Series: Owners

Do I Need a License to Rent My House?

Posted on Jun 7, 2020

Renting out a home (instead of selling it) is a great way to make extra income, and give someone a place to call their own. In addition to generating cash flow, it can also help you qualify for tax deductions and build long-term equity as your property value increases. You can set up your home as a long-term rental property or a short term rental. Both options give you the opportunity to turn your real estate property into a rental unit.

If you’re interested in renting your home, you’ve come to the right place. If you have questions—what do I need to do to rent my house? and do you need a business license to rent your home?—you aren’t alone. These are common questions that arise for future landlords and our informative article is the perfect place to start.

Let’s take a close look at rental licenses, business licenses, and the best practices for getting your home rented. Although it can seem like an overflow of information at first, once you nail down the basics, you’ll be a rental pro in no time.

Rental Licenses

One of the common questions we hear from property owners looking to make a rental income is, “Do I need a license to rent my house?” Unfortunately, the answer to this question varies from state to state. In certain states, you are required to obtain a rental license before leasing out to tenants and in others, you aren’t. The first step is to look into the housing mandates for your city and state for more information.

If You Do Need a License

If you need a rental license, don’t fret. Depending on your city or state, the process is easy and generally requires that you follow a few steps. It’s crucial that you do get a license (if you need one). Without it, renting your house and gathering income from it is illegal.

Fill out the Application

First, get your rental license application. This can often be found on your city’s department of housing website. If you can’t find the application online, venture to city hall, pay the application fees, and get started on the next steps.

Do an Inspection

An inspection is an important part of the rental license process, but it’s not required in all cities. When an inspector is sent out, their main objective is to ensure that the property is livable for tenants and meets the necessary safety requirements. The inspector will check the plumbing and electrical systems and also make sure the smoke detectors are in working order. The rental licensing inspections are different in each city, but generally, they serve to look for major health issue violations. Some places may require re-inspection after a certain number of years.

Make Necessary Changes

After you’ve done your inspection, make any necessary changes. To complete the changes properly (and up to code), it’s a good idea to hire a professional, licensed contractor. After the work is done, you’ll do another inspection to ensure you’re good to go. From there, you’ll receive your license and can move along with the next step—finding your tenants.

Business Licenses

If you’re asking, do you need a business license to rent your home? the answer is sometimes yes. Whether or not you need a business license to rent out your home is decided at the state level. Some people choose to create an LLC for their rental properties to reduce their liability risk and separate their assets. This also allows for “pass-through” taxation, which appeals to many people. The business income passes through the business to the LLC members who can then report their share of profits or losses on their individual tax returns.

Renting Your Own Property to Your Business

Property owners also tend to ask, “Can I rent my own property to my business?” It’s a good question and it’s why some businesses go for the “leaseback arrangement.” In this scenario, the owners of a business purchase a property then lease it back to their own business. For more information on “self-rental” read this article from The Daily CPA. They’ll cover the idea of “phantom income/losses” and what a self-rental might look like in your future.

What You Need to Rent Your House

After you figure out the license, there are additional steps that answer what do I need to do to rent my house. From the lease to the rental price, here’s what else you need to assume your role as a landlord.

Landlord-Tenant Law

If you want to rent your house, it’s a good idea to familiarize yourself with landlord-tenant law. Landlord-tenant law includes the rights that each landlord and each tenant has with a rental property. Again, the laws, codes, rights, and rules differ by state, so you’ll want to make sure you’re familiarizing yourself at the city and state level. It’s not a bad idea to encourage tenants to understand the basics of state law, too, as this can alleviate the possibility of any problems that may arise at a later date.

Lease

One of our top vacation rental tips for owners is to use a rental agreement or le ase. This is a legal document that will outline your arrangement and make sure both parties are on the same page. Remember, if you or someone else is drawing up this lease, and if it violates certain rental statues, a court can declare your lease unenforceable. Not only this, but landlord-tenant laws say that the courts can also award money damages to tenants as a result of the unenforceable rental agreement (so it’s crucial that your agreement is done well with all the necessary components).

Security Deposit

Most residential leases require a security deposit. This is often equal to one month’s rent and is given back (either in full or partial) at the end of the lease term. The point of the security deposit is to protect the landlord and ensure that rent is paid and no damages are accrued. The laws for security deposits vary by state, so this is something you’ll want to look into prior to drafting your lease.

Rental Price

Another important component of renting out your house is setting the right rental price. You want your price to make sense for both you and your potential tenant (or you run the risk of your property sitting vacant). When figuring out how much can I rent my house for, first consider your neighborho od. Do some research to see what homes in your neighborhood are renting for. If your house is remodeled or comes with appliances like a washer and dryer, this will increase its value to possible renters. Furnished places are also in high demand for short-term business travelers and vacationers.

Landlord Insurance

Landlord insurance is a policy for people who rent out their homes. Depending on the policy and who you obtain it from, this insurance can cover you for events that cause loss of rental income and damage or theft to your property.

Property Management Plan

A property management plan might sound overwhelming at first, but it’s a good way to stay organized if you’re considering renting out your property. To create your plan, consider how you’ll market your property. Once you find prospective tenants, how will you screen them and collect rent? You also want to think about regular inspections, repairs, and maintenance. If this isn’t something you’re interested in, you’ll want to reach out to a property management company like Zeus who can help with everything from applicant screenings to rent collection.

A Good Tenant

Of course, the most important part of any rental situation is finding a good tenant. You want someone who looks after the home as if it’s their own, who takes care of it, and hopefully — a tenant who rents for a long period of time. High turnover with tenants can be tough on new landlords, as it requires more time and effort on your end. If you’re looking for a long-term tenant, consider a 12, 13, or 15-month lease. If this isn’t something you’re interested in, hire a company that can help you manage your short-term rental.

Use Zeus

If you don’t want to do the heavy lifting as a landlord, no one can blame you. It’s tough work. But that’s where Zeus comes in. In signing a revenue-share lease with us, you’re able to sit back, relax, and let our full-service property management take over. We have rentals in the San Francisco Bay Area, Los Angeles, Seattle, Washington, D.C., New York Metro, and Boston, and we pride ourselves on creating a user experience that combines all the comforts of home (with hotel-level care and around-the-clock-support).

Now that we’ve covered some of the top questions of home rental, we hope you’re feeling inspired to make your next move. From all of us at Zeus, we’re wishing you the best of luck as you embark on your journey as a homeowner and a landlord. If you have any questions or would like to set up a time to chat, feel free to reach out to our team today.

We love what we do—and we’re always here to help.

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