How to Rent Out Your House: 8 Essential Steps for First-Time Landlords

Renting out a house can generate income, but collecting rent is only one part of being a landlord. Property owners also need to understand local rental rules, screen applicants fairly, maintain the home, and plan for expenses that rent payments may not cover.

If you have an unoccupied home or are considering turning your current residence into a rental property, the process starts well before you advertise it.

Here’s how to rent out your house in eight steps, from setting a competitive rental price to protecting the property with appropriate insurance.

Key Takeaways

1. Before renting out a house, check local licensing, zoning, safety, and landlord-tenant requirements, along with any mortgage or HOA restrictions.
2. Set rent using comparable local properties, then account for vacancies, repairs, insurance, taxes, and other expenses.
3. Screen applicants using consistent, lawful criteria and follow Fair Housing Act and Fair Credit Reporting Act requirements.
4. Use a written lease that clearly explains payment terms, maintenance responsibilities, deposits, and renewal or termination rules.
5. Keep accurate financial and maintenance records, and confirm that your insurance covers rental use.

Before You Rent Out Your House: What Should You Check?

Before listing a home for rent, determine whether you’re legally and financially prepared to operate it as a rental property.

Understand Local Rental Rules

Landlord-tenant requirements vary by state and municipality.

Depending on the location, you may need to register the property, obtain a rental license, schedule an inspection, or meet specific safety requirements.

Local rules may also address occupancy limits, security deposits, rent increases, notice periods, and eviction procedures.

If the property is part of a homeowners association or condominium association, review its governing documents for rental restrictions.

Some associations limit lease durations, require tenant registration, or restrict the number of units that may be rented.

Movoto’s guide to zoning rules for renting out a home explains additional considerations.

Check Your Mortgage and Insurance

If you have a mortgage, review the loan terms and contact your servicer or lender before converting the property to a rental.

Owner-occupancy requirements can apply to certain mortgages, particularly during an initial occupancy period.

Renting the property may also affect your insurance needs.

A standard homeowners policy may not provide appropriate coverage once the home is used as a full-time rental.

Understand How Rental Income Is Taxed

Rental income generally must be reported on your federal income tax return.

But rental income isn’t automatically treated as self-employment income.

For many individual landlords, income and expenses from residential rental property are reported on Schedule E, rather than being treated like wages or ordinary business earnings.

Different rules may apply when a landlord provides substantial services to tenants or operates under other circumstances.

Common potentially deductible rental expenses include mortgage interest, property taxes, insurance, maintenance, repairs, and certain management costs.

Depreciation may also apply.

However, improvements generally must be capitalized and recovered over time rather than deducted immediately as ordinary repairs.

The IRS explains these distinctions in Publication 527, Residential Rental Property.

A tax professional can help determine how the rules apply to your property, particularly if you’re converting a former primary residence into a rental.

8 Steps on How to Rent Out Your House

Once you’ve reviewed the legal and financial requirements, you can begin preparing the property and looking for tenants.

1. Calculate a Fair Rental Price

The first step is determining how much rent your house could reasonably command.

Start by comparing recently advertised or leased properties in the same area.

Look for homes with similar characteristics, including:

• Square footage and number of bedrooms
• Bathrooms and overall condition
• Parking and outdoor space
• Appliances and included utilities
• Location and access to amenities
• Lease duration and pet policies

A renovated home may command more rent than a comparable property needing repairs, but upgrades don’t guarantee that renters will pay a particular premium.

Local supply and demand also matter.

A property in a market with substantial rental competition may need to be priced more conservatively.

Once you’ve estimated market rent, compare that amount with your expected expenses.

Calculate the Cost of Operating the Rental

Rent collected isn’t the same as profit.

Consider ongoing costs such as:

• Mortgage payments, if applicable
• Property taxes
• Landlord insurance
• Maintenance and repairs
• Utilities paid by the owner
• HOA fees
• Property management fees
• Advertising and tenant turnover
• Periods when the property is vacant
• Capital improvements and major replacements

For example, suppose a property rents for $2,000 per month.

That produces $24,000 in annual gross rent if the property is occupied and rent is paid for all 12 months.

But if the property is vacant for one month, gross rent collected falls to $22,000 before accounting for any other expenses.

The amount remaining after operating expenses, financing costs, and other obligations may be considerably lower.

Set rent based on the market, not simply on the amount needed to cover your mortgage.

2. Prepare the Property and Organize Maintenance Supplies

Before showing the house, inspect its condition and address problems that could affect safety, habitability, or tenant satisfaction.

Check major systems and features, including:

• Heating and cooling
• Plumbing and water heaters
• Electrical systems
• Doors, windows, and locks
• Smoke and carbon monoxide alarms
• Roof and drainage
• Appliances included with the rental
• Flooring, walls, and exterior areas

Local law may establish specific inspection or safety requirements.

Address known problems before a tenant moves in rather than relying on the tenant to report them later.

Keep Useful Repair Materials Organized

If you plan to manage the property yourself, keeping a modest inventory of commonly used materials can make maintenance easier.

Leftover paint, matching trim, flooring materials, and replacement hardware may help with future repairs.

Store supplies safely, label them, and keep records of product specifications.

For properties near your residence, an organized storage area may reduce the time needed to complete routine maintenance.

However, buying spare appliances or storing large amounts of material isn’t always cost-effective.

Consider the available space, storage conditions, warranty limitations, and likelihood that an item will actually be needed.

For major systems or emergency repairs, establish relationships with qualified contractors before a problem occurs.

3. Screen Tenants Thoroughly and Fairly

Tenant screening can help landlords evaluate whether an applicant is likely to meet the financial and contractual obligations of renting the home.

But screening must be conducted consistently and in compliance with applicable laws.

Common screening information may include:

• Rental history and landlord references
• Employment or income verification
• Credit information
• Relevant eviction records
• Other legally permitted background information

Establish written screening criteria before reviewing applications.

Apply those criteria consistently rather than changing standards based on personal impressions.

Follow Fair Housing Requirements

The federal Fair Housing Act prohibits discrimination in housing based on race, color, national origin, religion, sex, familial status, or disability.

State and local laws may protect additional characteristics.

Screening policies that appear neutral can still create legal problems depending on how they are applied and whether they comply with applicable laws.

Some state and local laws restrict how landlords can use criminal history in screening, and federal fair housing guidance on this topic has changed in recent years. Check current requirements before adopting a criminal-history policy.

Understand Credit and Background Report Rules

If you use a tenant screening company or obtain a consumer report, the Fair Credit Reporting Act may apply.

Landlords must have a permissible purpose for obtaining the report and comply with applicable requirements.

If you take an adverse action based partly or entirely on a consumer report, you generally must provide an adverse action notice.

That requirement can apply not only when rejecting an applicant but also when imposing a higher deposit, requiring a co-signer, or taking certain other unfavorable actions.

The Federal Trade Commission explains the requirements in Using Consumer Reports: What Landlords Need to Know.

Avoid relying solely on screenshots of credit scores or informal background information. These may be incomplete, inaccurate, or difficult to verify.

Use a reputable screening process and protect applicants’ personal information.

4. Streamline Your Rental Application Process

An organized application process can help you respond to prospective tenants and compare applicants fairly.

Paper applications can work, but digital systems may make it easier to collect information, track status, and communicate with applicants.

Rental management platforms may provide application forms, screening integrations, electronic signatures, and document storage.

You can also use a simpler process if it meets your needs and complies with applicable requirements.

Whatever system you choose, protect sensitive information.

Rental applications may contain Social Security numbers, financial records, identification documents, and other personal details.

Avoid placing that information in broadly shared documents or folders.

Limit access to people who need it, use appropriate security controls, and follow applicable data retention and disposal requirements.

Also review local laws governing application fees, screening fees, and the information landlords may request.

5. Use a Clear, Legally Compliant Lease

A written lease establishes the rights and responsibilities of the landlord and tenant.

It should explain what each party has agreed to and provide a reference if questions or disputes arise.

Common lease provisions include:

• Names of the parties and property address
• Lease start and end dates
• Monthly rent and payment due date
• Late fees and grace periods, where permitted
• Security deposit amount and conditions
• Maintenance and repair responsibilities
• Rules for pets, guests, and subletting
• Utility responsibilities
• Notice requirements
• Renewal and early termination provisions
• Procedures for property access

A lease should comply with federal, state, and local laws.

Some provisions that appear in online lease templates may be unenforceable or unlawful in a particular jurisdiction.

For example, landlords generally can’t use a lease clause to waive statutory habitability requirements or bypass legally required eviction procedures.

Have a qualified local attorney review the agreement, particularly if you’re renting out a property for the first time.

Decide Whether to Offer a Fixed-Term or Month-to-Month Agreement

A fixed-term lease may provide more predictable occupancy and rent payments for a defined period.

A month-to-month arrangement may offer greater flexibility but can also involve more frequent changes or turnover.

Neither arrangement is automatically better.

Movoto’s guide to the difference between leasing and renting compares fixed-term and month-to-month agreements.

You can also review the advantages of choosing a long-term lease before deciding whether to offer a multi-year term.

6. Maintain the Property and Keep Accurate Records

Once a tenant moves in, property maintenance becomes an ongoing responsibility.

Landlords generally must comply with applicable habitability standards and repair obligations.

The lease may assign certain routine tasks to tenants where permitted by law, but it doesn’t automatically eliminate the landlord’s legal duties.

Establish a clear process for tenants to report problems.

For urgent issues, such as significant leaks or loss of essential services, make sure tenants know how to reach you or an authorized property manager.

Track Repairs and Expenses

Keep records of:

• Maintenance requests
• Dates problems were reported
• Contractor visits
• Work completed
• Invoices and receipts
• Property inspections
• Communications with tenants

A spreadsheet may be sufficient for a landlord with one property.

Owners with multiple rentals may benefit from property management software that tracks work orders and expenses.

Records can help resolve disputes, plan maintenance budgets, and document expenses for tax purposes.

They can also help distinguish ordinary repairs from improvements that may receive different tax treatment.

7. Establish a Reliable Rent Collection Process

Consistent rent collection helps landlords manage cash flow and maintain accurate records.

Common payment methods include checks, electronic transfers, and online rent payment platforms.

Choose a method that is practical for both parties and complies with applicable state and local rules.

The lease should clearly explain:

• When rent is due
• Which payment methods are accepted
• Whether any payment processing fees apply
• Whether a grace period is provided
• What happens if payment is late
• How tenants can report payment problems

Some jurisdictions regulate late fees, grace periods, and acceptable payment methods.

Don’t assume that a five- or ten-day grace period is legally required or appropriate everywhere.

Document Every Payment

Keep a record of the amount paid, payment date, and any outstanding balance.

Provide receipts when required by law and maintain accurate account records.

If a tenant falls behind, communicate promptly and follow the lease and applicable legal procedures.

Landlords may sometimes choose to offer a payment arrangement, but any agreement should be documented.

Avoid informal changes that create confusion about the amount owed or the terms of the tenancy.

8. Protect the Property With Appropriate Insurance

Insurance is an important part of managing rental property risk.

A standard homeowners policy may not provide the coverage needed for a home occupied by tenants.

Landlord insurance may offer coverage for:

• Damage to the insured building from covered events
• Certain landlord-owned property
• Liability claims
• Lost rental income when a covered loss makes the property uninhabitable, subject to policy terms

Coverage varies by insurer and policy.

Landlord insurance doesn’t necessarily cover ordinary wear and tear, neglected maintenance, every type of water damage, or rent lost because a tenant simply stops paying.

Flood and earthquake coverage may require separate policies or endorsements.

Talk with an insurance professional about the property’s use, location, and risks before renting it out.

You may also consider requiring tenants to carry renters insurance, subject to applicable law.

Renters insurance generally protects the tenant’s belongings and may provide personal liability coverage. It doesn’t replace the landlord’s property insurance.

Should You Manage the Rental Yourself or Hire a Property Manager?

Managing a rental yourself can reduce management fees, but it requires time and attention.

You’ll need to respond to tenants, coordinate repairs, maintain records, and understand legal requirements.

A property manager may handle marketing, tenant screening, rent collection, maintenance coordination, and other services.

However, management companies charge fees, and the services included vary.

Movoto’s guide to typical property management fees discusses the tradeoffs between managing a rental yourself and hiring help.

Even when you hire a property manager, you remain responsible for understanding your obligations as the property owner.

Review the management agreement carefully, including fees, authority to approve repairs, reporting requirements, and termination provisions.

Is Renting Out Your House Worth It?

Renting out a house may provide recurring income and allow you to retain ownership of a property.

But the financial outcome depends on more than the monthly rent.

A property can produce rental income while still requiring substantial cash for repairs, mortgage payments, insurance, taxes, and vacancies.

Before deciding to rent, compare the expected net cash flow with the cost and risk of keeping the property.

Also consider how much time you want to spend managing it.

If the house was previously your primary residence, review the tax implications of converting it to rental use, including depreciation and the potential consequences of a later sale.

For some homeowners, renting the property may be a reasonable long-term strategy.

For others, selling may provide greater financial flexibility and fewer ongoing responsibilities.

Bottom Line

Renting out your house involves more than finding a tenant and collecting monthly payments.

A successful rental operation requires realistic pricing, lawful tenant screening, a clear lease, reliable maintenance, accurate records, and appropriate insurance.

The most important first step is understanding the legal and financial obligations before the property is advertised.

From there, a consistent process can help reduce avoidable problems and make the responsibilities of being a landlord easier to manage.

FAQ

Do You Need a License to Rent Out Your House?

It depends on the location. Some cities and counties require rental registration, licenses, inspections, or other approvals. Check local requirements before advertising the property.

Can You Rent Out a House That Still Has a Mortgage?

Often, yes, but you need to review your mortgage terms. Some loans include owner-occupancy requirements or other restrictions. Contact your lender or servicer before converting the property to a rental.

How Much Should You Charge to Rent Out Your House?

Compare similar rental properties in the same market, considering size, condition, location, and amenities. Then evaluate whether the expected rent can support the property’s expenses. The amount needed to cover your mortgage doesn’t necessarily reflect market rent.

Is Rental Income Considered Earned Income?

Generally, ordinary residential rental income is treated as rental income rather than wages or self-employment earnings for federal tax purposes. Exceptions may apply, including when substantial services are provided to tenants. A tax professional can help determine the correct treatment.

Can You Rent Out Your House Without a Property Manager?

Yes. Many owners manage their own rentals, particularly when they have one property nearby. However, self-managing landlords must still comply with applicable laws and handle maintenance, tenant communication, rent collection, and recordkeeping.

What Happens if a Tenant Stops Paying Rent?

The landlord must follow the lease and applicable state and local laws. These may require specific notices, waiting periods, and court procedures before eviction. Landlords generally cannot remove tenants or their belongings without following the legally required process.

What Expenses Can You Deduct When Renting Out a House?

Potential deductions may include qualifying repairs, maintenance, insurance, property taxes, mortgage interest, management fees, and depreciation. Rules vary by expense and property use. Major improvements generally receive different tax treatment from routine repairs.

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