How to Set Up a Rental Property: 12 Steps to Success
Published on Feb 2, 2024Landlords
Say goodbye to the whirlwind of short-term arrangements like AirBnB and hello to steady income, loyal tenants, and sweet, sweet tax advantages.
So your transition from homeowner to first-time landlord goes as smoothly as possible, our 12-step guide breaks down the insights needed to succeed. Here’s what’s in store for you:
Learn how to run a rental property, from setting up for long-term tenants to market research and legal compliance.
Discover financial planning, tenant screening, and maintenance tips for long-term profitability.
Find out how services like Ziprent will simplify your landlord role, ease the challenges of property management, and keep your bank account brimming with passive income.
Step 1. Market Research: Find Your Long-Term Tenant Niche
Before you even think about collecting rental applications, your first step to success is three-fold: doing your due diligence by examining 1) the local economy, 2) the housing market, and 3) demographic trends.
Local Economic Trends
Without demand, there’s no need for supply. And seeing as you’re about to enter the supply business, it’s within your best interests to start your journey with a touch of rental property market research. Local economic trends are a good place to start.
Ask yourself the following questions:
Are existing and new businesses flourishing in the area?
Are any local government initiatives being rolled out?
Is there a healthy influx of new residents?
What are the local employment rates?
Are local wages stable, rising, or falling?
If local economic trends are moving up and to the right, there’s a good chance the rental market in your prospective area of choice is primed and ready to deliver a healthy return on your investment.
Housing Market Trends
Let’s hone in on the housing trends in your chosen locale. Begin by looking at the current supply of rental properties versus demand.
Some questions to ask yourself:
Are there many vacancies, or is the market tight with high occupancy rates?
How do the average rental prices compare to your expected rental income?
Are there highly sought-after amenities in the area?
How have rental prices fluctuated in recent years?
Are there developments or changes in infrastructure due to commence?
Understanding these trends will allow you to discern long-term rental rates and set a competitive price for your property.
Learn more: how to buy your first rental property.
Different age groups and family sizes require different housing needs. Take an area with a higher concentration of families. Such a locale might see a greater demand for single-family homes, whereas urban areas might lean towards studio apartments or condos.
Keeping these potential housing preferences in mind, here are some demographically-focused questions to focus on:
Are you seeing more young professionals, families, students, or retirees move to the area?
Do residents in the area prefer urban living close to amenities and nightlife, or are they more inclined towards quiet, suburban neighborhoods?
Are there educational institutions like universities, high schools, or elementary schools nearby?
What is the age distribution in the area?
Are there any cultural or community trends, like a desire for proximity to specific businesses, parks, or community centers?
Explore online real estate platforms and property listings, or consult with locally-based real estate agents. There, you’ll find all the information you need.
Step 2. Prepping for Profit: Convert to an Attractive and Compliant Long-Term Rental
Converting to a long-term rental that generates your expected return on investment requires creating a tenant-friendly atmosphere. Although a vibe check isn’t going to swing it with regulators, a successful rental property must also comply with local rental laws and regulations.
Let’s tackle the former first: creating a living space that’s attractive to potential tenants.
Start by assessing your property's current condition. Ask yourself: What renovations or updates are necessary to make the space appealing and functional for long-term tenants?
Your answer might include superficial upgrades, like applying a fresh coat of paint or installing modernized fittings. But perhaps the renovations run a little deeper.
Good flooring improves aesthetics and adds to the property's durability. Decent lighting can make a significant difference in how a space feels. Functional aspects like upgrades or servicing to heating and cooling systems, plumbing, and insulation help prevent future maintenance issues and make the property more comfortable for tenants.
Remember, the goal is to create a welcoming environment that good tenants see as their long-term home rather than a stepping stone to another real estate investor’s property.
And the latter? To keep regulators off your back, bring the property up to scratch with local housing codes and safety standards.
Anything from defective smoke detectors, absent carbon monoxide alarms, or unsafe electrical installments can get you on the wrong side of the law. Familiarize yourself with the local landlord-tenant laws to understand your responsibilities regarding property maintenance and tenant safety.
Step 3. Innovative Pricing: Secure Long-Term Financial Stability
Effective long-term rental property financing requires a well-thought-out financial plan that accounts for a shifting market. When formulating your financial plan, consider the following:
Determine a competitive rental price that aligns with the market and covers your regular expenses, such as property taxes, landlord insurance policy fees, maintenance, utilities, and property management fees.
Set aside an emergency fund to cover mortgage payments and other expenses when the property isn’t generating rental income.
Define your long-term financial goals for the property by tracking rental income and expenses effortlessly, gain insights into your property's financial performance, and make informed decisions for long-term success. Get started with Ziprent today and transform how you manage the finances of your rental property.
Learn more: is buying a rental property worth it?
Step 4. Legally Literate: Navigate Rental and Zoning Laws
Prepare for the eye glazer of all eye glazers—long-term rental legal requirements. Start by familiarizing yourself with landlord-tenant laws that are specific to long-term rentals. These laws can vary significantly from one jurisdiction to another, so be sure to:
Wrap your head around the legal requirements for lease agreements, such as mandatory disclosures, security deposit limits, and lease termination and renewal rules.
Read up on tenants' rights regarding privacy, habitability, and anti-discrimination laws.
Learn about your obligations as a landlord, including property maintenance, handling repairs, and addressing safety concerns.
Familiarize yourself with the legal process for evictions, and don’t slack on proper notice requirements or grounds for eviction.
Check local zoning laws, as they can affect the use of your property and may have regulations specific to rental properties.
If your property is in an area with rent control or stabilization laws, understand how these regulations impact your ability to set and raise rent.
To cover your bases, consider consulting with a real estate attorney specializing in landlord-tenant law to get expert advice tailored to your situation.
Learn more: out-of-state rentals.
Step 5. Home Sweet Rental: Prepare for Your First Tenant
The goal here is to make the space feel like a home where tenants see themselves living comfortably for an extended period. To nail creating an appealing home, consider the following:
Neutral decor appeals to a broader range of tastes, so opt for neutral colors and simple designs when painting walls and choosing fixtures.
Reconfigure spaces to maximize livability by removing walls to create open space, adding shelving to maximize shelving, or installing bedroom closet space.
If you have an unfurnished property, and the market is not strong for renting out homes quickly, consider using staging furniture to boost appeal.
Invest in durable and reliable fixtures and appliances. Long-term tenants will appreciate the quality and dependability, likely reducing the frequency of repairs and replacements.
Install safety measures, such as working smoke detectors, secure locks on doors and windows, and any necessary safety equipment like fire extinguishers.
If your property includes outdoor spaces, make sure they are well-maintained.
Don’t skimp on checking plumbing, electrical, heating, and cooling systems and other structural elements.
A well-prepared property attracts quality tenants and encourages them to take good care of the space, leading to a more prosperous and stress-free landlord experience.
Step 6. Attract the Best: Targeted Marketing for Long-Term Renters
Marketing your long-term rental property isn't about finding any tenant. It's about attracting the perfect tenant—someone who sees your property as more than just an address but a welcoming haven.
Here’s some tips on how to go about just that:
Don’t just showcase square footage. Instead, paint a picture of comfort. Underscore any extended lease potential, strong community connections, and quaint details that make tenants feel truly at home.
Does the kitchen cater to culinary genius? Does the balcony boast to-die-for sunset views? Feature amenities that appeal to long-term residents, like dedicated workspaces, pet-friendly policies, or on-property parking.
Instagramable is the order of the day, so low-quality photos won’t do. Instead, showcase your property’s best angles with professional photos. Or, perhaps, take it a step further with a virtual tour or property highlight video.
Dig back into your demographic research and frequent online platforms and local communities used by your ideal tenant. Stand out by tailoring your message and listing details to resonate with your target tenants’ needs and living preferences.
Consider leveraging tools like Ziprent's marketing expertise. From professional photography and on-demand showings to automated lease generation, Ziprent streamlines the process and helps you easily land long-term, high-quality tenants.
Step 7. Secure Your Investment: Rigorous Tenant Screening
Next up, let’s lay the foundation for a solid tenant screening process:
Run comprehensive credit score and background checks, verify income sources, and dig into rental histories. The more you know, the easier it will be to single out candidates with a proven track record of long-term leases.
Don't underestimate the power of references, either. Speak to previous homeowners and landlords to gain insights into previous tenant behavior.
From verifying employment and income to running credit checks, consider outsourcing the heavy lifting to a tool like Ziprent. Ziprent, that’s us, will make sure you choose qualified tenants and those who value a long-term commitment.
Remember, fair housing laws vary depending on your investment property’s location. So, before you start any tenant screening, make sure it adheres to all legal regulations, avoiding discriminatory practices.
Learn more: buying rented properties with existing tenants.
Step 8. Lease with Confidence: A Win-Win Agreement
You've meticulously chosen your ideal tenant and built a bridge of trust through screening, and now comes the cornerstone of your long-term partnership: the long-term lease agreement.
How do you draft a lease agreement? We’ve got you:
Your lease should clearly state the names of all parties, property address, rental amount, lease term, and payment due dates.
Outline the tenant's responsibilities regarding property use and maintenance.
Clearly define the rules and regulations of the property, including policies on pets, smoking, noise levels, and guest stays.
Detail the process for lease renewal and termination. Include any notice requirements and conditions under which either party can terminate the lease.
For long-term leases, include guidelines for subletting, lease-breaking penalties, and rent increase procedures.
Include a clause on how disputes between landlord and tenant will be resolved, whether through mediation, arbitration, or legal action.
Learn more: home warranty.
Step 9. Management Choice: Solo or Partner for Long-Term Success
Now comes a crucial decision: are you ready to captain your rental ship solo, managing long-term rental properties all on your lonesome, or should you consider a property management partner to ensure smooth sailing for years to come?
Self-management can be rewarding if you relish the hands-on approach and feel confident handling rent collection, maintenance requests, and potential tenant issues. However, long-term rentals bring a steady stream of responsibilities—late-night emergency calls, tenant communications, and legal compliance can chip away at your precious time.
A property management company’s services can be a game-changer for those seeking a lighter load and more peace of mind. Professionals will handle the day-to-day grind, from rent collection and tenant screening to maintenance coordination and legal compliance, freeing up your time and energy and allowing you to focus on other pursuits while knowing your property is in capable hands.
Enter Ziprent, your co-pilot for long-term rental success. We go beyond the typical property management experience by leveraging technology and a dedicated team to streamline every aspect. From online rent collection and automated maintenance scheduling to 24/7 tenant support and comprehensive reporting, Ziprent takes the wheel, freeing you to enjoy the journey.
Step 10. Proactive TLC: Maintain Your Long-Term Property Value
What better way to show you secure long-term profits than by investing in the very foundation of your asset—the property itself? That's where proactive long-term rental property maintenance takes center stage:
Ditch the reactive approach and embrace a proactive one by developing a customized maintenance schedule tailored to your property's needs and tenant agreements. It’s a proactive approach that’ll set the stage for regular upkeep, preventing minor issues from snowballing into costly problems.
Schedule seasonal checkups for major systems like HVAC and plumbing, proactively replace air filters and inspect potential trouble spots like roofs and gutters. Remember, an ounce of prevention is worth a pound of (and a ton of stress about) potential repairs.
Don't hesitate to involve qualified professionals for complex repairs or specialized skills. Their expertise can save you time, money, and potential headaches in the long run.
Ziprent’s 24/7 customer service team handles everything from scheduling appointments and coordinating repairs to managing vendor relationships and ensuring timely execution. Our technology platform keeps you informed every step of the way, leaving you free to focus on building a thriving long-term rental partnership.
Step 11. Tax Savvy Landlord: Maximize Your Rental Income
Savvy long-term rental income management secures a steady cash flow and helps you take advantage of specific tax benefits of long-term rentals.
Keep accurate records of all rental income received, including the monthly rent payments and any other charges tenants pay, like rental late fees.
Tax laws can be complex, especially when it comes to rental properties. Consider consulting with a tax professional specializing in real estate to ensure you maximize your tax returns and comply with all IRS tax regulations.
The value of your property naturally declines over time due to wear and tear. With long-term rentals, you can deduct a portion of this depreciation each year, reducing your taxable income.
Those routine maintenance checks and necessary repairs you diligently undertake? Don't forget to deduct the costs from your taxable income. Be sure to keep receipts and invoices for all legitimate maintenance expenses.
If you have a mortgage on your rental property, the interest you pay on the loan can be deducted from your taxable income.
FYI: according to the IRS, if you rent your property for 15 days or fewer in a year, the income received is typically tax-free.
Step 12. Learning Never Ends: Stay Ahead in the Rental Property Business Game
In the real estate game, the only constant is change. Don’t rest on your laurels. Instead, embrace long-term rental knowledge as your new superpower and watch your landlord journey bring new, profitable opportunities.
Here are some key areas to keep your learning muscles strong:
Explore how innovative tech tools and platforms can streamline your rental management, attract tenants, and enhance the overall experience. Think smart home features, automated rent collection, and AI-powered maintenance scheduling.
Understand what today's long-term renters crave. Are pet-friendly policies becoming the norm? Is sustainability a growing concern? Stay informed about changing expectations and adapt your offerings accordingly.
Don't let legal surprises trip you up. Familiarize yourself with local ordinances governing landlord-tenant rights, safety standards, and tenant eviction procedures. Knowledge is your shield against legal woes.
Remember your partner in long-term rental success, Ziprent? We're not just about managing tenants and maintenance—we're also a treasure trove of valuable resources. Our blog and FAQ portal are a wealth of knowledge, ready to update you on the latest industry trends, legal changes, and best practices.
As you’ve probably realized by now, managing a rental property can be a rewarding yet time-consuming and sometimes overwhelming experience—precisely where Ziprent comes into play.
Ziprent will significantly ease the burden of property management, offering services that cover everything from tenant placement to rent collection and maintenance coordination.
Ready to streamline your property management journey?
Get started with Ziprent today and experience hassle-free rental management.