Renting out your property can seem like a monumental task if you’ve never done it before. It can even seem intimidating and make you wonder if you should put it on the market at all. The truth is, it’s not that hard to rent a property and there are several ways to do it.
If you’re planning on renting your property through a real estate agent, they’ll handle everything for you. If you’re interested in renting it out yourself, you’ll be using the “For Rent by Owner” (FRBO) strategy, which is a little different.
Some people say you should never use FRBO to rent a property because the risks are too great. There is some truth to this, and it’s why most people rely on agents and professional property management companies to do the work for them. They are experts in the industry and know how to get things done smoothly. Plus, property managers will also take care of your tenants while they rent. If you’ve never thought about this type of service, click here to learn more about what one Houston property management company does to provide a full-service package for its clients. You’ll get a pretty good idea of what’s possible through a professional service.
If you’re set on trying to rent your property on your own to save some money, here’s what you need to know about the “For Rent by Owner” process.
You will be responsible for knowing all laws
The first thing you need to know when renting FRBO is that you will be responsible for everything top-to-bottom, including listing your property, hosting showings and tours, creating and accepting applications, screening potential tenants, creating strong lease agreements, and more.
These responsibilities come with a need to know the laws. For instance, if you’re not living on or in the same property as your tenants, you can’t discriminate in your ad by stating a gender preference. A gender preference is something you can only express for roommates and other limited situations. If you state anything in your ad that can be interpreted as a discriminatory preference, like “perfect for single mothers,” you are probably breaking the law. These types of statements might come from an innocent place, but they aren’t allowed in rental ads.
Other laws you need to know include:
- Federal, state, and local landlord-tenant laws in general. In order to write a lease that will hold up in court and pass tenant scrutiny, you need to know the landlord-tenant laws. You’ll also need to know these laws to be a good landlord.
- How many occupants are allowed in the unit. Sometimes landlords illegally deny families for having too many people when the state or local occupancy limits allow for that number of people to rent the unit.
- How to write specific lease terms without breaking the law. Your lease is a legal agreement between you and your tenant, and if any part of it is unenforceable, there’s no guarantee a judge will hold any of it enforceable. It’s up to their discretion, especially if your terms are blatantly illegal.
- What lease terms are unenforceable vs. enforceable. Unenforceable lease terms will be a huge disappointment if you end up in court.
- What you can and can’t expect from your tenants. You can only tell your tenants how they can use the property to a certain extent. For example, you can prohibit smoking, but you can’t prohibit guests.
- How to reject applicants legally. For instance, stating a general reason is always better than being specific. The more specific you are, the more likely you are to be sued for discrimination, even if it’s a false accusation.
- What you can and can’t research about your applicants to make a decision. Looking through social media accounts has gotten landlords in hot water for discrimination. If you deny an applicant because of what you see on their social media, it can be considered illegal.
- Security deposit maximums, if applicable in your state. Charging too much for a security deposit can yield fines.
- How to handle service animals and emotional support animals (ESAs). ESAs have to be afforded the same rights in housing as service animals under the Fair Housing Act (FHA). However, owner-occupied buildings with less than 4 units and single-family homes rented without an agent are exempted from the FHA. This means you can deny ESAs and service animals if you are exempt from the FHA, but you need to be absolutely sure you’re exempt before denying an applicant for having an ESA or service animal. The best way to learn these laws is to consult an attorney.
- And more
As you can see, it takes a lot of legal knowledge just to stay on the good side of the law when renting out a property on your own. That doesn’t mean you shouldn’t do it, but it does make using an agent seem like the easier route.
3 Reasons to use an agent to rent your property
If you really want the experience of listing and renting your property FRBO, by all means, go for it. However, sometimes saving a little money isn’t worth the hassle. Here’s why most people choose to work with an agent or property management company to get their units rented.
1. Less hassle
If you don’t have time to make mistakes and learn from them while you manage setbacks, using an agent is better.
2. Access to expertise
Legal expertise can save you from expensive lawsuits arising from a lack of knowledge.
3. More free time
Hiring an agent means you can spend your time doing other things that matter to you.
FRBO is only ideal if you’re trying to learn the ropes
Ultimately, renting your property without an agent only makes sense when you’re trying to learn the ropes of the business. If you’re just trying to get a renter into your property so you can generate long-term rental income, go with an agent or property manager for the smoothest experience.