How to become a landlord: essential steps for first-timers

Key takeaways:

• Becoming a landlord requires upfront savings for a down payment, repairs and reserves. Plan on having at least three to six months of expenses set aside. 
• Know your local laws, prepare your property for safety and always use screening tools to select reliable tenants. 
• Landlords can deduct mortgage interest, property taxes, repairs and insurance, but should consult official sources or a tax professional for current rules. 

Being a landlord is not just about collecting rent. Sometimes you're the one who unclogs a drain or referees a neighbor dispute.

Here's what landlords are responsible for:

• Keeping the property safe and up to code 
• Handling repairs and maintenance 
• Following local laws (like fair housing rules) 
• Collecting rent and managing payments 
• Solving problems as they pop up 

In most cases, you'll juggle a bit of everything: handyman, accountant and peacekeeper.

Start with considering your finances, time and risk tolerance.

Owning rental property sounds great until the toilet breaks at 2 a.m. Before you jump in, ask yourself:

1. Do you have enough savings for repairs, vacancies and surprise expenses? 
2. Can you spare time for ongoing management? 
3. Are you comfortable with some risk and learning as you go? 

Landlording isn't passive income, especially in the first year. If you're ready for a challenge and don't mind a few late-night calls, it can be a solid investment.

Check permits, zoning and fair housing rules first before moving forward with a rental property.

Before you list your rental property, make sure you're following the rules. Most cities require:

• Rental permits or registration 
• Zoning approval for rentals or short-term stays 
• Compliance with fair housing laws (no discrimination) 

Skipping these steps can lead to fines or unhappy tenants. In most cases, staying legal keeps your rental attractive and your stress levels low. If you're unsure about your area, start with local government to see what's required.

Make your property safe, clean and attractive. Getting your place ready for renters starts with safety because nobody wants to live in a fire hazard or a leaky home. Here's what to check:

• Smoke detectors and carbon monoxide alarms 
• Working locks on all doors and windows 
• Lead paint disclosure if built before 1978 
• Fix broken appliances, patch holes and handle plumbing/electrical issues 
• Fresh paint or new flooring (optional, but helps) 
• Simple staging or clean, empty rooms 

A safe, well-kept home could mean happier tenants and fewer late-night calls. In most cases, meeting legal standards and keeping things tidy will attract better renters.

Use market data and calculators to price your rental. Setting the right rent price takes a bit of homework and maybe a little luck. Here's how to get it right:

• Check what similar properties in your area are renting for (size, condition, location) 
• Make sure your rent covers mortgage, property taxes, insurance and maintenance 
• Leave room for profit, but don't scare off renters with a sky-high price 
• Use online rental tools to set a price 

If you price too high, your property sits empty; too low, and you're basically running a charity. In most cases, a balanced price keeps your budget on track and your property filled.

Advertise online and offline to reach tenants. Getting your rental noticed is part art, part science and sometimes part luck. Try these tactics:

• List your property online with quality photos and a clear description 
• Snap pictures in good light and show off the best features (like a kitchen that doesn't look like a crime scene) 
• Write honest descriptions, but highlight perks (nearby schools, easy parking) 
• Host open houses for in-person tours 
• Spread the word to friends, neighbors and coworkers 

In most cases, mixing online and offline strategies helps you find reliable tenants faster. If you're lucky, you'll get a renter who actually pays on time.

Use screening tools to check applicants. Screening tenants protects you and your property because it helps spot red flags before you hand over the keys. Here's what to check:

• Credit history (steady payments, no major debts) 
• Criminal background (follow fair housing laws) 
• Rental history (paid rent on time, took care of past homes) 
• Income verification (typically, renters should earn at least three times the monthly rent) 

Using a tenant screening service makes this process easier and more reliable.

Write clear, legal contracts for tenants. A strong lease agreement spells out the rules for your rental, so everyone knows what to expect. Include these essentials:

• Rent amount, due date and security deposit 
• Maintenance responsibilities (who mows the lawn, who fixes appliances) 
• Pet policy  
• Lease term (one year, month-to-month) 
• Termination clauses (how either party can end the lease) 

Using lease agreement templates saves time and helps you avoid legal mistakes. In most cases, a clear contract gives peace of mind to both landlord and tenant.

Stay on top of repairs to keep tenants happy. Keeping up with maintenance is important, and tenants want quick fixes and a safe place to call home. Here's what you'll need to do:

• Handle emergency repairs fast (think burst pipes or broken heat) 
• Schedule routine tasks like heating, ventilation and air conditioning checks, gutter cleaning and pest control 
• Build a list of reliable vendors before things go sideways 
• Budget about 1% of your property's value each year for repairs 
• Use property management software to track requests and keep records 

If you ignore repairs, expect unhappy tenants and maybe a few angry phone calls at midnight.

Weigh DIY management against hiring a pro. Managing your own rental means you're the go-to for everything: tenant calls, repairs, rent collection and late-night emergencies. If you're handy and don't mind juggling tasks, DIY works for one or two properties. Here's what to consider:

• DIY saves money but takes time and patience 
• Property managers charge 8% to 12% of monthly rent 
• Managers handle day-to-day issues, so you get your evenings back 
• Hiring is smart if you own several properties or live far away 
• If you want a hands-off investment, a manager is worth it 

If you're local and like being involved, start solo. If you'd rather not answer calls about clogged toilets, let a pro handle it.

Understand deductions and financial planning for landlords. Landlords get tax breaks that help keep more money in their pocket. Here's what you can usually deduct:

• Mortgage interest 
• Property taxes 
• Repairs and maintenance 
• Depreciation 
• Landlord insurance premiums 

Keep good records — save receipts, track expenses and write down repairs. This makes tax time easier and helps you avoid mistakes. Tax rules change, so check IRS.gov's rental property page or talk to a tax pro before filing.

Most lenders require a 15% to 25% down payment for an investment property, plus closing costs. You'll also want cash reserves for repairs, vacancies and startup expenses like inspections or marketing. Plan on having at least three to six months of expenses saved before you get started.

It depends on where you live. Some states and cities require a business license or rental permit before you can rent out a property. Check with your local government to find out what's needed in your area.

Yes, but it takes good time management. Expect tenant calls, maintenance requests and paperwork outside of work hours. If it gets overwhelming, hiring a property manager can take most of the day-to-day work off your plate.

Underestimating costs and skipping tenant screening are the two most common mistakes. New landlords often forget to budget for vacancies, repairs and turnover expenses and placing the wrong tenant can cost you thousands in lost rent and property damage.

This story was updated on May 13.