In any kind of business, you look for a partner that brings a diverse set of skills that complement your goals. The same is true for finding a property management team. Property manager partners will do more for you than collecting rent and fulfilling maintenance requests. Knowing how to lease your house is an important aspect of property management.
You will want your property management company to handle the leasing, financial aspects, management, and maintenance – all while being your investment advisor. This series will break down the different features a good property management company should offer investors like you.
Figuring out how to lease your home is the underlying goal. Your property is ready to go, you just need a quality tenant to fill it. Although this may seem simple, there is plenty of work to be done before you find a quality tenant. Let’s walk through the steps included in the leasing process:
- Property analysis
- Screening potential tenants
- Lease agreement
How to Lease Your House in 4 Steps
Step 1: The Property Analysis
To determine the rental rate, it’s important to know multiple aspects of your investment including the house, location and the surrounding market. Here are the important elements of a property analysis:
“The physical composition of the home and the lot it sits on are two of the most important aspects of a successful survey,” said Ben Flurey, General Manager of RPM Iowa. The most common property aspects are:
- What is the square footage of the home?
- Is it a town-home, ranch style, or two-story house?
- What is the foundation made of?
- How many bedrooms?
- How many bathrooms?
- Is there a basement?
- If there is a basement, is it finished?
- Will there be repairs needed before putting this home on the market?
- Is there a garage and is it attached?
- Are there any trees surrounding the house?
- What kind of trees are there?
- Is there a backyard?
- What kind of grass is on the lawn?
- Is the driveway paved?
- Is there enough street parking coming up to the driveway?
- Where does the house sit on the property?
The Property’s Location
Location matters to potential tenants because of accessibility to lifestyle amenities and their jobs. “A single-family home in the metro will be priced differently than a single-family home in a smaller, more rural town,” said Flurey. Location factors include:
- Is the property in a developing neighborhood, or is it already developed?
- How close is the next door neighbor?
- How far away are amenities?
- Are there schools nearby?
- Are there any parks nearby?
The Market Survey
A combination of both property aspects and location, the market survey should compare similar homes to yours. “Comparables are key because you shouldn’t set your leasing price higher than a home that has more square footage and a three-car garage, when you have smaller square footage and a two-car,” Flurey explained. A market survey includes:
- What are the prices of similar homes sold in the last 3-6 months?
- What are the current listing prices of homes like mine within a 3-5 mile radius?
- What listings have expired or not sold that are similar to my property within a 3-5 mile radius?
If the property was an investment home before, you must take financials into account. Looking into past historical data, such as the average length of tenancy, vacancy rates, past and potentially current cash flow statements, and past income and expense statements, will help you determine an appropriate rental rate to lease your house.
Once a thorough property analysis has been conducted, a good property management company will give you a rental range, rather than one number. The lower lease rate should be competitive and comparable with what is on the current market, especially if you want to lease your house quickly. This is known as a “rent now rate.” The price on the opposite end of the range will be higher. If you are leaning towards the higher rental rate, it will take longer to find tenants, but this rate will be ideal if you are looking for more cash flow.
Step 2: Marketing the Property
Marketing is the next step to getting your property leased. Online resources are the best way to get the attention of potential residents. Professional photos, virtual tours, self-guided showings, using your leasing specialist as a resource, and following up with your potential resident are essential steps in learning how to lease your house. We’ve provided a breakdown of each:
You need professional photos of your property to market it online. If you have more than one property listed, these photos should remain consistent with the rest of your portfolio. You need a clean and crisp series that really makes the viewer feel as though they are inside the home.
In addition to photos of the property, there should be a detailed description that includes the number of bedrooms and bathrooms, the square footage, and amenities, like a fenced-in backyard or a fireplace. A property management company may hire a professional photographer to maintain quality and consistency.
Virtual tours are vital nowadays to get more eyes on your property. They should be made available for all of the properties in your investment profile to give the potential residents as much information as they need to feel comfortable moving forward. Some property management companies use Matterport to create their virtual showing. Matterport has 3D equipment that can create a life-like experience for viewers. Research local agencies who can provide these services to find the best professional service for you.
Offer self-guided showings. Some people may not feel comfortable meeting in person or their schedules just may not align with yours. You don’t want a scheduling problem to get in the way of leasing your property, so install a coded lockbox on-site to allow potential residents to tour on their own time.
Be a resource during in-person showings. A leasing specialist is there to assist during the process and be a resource for potential residents, rather than taking over. Caleb Schafbuch, a leasing specialist at RPM Iowa, asks people if they would like him to join them during the tour or if they would like to proceed without him and refer back to him with any questions afterwards. “I go about it from the angle that I’m there to get to know a person, not sell the home,” Schafbuch said. “I give people room to do their own thing so they feel comfortable enough to share their story or ask me any questions.”
Don’t forget to follow up! Keep up with potential tenants throughout the showing process. Remain in consistent contact with them before, during and after a showing so you can answer any questions that may pop up. “When I follow up, I make a point to ask about the condition of the home first,” said Schafbuch. He does this to get the conversation rolling so he can better gauge how motivated they are to move. Pay attention to certain cues, like if a couple is discussing where the couch or dining room table might go.
If there’s lag time after the showing, Schafbuch will follow up via email to see if there’s anything else he can show them or see if they’re interested in filling out an application.
Your property needs to receive as much exposure as possible. It takes more than a yard sign to lease your property. In today’s world, social media and the Internet is where people turn to get information and conduct their research. Put it on sites like Facebook Marketplace, Zillow, company websites, and Trulia. Applications such as Appfolio and Yardi Breeze can help you post on multiple sites at once, so you don’t have to copy and paste individual properties.
A team of leasing specialists will support the marketing process by knowing everything about your property or portfolio and being able to relay information. If someone is interested in renting from a specific company, but is not sure how to go about finding the right place, a leasing specialist will help them narrow down their options. Weeding through available properties online can be stressful and overwhelming. Schafbuch has found that if he asks specific questions about a potential tenant’s lifestyle and needs, he can then gather a list of four to five properties for them to choose from.
“It takes what usually is a stressful process and turns it into a more enjoyable and fun experience for our residents,“Caleb Schafbuch
Step 3: Screening Potential Residents
After a potential tenant has found the perfect property and filled out an application, your management company should screen them thoroughly. This will ensure that your investment is filled with good tenants who will treat their new home as if it were their own.
A good property management company will have more than one set of eyes on applicants. It”s easy to miss critical information in an application or to skip over suitable residents if you use an online application scanner or only have one person reviewing them. The screening process should include credit checks, background checks, income statements, and landlord references.
1. Pre-Screening: Leasing specialists should be part of the tenant picking process because they are the first people to meet applicants. The human interaction aspect of the process can help the team condense the applicant list down to the most qualified tenants. “You can learn a lot about someone if you tune in and listen,” Schafbuch stated. A property management company should be focused on getting the right renters into the right home.
2. The Application: Require multiple forms of identification, an estimate of gross income, and ask questions regarding pets, any roommates applying, if the residents smoke, etc. A resident relations specialist will take further steps to ensure the accuracy of applications.
There are legal limits when it comes to application questions, due to the Fair Housing Act. State and local laws may protect potential tenants even further than the Fair Housing Act, so be sure that you are aware of these.
These are some of the topics property managers cannot question applicants about:
- Sexual orientation and gender identity
- Public assistance
- Religious affiliation
- Familial status
- Service or emotional support animals
3. The screening process: Income statements, background and credit checks, and landlord references will help you come to a decision about a resident. Usually, management companies will require proof of income in the form of two recent pay stubs. This will show a tenant’s ability to pay rent. Double check that the pay stubs are recent so you are sure they have a current stream of income.
Background checks will give you a detailed summary of a potential resident’s past. You should also be aware of past evictions, criminal records and public records. Start by searching through the public records to see if a tenant has past charges and if so, if there is a pattern of frequency of charges, the severity of them, or if the tenant is currently involved in a legal battle over financial matters.
It’s a good idea to pull a resident’s credit report. Some reports will allow you to see back quite a few years. Look for incidents like late payments, bankruptcies, collection accounts, maxed-out credit cards, or several unpaid balances. These are all indicators that a resident may not make rent on time.
Requiring landlord references will give you a better understanding of who your tenant is. Your leasing specialist’s observations should match or come close to a previous landlord’s statement. Ask questions about late payments, damage to the rental unit, if the tenant caused any issues while living there, etc.
Learning how to lease your house to the right tenants is key for tenant retention, so that you do not have frequent turnover costs. Each applicant should be treated equally throughout the process. Iowa law states that you or your property management company has to fully approve or deny an application before looking at any other applications for a single property.
“We go a little deeper and have more eyes on the application process because we want to ensure that we’re giving people the opportunity to lease the home they want, while also providing investors with peace of mind knowing their properties are being well taken care of.” said Rachel Meyer, Office Administrator at RPM Iowa. “Getting to send the ‘congratulations!’ email is my favorite part because I know how stressful the search for rentals can be, and it gives our residents relief from their search.“
Step 4: The Lease Agreement
Once an applicant has been approved, they need to sign a lease agreement. The contract should cover property-specific stipulations, like the monthly rental rate, move-in and move-out dates, lease term, tenant names, pet fees, utility information, and the lease terms.
A lease agreement is written to protect and hold both parties involved accountable for the condition of the home. It will have clauses that include the duties of a landlord, the duties of a tenant, the rental deposit amount, and when and how a tenant or landlord can end the rental agreement. A good property management company will do their research in order to cover everything needed in a proper lease agreement.
Your lease agreement should be looked over by a lawyer. If your property management company is supplying the lease agreement, you can still have your own personal lawyer look it over. There is no such thing as being overly cautious when it comes to lease agreements. Some companies will use structured templates created by their team of in-house lawyers.
Mastering how to lease your house to quality tenants
There is quite a bit of work that needs to be done in order to lease your property to the right residents. The leasing process includes property analysis, in-depth marketing, the tenant screening and approval, and creating lease agreements.
Finding a tenant is half the battle, there is more to it than just picking someone to pay the rent. You want a reliable tenant and the process of finding one can become time-consuming. The longer your investment property sits vacant, the more money and time you will spend on property upkeep and marketing. Hiring a qualified property management company could be the solution for your leasing needs.