Leasing your condo can be challenging, especially if you're new to being a landlord. This guide will walk you through 10 essential steps to transition from having a vacant unit to becoming a successful landlord. Many condo owners never plan to be landlords but find themselves in this position after moving to a new home. If you need to know how to rent out your condo effectively, these 10 steps are for you.
Step 1: Contact Your Homeowners Association for Condo Rental Rules
It is the first and most important step. Most condos permit rentals, but unfortunately, others do not. Some condos require board approval, function on a rental cap, or even impose certain lease terms. One trend as of late is to restrict the act of renting until the owner has lived in the unit for an extended period (i.e., 1-2 years). The best way to determine the rules and regulations is to contact your homeowners' board, the association, or have your real estate agent request the CC&Rs from their preferred Title Company.
Step 2: Know Your Local Rental Market and Set Competitive Pricing
Have you ever thought about how much your place may rent for? What are similar condos in your project renting for per month? What about other condos in the area? You have to think about what your condo offers in comparison to others—amenities, services, location, neighborhood conveniences. Do some homework and research what other landlords are offering in terms of incentives. Some projects or even individual owners are offering month(s) free rent, gift cards, gym memberships, cable, etc. Before you take your unit to the market, you must know about the 3 P’s of the rental process: Your product, your placement in the market, and your price!
Step 3: Run It Like A Business
How much do you owe per month? You know you have to add the mortgage, the taxes, and your dues, but do you know all your potential expenses like updated insurance, preparation costs including; painting, polishing floors, carpet cleaning, advertising, commission for rental agent, rent loss on turnover, repairs, legal fees if needed, and the potential if you have a destructive tenant.
Step 4: Understand The Tax Picture
Talk to your CPA, because when you convert a principal residence to a rental, your tax picture will change. In fact, your taxes may go up. How will the tax assessor know when you converted your condo to rental status? You are going to furnish that information on your next federal and state tax return. You report your real estate rental income and expenses on Schedule E of Form 1040. This isn’t my specialty, I would encourage you to contact your CPA for further details.
Step 5: Understand Local Rent Laws
It is imperative that you know the local landlord-tenant laws. Some jurisdictions may require you to register the property or obtain a business license to rent your unit. Cities that have rent control almost always require rental registration even if you are exempt from the rent control laws. Failure to comply with local rent laws can be costly. Do your research so you can avoid pesky fines. Local laws may contain other rules you should know about as well. For example, there may be regulations on security deposits. It may limit you on the amount you collect and especially where you keep the money. In general, knowing your rental laws is a must. Understanding the process of eviction, deposits, and property management should be mandatory as a landlord.
Step 6: Get to Know Your Paperwork
If you are going to rent your condo yourself, you need to understand the paperwork required. The basics include:
- A lease
- A rental application
- A service to provide, credit, criminal, and an overall background check
You might try using some accounting software as well. You’ll need to know your income and expenses for when you file your tax returns. Remember what I said earlier; run your unit like a business!
Step 7: Conduct Credit, Criminal, and Background Checks
As a landlord, I would recommend at a minimum that you require a credit report on prospective tenants. This gives you a look at the tenant’s payment history. These reports also will reveal criminal activity plus other information like foreclosures and bankruptcies.
Step 8: Call Your Insurance Agent
Tell them you plan to rent your condo. The insurance you need to cover your condo while it is rented can usually be written as a rider to your primary homeowners insurance policy. Don’t skimp on liability insurance. Once you become a landlord, you are more exposed to potential lawsuits. The cost of insurance is nominal compared to the added protection it can provide. An umbrella policy is a great way to give you the overall protection you may need.
Step 9: Follow Fair Housing Laws
Fair Housing Laws are there for a reason. Follow them. Federal law protects against discrimination on the basis of race, color, sex, national origin, religion, handicap, or familial status. State laws may extend the federal protection to additional categories. For more information on Fair Housing Law, go to the federal government’s Housing & Urban Development website.
Step 10: Hire A Good Lawyer
If this is your first time, or you plan on doing this all by yourself, you should have a real estate lawyer review your paperwork. A qualified real estate attorney can make any changes necessary to comply with local laws and prepare any addenda that you may need. An addendum spells out any additional conditions to the contract and is often important as it adds additional terms and protection.
For example, there are many condominiums that require a signature on the rules and regulations of a contract prior to move-in. An experienced real estate lawyer can also advise you if there are any particular pitfalls in the local laws for landlords. This will put you on notice in terms of any issues you need to navigate carefully. In addition, getting a lawyer on your team early gives you a legal contact in the event problems arise in the future.
If you have made it this far, you are obviously serious about renting your place. By following these 10 steps, you can successfully lease your condo and navigate the complexities of being a landlord in the Seattle, Kirkland, and Bellevue areas. Whether you're renting a modern condo in downtown Seattle, a charming unit in Kirkland, or a luxurious space in Bellevue, these guidelines will help you manage your property efficiently.
For personalized assistance or if you have any questions specific to the Seattle, Kirkland, or Bellevue rental markets, feel free to contact me. I'm here to help you through the process of renting out your condo, ensuring you meet all local regulations and attract quality tenants.
In FULL DISCLOSURE, I assist clients in leasing their condominium units in addition to helping them buy and sell homes throughout the Seattle, Kirkland, and Bellevue areas. My local expertise ensures you get the best advice tailored to these vibrant and diverse communities.