You've just acquired your first residential rental property. What now? Here's a quick checklist to make sure your property is ready to rent.
You should have contacted an insurance broker before closing on the property, but if you haven't, do so now. A comprehensive landlord insurance policy will protect you from many kinds of losses, including damage to the property caused by fire or vandalism. Make sure you are insured for "general liability," covering injuries or losses suffered by tenants or visitors at the rental property.
Put the utilities, including water and trash collection bills, into your name. Make sure they are active even before the property is occupied. It will be hard to rent your place if the electricity is off! Once you've chosen someone to rent out the property, you can switch all or some of the utilities to the tenant's name.
Contact your city manager's office and find out what department handles property taxes. You want to make sure these bills are sent to your mailing address, not the rental property (unless the address is the same). If the bills aren't sent to the correct address, you could miss a payment and get hit with interest charges, or worse, a lien on your property, before you are even aware of it.
Make sure everything in the property is properly repaired. If the furnace hasn't been serviced in a few years, get it done now before your tenants call you in the middle of the night to tell you black smoke is coming out of it! Lax repair and maintenance practices cost more in the long run (such as the cost of emergency after-hours repairs) than it will to get the work done now. Also, you may be violating the law if you fail to provide habitable rental property, resulting in tenants possibly withholding rent.
If you bought a single-family investment home, the sale may or may not have included appliances such as washers, dryers, or refrigerators (this was probably covered in the purchase offer). Hopefully, the contract not only made clear what appliances would stay, but the seller abided by this, so that you aren't facing any surprise disappearances. In any case, you'll want the place to include a full set of appliances before you try to rent it.
Renters and their agents will, in some states, expect a full tank of oil for the rental unit's heating system at the start of the lease. You can time this so you get it done once a lease is signed, depending on the time of year and when you think the tank may run out of oil. But don't let it go empty! One of the landlord's responsibilities is to ensure the rental unit has working heat, especially during cold weather months.
If the property is currently occupied by renters, make sure the seller or previous owner has transferred their security deposit to you and that you have a copy of all signed leases and other rental documents. Don't terminate any tenancies without following state rules and procedures. If the current tenant is in good standing and comes recommended from the previous seller, it is best to continue that relationship once you take ownership. It is optimal to have a solid tenant already in place when you complete your purchase so that rent payments are coming in from day one to cover your costs.
You'll want to keep track of tax deductions available for landlords, tenant complaints, a general ledger of rents paid and owed, and all other information relevant to owning and managing your rental property.
State laws cover every aspect of renting out property: choosing tenants, providing a habitable place to live, collecting and using security deposits, addressing tenants who pay rent late or cause other problems, and much more. Even if you hand over the responsibility for tenant selection and ongoing rental management to an outside firm, you still retain legal responsibility should things go wrong. If an issue arises, consult with an experienced landlord-tenant lawyer from the beginning to avoid unnecessary disputes and problems with tenants.
See the Landlords & Tenants section of the Nolo site for details on landlord legal responsibilities and relevant state laws.
You may handle tenant screening and selection yourself, or have a real estate agency or property management firm do the work. If you rent it yourself, you can save yourself from paying the real estate agent commission or management firm fee, but you'll have to spend time showing the place to do so. You'll also need to run credit checks and do other types of tenant screening.
To save time and get cash coming in as soon as possible, many rental property owners have the real estate agent who helped with the property purchase get it rented as well. Whatever route you take, make sure you have a clearly written and legally accurate lease or rental agreement and that you comply with all laws, such as state rules on security deposit limits and use.
For a comprehensive guide to landlord-tenant law, see the Nolo book Every Landlord's Legal Guide (or if you are a California landlord, see The California Landlord's Law Book: Rights & Responsibilities).