How to Become a Landlord: A Step-by-Step Guide

The order to do it in

1. Run the numbers

Start with what the rent has to cover. Say a house would rent for $1,650. The mortgage principal and interest is $900, property tax is $230 a month and a landlord policy is about $210. Set aside 5% of rent for vacancy ($83) and 10% for repairs and replacements ($165). That’s $1,588 in costs, which leaves $62 a month. That’s thin but positive, and one $700 repair beyond your reserve wipes out most of a year’s profit. If the numbers don’t work on paper, they won’t get better once a tenant moves in.

2. Prepare the property

Fix anything unsafe first: working smoke and carbon monoxide detectors, secure locks (rekey between tenants), handrails, and no exposed wiring. If the home was built before 1978, you’ll owe the tenant a lead paint disclosure. Check whether your city requires rental registration or an inspection. Then take dated photos of every room, which become your move-in record.

3. Switch to landlord insurance

A homeowners policy generally won’t cover a home you rent out. Replace it with a landlord (DP-3) policy that covers the building, loss of rent and your liability, and require tenants to carry renters insurance for their own belongings.

4. Set the rent

Price it from comparable rentals nearby with similar size, condition and amenities, not from what you need to break even. Overpricing costs more in vacancy than it gains in rent: a month empty on a $1,650 rental takes almost two years of a $75 premium to earn back.

5. List it

Good photos, an accurate description, the rent, deposit and pet policy, and your screening criteria in writing. Free landlord apps syndicate a listing to the big rental sites from one place.

6. Screen applicants

Write your criteria before you list and apply them to everyone in the order they apply. Get written consent, run the same report for each applicant, verify income, and call past landlords. Follow the Fair Housing Act, check your state’s source-of-income rules, and send an adverse action notice if a report leads you to say no.

7. Sign the lease

Use a lease that fits your state, with the deposit and late fee inside your state’s limits and every required disclosure attached. Every adult who’ll live there signs.

8. Handle move-in

Collect the first month’s rent and deposit in cleared funds before you hand over keys. Walk the unit with the tenant, complete a signed condition checklist with photos, and follow your state’s rules on where the deposit is held.

9. Collect rent

Set up online rent collection with autopay at move-in. It gives you a dated record of every payment and can apply late fees automatically.

10. Maintain the property

Give tenants one way to report repairs and answer quickly. Fix urgent problems (no heat, no water, a leak) right away and schedule the rest. Seasonal checks on gutters, furnace filters and smoke detectors prevent bigger bills.

11. Keep books and file taxes

Open a separate bank account for the rental, sort every transaction into a Schedule E category, keep receipts, and claim depreciation each year. Rental income and expenses go on Schedule E with your personal return.

Read the guides in this order

The guides below follow the same path. Start with renting out your house, which covers turning a home you lived in into a rental. Next, decide whether you need an LLC, then compare what property management fees would cost if you’d rather hire out the work. Read the Section 8 guide before you set screening rules, since vouchers interact with source-of-income laws. Then tenant placement, marketing your rental, and finally maintenance, which is the job that lasts as long as you own the place.

Mistakes first-time landlords make

• Skipping the math on vacancy and repairs. A rental that only works at 100% occupancy doesn’t work.
• Keeping the homeowners policy. A claim on a rental can be denied.
• Screening on gut feel. Inconsistent screening is how fair housing complaints start.
• Using a lease from another state. Deposit caps, late fee limits and notice periods vary.
• Mixing rental and personal money. It makes taxes harder and records weaker.
• Being too casual about late rent. Apply the lease the same way every month from the start.