in mind (and we really ought to be packed by then anyway!). By allowing the tenant to pick the specific move-in date, we think we earned a little bit of goodwill.
We recommend being generous regarding details that don’t matter a whole lot to you so that you can negotiate a bit more aggressively on the must haves. Pick your battles, as they say.
7. Background and Credit Checks
Truth: We had no idea whether “just anyone” could run a background check on another person. I mean...aren’t there privacy laws to consider? Well, we found that it is possible (and common) to do so. After doing a bit of online research and finding several sites offering “landlord services,” we settled on Rentprep.com.
With RentPrep, you first create an account. They verify that you are actually the owner of the property to be leased and that you have the tenant’s permission to run a background and/or credit check via your rental application we discussed above.
We paid ~$55 to run both a background and credit check on the husband and wife who will be named as tenants on the lease. You may want to require that applicant tenants pay this fee upfront when they apply and, if approved, offer it as a credit on their first month’s rent. It may help deter potential applicants who know they wouldn’t pass a background check. (RentPrep actually has a feature that makes this quite easy. You can purchase one of the packages that includes tenant involvement and it provides them with a web portal where they can log in and pay for their background check.)
However, to keep things simple we opted to just cover this fee ourselves.
In the end, only time will tell if our foray into being landlords is as smooth as the leasing part has been. Something tells us the PhD, lawyer, and their two small children will be kind to our home. If you do your homework, pay attention to the details, and have a solid agreement in place, you can more easily enjoy your time abroad without having to worry about a property you own back home.
Have you rented out your primary home? Was it a positive experience? Please share in the comments below!
Eddie & Megan
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