Are you moving out of your home?
If you’re buying a new house, moving in with a partner, downsizing, relocating, or just looking for something new, the immediate plan might be to sell your house. But you don’t have to. Instead, you can rent that property out and make some rental income in the short term while your asset continues to appreciate and your tenants help you pay off the mortgage and/or build equity.
Transitioning from owner-occupant to landlord involves legal and financial details and a lot of logistics. We’re here to walk you through the process of converting your primary home into a rental property, helping you navigate everything from initial considerations to managing the day-to-day of your rental.
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Evaluate Your Property’s Rental Potential
Start by assessing your home’s rental potential. Not all properties make good rental investments, so it’s essential to analyze your property’s suitability for long-term renters. Consider location first. Are you in Los Angeles? Redondo Beach? Somewhere a bit more suburban? The location of your home will impact rental values, tenant interest, and even maintenance and upgrades. Consider how close your property is to public transportation, schools, parks, and grocery stores. Evaluate the rental market in your neighborhood. Study the competition. Are there a lot of rental properties just like yours in the area?
The features of your home will also tell you whether it will be appealing to tenants. Renters are looking for updated kitchens, spacious living areas, in-unit laundry, parking, and outdoor space. They are willing to pay more for smart home tech and energy efficiency.
What does the market say about what you’ll earn? Research the rental prices of comparable homes in your area. Start with sites like Zillow, Rent.com, or Apartments.com, but reach out to local property managers or real estate agents for insights that are data-driven and accurate. Compare the rental rates of homes that are similar in size, condition, and location. This will give you an idea of what you can reasonably expect to earn from your rental property.
Understand Local Laws and Regulations
California has specific laws and regulations that landlords must comply with to avoid legal complications. It’s crucial to familiarize yourself with these before converting your property into a rental.
- Rent Control Laws
Los Angeles has one of the most robust rent control policies in the country, governed by the Rent Stabilization Ordinance (RSO). Rent control laws restrict how much you can increase rent on certain properties, based on factors like the date the building was constructed and whether it is located in the RSO zone. For example, if your property is located in a rent-controlled area and was built before 1978, it is likely subject to rent control, meaning you’ll be limited in how much you can increase rent annually. You will also be required to follow specific procedures when evicting tenants. State laws apply to properties outside of L.A. Familiarizing yourself with these rules can help you avoid costly legal pitfalls down the road.
- Security Deposits
In California, most landlords are allowed to collect a security deposit equal to one month’s rent for a rental property unless specific exclusions apply. Security deposits must be returned to tenants within 21 days after they move out, minus any deductions for damages. You’ll need to include photos and documentation that establish property condition before and after the tenancy.
Prepare for Property Maintenance and Habitability
As a landlord, you have a legal obligation to keep the property in a habitable condition. This means ensuring that basic facilities like plumbing, heating, and electrical systems are functional. Additionally, you’ll need to address any health and safety hazards that may arise during a tenant’s lease.
We have strict regulations around things like mold, lead paint, and pest control. Ensure that your property is up to code before renting it out to avoid any future disputes. Make sure you have a budget for ongoing maintenance. Things will break down and while you can wait to fix them until it’s convenient when you’re living in the property, you’ll have to make those repairs right away when a tenant is renting for you.
Hiring a Property Manager
Some homeowners think it’s easy enough to rent out their home once they move out. You find a tenant and you collect rent, right?
Right, but it’s often far more complicated than that. Partnering with a property manager early in the process allows you to benefit from expertise, technology, and rental resources that independent landlords simply cannot leverage on their own.
A property management company can handle everything from finding tenants to responding to maintenance and collecting rent, leaving you free to focus on other things.
We’re also managing risk and protecting you from liability. We know the laws well. We invest time into good tenant relationships. We make sure that all of our systems and processes are consistent and compliant.
Prepare Your Home for Rent
Once you’ve decided that renting out your property is a good idea, you’ll need to get it ready for tenants. This involves several steps to ensure the home is attractive, safe, and functional, and again – having a property management partner to lead the way is invaluable. Here’s what we do for the owners who come to us for help.
- Clean and Repair
First, make sure the property is thoroughly cleaned. This includes cleaning carpets, washing windows, and scrubbing bathrooms and kitchens. Repair any damaged or outdated features, whether it’s a leaky faucet, broken appliance, or chipped paint. Tenants will appreciate a well-maintained space, and you’ll be more likely to attract higher-quality renters.
- Take Photos and Create a Listing
The next step is to create an attractive listing. Take high-quality photos of the property’s best features, such as the kitchen, living room, and bedrooms. We write detailed descriptions that highlight the property’s amenities, location, and any upgrades or unique features.
- Set the Right Rent Price
While it’s important to price your property competitively, remember that you want to make sure it makes you money. You want a rent that provides a reasonable return on your investment without creating a longer-than-necessary vacancy.
- Screen Tenants
Tenant screening is one of the most crucial aspects of renting out a home. A bad tenant can lead to costly legal issues, unpaid rent, and property damage. But a good tenant can be a valuable long-term asset to your rental property.
California law requires that you accept the first tenant who meets all of your criteria when you collect an application fee. Don’t collect a dozen fees and applications and choose the one you like best. We establish strict rental criteria that include credit, income, and rental history. This protects owners and their properties while respecting the tenant protections that are in place.
Finalize Lease Terms and Sign the Agreement
Once you’ve screened and approved a qualified and reliable tenant, you’ll need to finalize the lease agreement. A well-drafted lease should outline important terms such as:
- Rent amount and due dates
- Duration of the lease (typically one year)
- Maintenance responsibilities
- Rules for pets, noise, and property use
- Security deposit details
- Termination and eviction procedures
If you’re not working with a property manager, we advise you to have an attorney review the lease agreement to ensure that it complies with California-specific laws. We have seen owners make the mistake of downloading any lease template they find on the internet. You need something more specific and detailed than that.
Ongoing Property Management and Maintenance
Once your tenant is in place, the work is really just beginning. As a landlord, you’ll need to maintain the property and ensure that everything is in working order. Regular maintenance can prevent expensive repairs down the line and keep tenants satisfied. As property managers, we are especially careful to stay on top of:
- Routine maintenance and inspections
- Handling repair requests promptly
- Enforcing the lease terms and addressing any tenant issues
Be proactive in keeping communication open with tenants and handling issues efficiently. A happy tenant is more likely to stay longer, which can reduce turnover and vacancies.
Converting your primary residence into a rental property can be an excellent way to generate passive income, offset your mortgage payments, and build long-term wealth. However, the process requires careful planning, research, and a commitment to maintaining a quality living space for your tenants.
By evaluating your property’s rental potential, understanding the legal landscape, preparing your home for rent, and effectively managing the property, you can set yourself up for success as a landlord. Hire a property manager to plan and execute the conversion seamlessly.
We can help. When you’re ready to turn your home into a rental investment, contact us at Real Property Management Choice. We’re your best resource and partner when it comes to leasing, managing, and maintaining investment properties.
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