There are definite perks of becoming a landlord, including but not limited to passive income (i.e. “mailbox money”/recurring income with the idea of little effort to maintain), property value appreciation and building equity, diversification of assets, as well as potential security that a loved home is being taken care of and used when you and your family are not personally using it. That said, there are some very important preliminary logistical items to check off before you can put your property on the market. While not an exhaustive list, below are a few of those items —check your local jurisdiction for specific requirements and consult with an attorney as appropriate:
Obtain a Basic Business License, As Needed.
Check your jurisdiction to see what you need from a governmental compliance perspective. Most states require some type of basic business license (“BBL”) to rent property. For example, the District Columbia requires such a license and you can find more information about it here. You also need to schedule a corresponding safety inspection to ensure that your home meets health and safety requirements as a part of this license. Keep in mind that these laws and obtaining a BBL protect tenants from unscrupulous landlords but also protect the landlord from fines for failing to comply with the law.
Comply with Notice Requirements of Your BBL.
Ensure that you comply with “notice” requirements insofar as your BBL – i.e. post it properly in your rental property in a conspicuous location, as well as forward to tenants in connection with the rental lease process so it is clear to your tenant that your home has met local standards and that you as a landlord are in compliance with local business license requirements.
Identify a Local Resident Agent (in Case of a Lawsuit).
In connection with your BBL, make sure that you have identified a local Resident Agent who can accept service of process for you in the event of a lawsuit.
Get Your Property Inspected to “Perfect” Your BBL.
You likely need a safety inspection to perfect/complete your BBL. What should you expect during your safety inspection? It depends as to specifics — but likely all issues going to the heart of safety —what would potentially cause a safety issue for a tenant? At a minimum, the inspector will likely look at the fire and carbon monoxide detectors to ensure that they are working property and placed properly throughout the home, e.g. in all bedrooms. They may check for evidence of mold (hopefully, lack thereof), problems or conditions with electrical circuits and/or running water, working fixtures, and/or sufficiency of handrails inside and outside the home to name a few.
Check on Requirements for Exemption from Rent Control.
Do you want your property to be exempt from rent control? If yes, check government regulations on this issue as your properly likely falls in this category if you are not a “big time” landlord (rent multiple properties) and want to have some flexibility as to monthly rent subject to operational costs. That said, any rent increases should comply with local law and be reasonable – i.e. tied to direct costs in connection with the property and not retaliatory.
Avoid Discriminatory Practices.
Ensure that you avoid any discriminatory practices (e.g. source of income) in renting your home. For example, you may rent to students who do not have a source of income. If that is the case, have a guarantor sign the lease on their behalf but do not discriminate against tenants regarding source of income. As an example, you can find the DC Fair Housing Law here. This document cites some examples of illegal discrimination in DC. Check your specific state for discriminatory practices.
Organize, Understand, and Prepare Necessary Disclosures.
Most states require disclosures in connection with the rental process, e.g. homes built before a certain date, there are no known lead hazards, local Tenant Bill of Rights, etc. Often both landlord and tenant will have to sign off on these disclosures.
Draft Your Ad for Your Property + Prepare Photographs.
When time permits, prepare a working draft of an advertisement for your property and corresponding photographs. Both of these can be integral to finding a good tenant and for showcasing your home.
Identify and Sign On with a Company to do Credit & Background Checks.
Once you put your property on the market, you likely will want the ability to do credit and background checks on potential tenants. Have a plan in place before you begin interviewing possible tenants.
This article does not constitute legal advice. When questions are based on specific situations, direct them to a knowledgeable attorney.