So I am closing on my first property in a few days (i also have another short sale that is in the works as well).
My question is:
What do i need to do before i can rent the place out? some sort of checklist? and can i get things lined up before i even close?
do i need a licence?
i need to get insurance, but what types?
its probably to late to start an LLC to put the property under. can i create one and move the property to in later?)
very basic question, i know. Thanks for the help!
You don’t need a license.
Many local areas require registration/ inspection of houses.
Get a Landlord’s insurance policy.
You can start an LLC and quit claim deed the properties to get them under the LLC’s name.
All of this besides the registry with local gov’t can/should happen before close.
LLC took 6-8 weeks for me in IL.
If you are getting a loan you won’t have an option on the insurance.
Sounds like you’ve got some work to do in a short time frame if you want to get this rented out soon.
The basic things you’ll need to get started are a lease and lead based paint disclosure pamphlet/form (if the house was built before 1978). You need to make sure your lease is compliant for your area. You should get a RE attorney to look at it to ensure it contains the proper wording. You can find the lead based paint pamphlet and disclosure form through the EPA’s website. If your property was built before 1978, you are required by law to give the tenant a LBP pamphlet and get them to sign the disclosure form. If you have any reports concerning LBP in the house, you must disclose them to the tenant.
I don’t know if you have any special things you have to do in your area prior to renting out a property, but here are a few things I would do no matter what:
You should have some type of rental application and screening process. I do criminal background checks on all our tenants thru the county Sheriff’s dept. Find out if there are special forms required and the cost for this. Pass this cost on to the applicants. You’ll want to verify income for them as well. A common rule of thumb is that the tenant should make 3x the rent amount per month. You can also establish other criteria like only so many misdemeanors in the past so many years, no felonies, etc. Just make sure you don’t deny someone based on one of the federal protected classes (age, race, sex, religion, familial status, handicap, etc). Federal housing guidelines are 2 people per bedroom plus one extra person. So you could put a family of 7 in a 3 bedroom house. You’re not wrong to deny someone with 10 kids tenancy in a 2 bedroom house.
Know your local LL/tenant laws. You need to know what your rights are and what rights the tenant has. Know your procedure for eviction. If you wait until you need it, it’s too late.
You need to have NOO (non-owner occupied) insurance for a rental property. You can also consider a umbrella policy for liability, but I recommend upping your liability coverage on your NOO policy to the insurance company’s maximum amount. It shouldn’t increase your premium by a huge amount and the peace of mind of having 500k or 1MM in liability vs just 100k is worth it IMO.
put a sign in the yard the day you close, even if you need to do rehab before its ready to rent, and spend $50 or so and get a nice looking “for lease” sign (I use a place www.buildasign.com), it just looks like a professional is leasing the house instead of someone with a cheap plastic sign with a phone number scribbled on it
establish what the house should lease for, and don’t lease it until you have someone that completely checks out,don’t “they looked good”, etc,it will bite you later
and as others have stated, check out what is required by your city as far as inspections,plan to fail your first inspection, because you don’t know what they will be looking for,but its no big deal they will give you a list of what you need to do