7 Tips for Renting Out Your House While Still Paying the Mortgage

If you own your home but need help with the mortgage, you're in good company. Many homeowners look to renters to help make ends meet. And there's definitely a market for rental properties—some estimates are that 36.6% of households are currently renting their homes.

Before you look for tenants, though, there are a few things you should know to protect you, your family and your home.

Here are seven tips to rent your house while still paying the mortgage.

1. Know your market—Before you do anything, determine how much rent your home is worth. This will help you determine how much you can charge a tenant and help you decide if renting will ultimately save or cost you money.
    

   Look up how much comparable spaces are going for in your area. Then find out what extras you can charge for, such as a nice view or a parking space. To resist overcharging due to emotional attachment, consider reaching out to a local realtor or property manager for an expert's opinion.

    

   From there, determine how competitively you want to price your rental.
    

2. Choose your tenants carefully—Next, start looking at who you want living in your home. Think about who your ideal tenant is and use that to guide your listing.
    

   A few necessary questions you'll want to ask applicants to include:

   • Do you make enough to comfortably afford rent? Make sure to verify a potential renter’s income.
   • Do you have previous landlords I can contact for references?
   • What date would you like to move in? How long would you like to stay?
   • Do you have any pets?
   • Do you smoke?
    

   There are a few things you can't control, like someone's personality or cooking habits. And there are a number of things you can't ask about—such as sexual orientation, gender identity, religious affiliation and age—or you'll risk a discrimination lawsuit.

    

   Use your best judgement when scouting and selecting tenants. Eviction is a tricky, lengthy and often expensive process.

    
3. Write a solid lease agreement—A rock-solid lease agreement protects you just as much—if not more—than it protects any potential tenant. There are plenty of free templates available online, but it would be in your best interest to have a lawyer review it ahead of time.
    

   Here are a few must-haves to include in your lease:

    
   • Lease term
   • Monthly rent due date
   • Fees—late payment, lease termination, replacement key, etc.
   • Security deposit
   • Pet policies
   • Rules of conduct
   • Eviction terms
   • Repair, cleaning and landscaping responsibilities
   • Subletting rules
    
4. Budget for extra repairs and maintenance—Your tenants will pay you rent to live in your home. That being said, they should also be helping out with other responsibilities.
    

   Determine ahead of time what kind of help you need from a tenant. Will they have access to a front or backyard? If so, they should help with general upkeep. Consider adding a clause to your lease that explains how often they'll need to chip in with lawn maintenance, how clean they need to keep their space and what kind of damages they'll need to pay for.

    

   Doing so before they sign the lease can help ensure they respect your home for the duration of their stay.

    
5. Learn tax rules—Tax changes are perhaps the biggest thing to watch out for when renting your home. Keep careful track of all your records and documents to make the process easier.
    

   One thing to note: Rental income includes security deposits, advance rent and lease termination fees. While renting out your house will certainly change some aspects of how you file your taxes, the IRS says you can still deduct certain things—like mortgage interest, property tax, operating expenses, depreciation and repairs.

    

   The tax implications on a residential property and an investment property vary by state. Before you sign anything, find out what you will and won’t be able to claim on your taxes.

    
6. Get the right insurance—Adding a renter to your residence usually means upping your homeowner's insurance. Ideally, your tenant will never slip on your icy driveway or trip down your stairs, but you want to be prepared if they do.
    

   Consider speaking to your accountant about creating an LLC to protect your assets. It could make the difference if you are ever sued by a tenant.

    
7. Budget for an empty house—Using rental income to supplement your mortgage payment is generally a safe bet, as long as you've done your research and vetted potential tenants. That being said, life happens.
    

   It's in your best interest to keep enough money in an emergency savings fund to cover a few mortgage payments. A tenant may need to leave before their lease is up, or you may need to evict one—or something crazy like a global pandemic may force your tenant to move back home. Apparently, it can happen!

    

   Regardless of the reason, it’s possible your rental space could wind up empty. Knowing you’re covered for a few months can relieve stress and allow you time to find the right, new tenant.

    

   Follow these tips to help you find the best tenant for your situation and protect yourself from unnecessary fees and fines. If you're interested in renting your home, talk to one of our mortgage experts about how best to proceed.