Are you contemplating renting out your Metro Detroit home? If you are, that can be a great move! Currently, Metro Detroit is an excellent place to invest in for both cash flow and property appreciation.
The population is increasing, the market is doing great, and home values are rising. There is a lot that goes into renting out a home, though. It’s not as easy as putting it up on a few listing sites and waiting for interest to come in.
By renting out your home, you can generate steady rental income, and with the rising demand, it could be a reliable source of extra cash. If done right, the rental income from your property can be an excellent way to build long-term wealth.
A well-crafted lease agreement is essential for protecting both you and your tenant. It clearly outlines the terms and responsibilities, ensuring a smooth rental process. Be sure to include essential details in the lease agreement, such as the rent amount, due dates, and maintenance responsibilities.
Additionally, renting out your property can open up the possibility for tax deductions related to things like repairs, maintenance, and mortgage interest. A solid lease agreement and smart tax planning can help you maximize the financial benefits of your rental property.
Now that you’ve decided to rent out your Metro Detroit home, here’s everything you need to know to make it a success, including how to draft a solid lease agreement for your rental property. Keep reading to learn more!
1. Know That Being a Landlord Is a Skill
While anyone can own a rental property, not anyone can manage it. You need certain skills to succeed in the rental property world.
Can you fill a vacancy with a quality tenant? Do you have a system in place to ensure that difficult renters don’t rent your home? How are you going to handle maintenance issues? Can you determine the rent price?
Those are just some of the questions that you’ll need to ask yourself prior to renting your property out. If you answered “no” to most of them, it would be best to hire a professional to handle your property’s management.
2. Understand Your Responsibilities
As a landlord, you’ll have tons of responsibilities under your belt. For example, you have to ensure your property meets all applicable habitability standards. If you don’t, your tenant may have options that are unfavorable to you under the statewide landlord-tenant law. For instance, they may have a right to “repair and deduct.” And, at worst, they may even have a right to terminate their lease.
Other responsibilities you have under a typical lease or rental agreement in Michigan include:
- Provide your tenant with a clean environment
- Ensure your tenant enjoys their privacy and quiet
- Respond to maintenance issues promptly without unnecessary delays
- Store your tenant’s deposit in accordance with the statewide security deposit laws
3. Create a Solid Lease Agreement
The rental agreement is also a key aspect to renting out your Metro Detroit property. While not a requirement under the law, having a lease agreement is essential in protecting your interests as well as those of your investment.
Having a clear agreement will also minimize any confusion or misunderstanding during the leasing period. The following are some details you’ll want your agreement not to miss:
- Details about rent. How much is it, when is it due, how will you accept it, and what are the late fees
- Details about the security deposit. How much is it, how will you store it, and what are the conditions for its return
- Details about pets. Will you accept them? If so, will you charge for this? Will you have restrictions on the breed, size, and the number of pets?
- Details about property alterations. Will you allow your tenants to make changes to the unit, like repainting the unit to their color of choice?
These are just a handful of the rules you’ll need to put in place in order to ensure the lease term goes on as smoothly as possible.
4. Handle All Repair Issues Before Marketing the Unit
Quality tenants want to rent a quality home. No tenant will want to rent a home with flickering lights, leaky faucets, or clogged drains.
You also want to ensure your property stands out from the rest. Doing this can be beneficial in multiple ways. For starters, you may be able to ask more for the monthly rent price. A well-maintained property tends to attract better tenants and could even mean a shorter vacancy time.
So, go around the home and ensure everything is functioning as it should and appears to be in good condition. For example, is the curb appeal taking a hit by having an overgrown lawn? If so, reinvigorate it by mowing the grass, trimming branches, and adding new flowers.
Check the walls. Does the paint look dry and streaky? If it does, consider giving the walls a fresh coat of paint. You’d be surprised at the transformation that can take place.
By improving the overall condition of the property, you’ll increase its attractiveness to potential tenants and may justify a higher monthly rent price. Once tenants are in place, make sure you have a reliable system for collecting rent on time each month. Efficiently managing your property will ensure consistent cash flow.
Don’t forget that protecting your investment is equally important, so make sure you have landlord insurance in place to cover potential damages or liabilities. This provides peace of mind while maximizing the value of your property and streamlining the process of collecting rent.
What about the appliances? Consider replacing dated ones with new, energy-efficient ones.
5. Determine a Fair Rental Price for the Unit
This is key. You must take caution not to undercharge or overcharge your tenants. Undercharging your tenants will simply mean you’ll be losing income you could’ve otherwise been making. This can hurt your bottom line.
Overcharging your tenants, on the other hand, can make prospective tenants avoid renting your unit. Consequently, this may mean longer vacancy periods for you.
If you are just starting out and don’t know how to go about pricing your unit, consider hiring a pro. This can be an experienced property management firm like Nelson Property Management!
6. Know Michigan's Landlord-Tenant Laws
Once you sign the lease, you become obligated to follow certain rules, as do renters. If the latter does not, they are seen as breaking their lease. Besides the common procedures like rent collection and responding to maintenance issues, you’ll also have a responsibility to abide by all relevant landlord-tenant laws.
To begin with, you’ll need to familiarize yourself with Michigan’s Fair Housing Laws. This is key especially when marketing and screening prospective renters. You must ensure that all statements in your advertisement and all questions you ask when screening renters don’t contain discriminative language.
Another law is the landlord entry law. Tenants have an implied right to live in peace and quiet. At the very base, this means that you cannot barge in on your tenant unannounced. You must also shield your tenant against unreasonable disruptions.
Other laws to keep in mind include eviction laws and security deposit laws.
7. Hire a Property Management Company
At this point, do you still feel confident about managing your Metro Detroit home? If you still do after all that has been mentioned, then great! However, if you don’t, then hiring a professional property management firm may be your best bet.
Bottom Line
Renting out your Metro Detroit home can be a great move if done well. Nelson Property Management is a trusted and proven property management firm serving the Metro Detroit area. We can help you boost profitability, grow your portfolio, and take all the hassle off your shoulders! Contact us today to learn more about our services.
