If you’ve bought a multi-unit home, you may be intending to rent out the units you aren’t living in to tenants. While renting units can generate extra income, being a landlord also comes with its own set of costs and responsibilities.
Finding a Tenant
Make sure you’re selecting the right person to rent a unit in your new home. This can be a challenge: You not only want to be sure they can pay on time reliably, but that you’ll enjoy sharing a building with them. You’ll also want a tenant who isn’t spending more than 35% of their income on housing and has good credit. You can use any of the major credit monitoring companies to run a credit check and charge the applicant the fee. You can also ask for a letter of reference from a previous landlord. Professional brokers can help match tenants with landlords. Finally, you must follow all non-discrimination rules when becoming a landlord.
Use the lease to set expectations on both sides to help avoid confusion later on or to help clear up any future disputes if needed. You can find lease templates online so you don’t need to start from scratch. Check rental sites for similar properties to help set a price, but also consider all expenses associated with renting a unit including extra insurance, taxes, repairs, etc. Include the following in your lease agreement: rental payment and late payment terms, length of occupancy, damage responsibilities, deposits, pet allowance, and utility responsibilities.
Make Sure You’re Legal
Buildings with three or more residential units need to be registered with the New York City Department of Housing Preservation and Development (HPD) each year, and HPD also offers free classes for first-time property managers. Check your building’s Certificate of Occupancy to ensure you are renting out legal units. If you make any modifications to your home without the proper approvals and rent a unit outside of what’s in your COI, you may not have the same protections if you need to take legal action against a tenant. Additionally, the multiple dwelling law means units must be occupied by the same person for 30 or more consecutive days. The means renting a unit or room through short-term rental sites may be illegal. Become familiar with tenant’s rights so you know your responsibilities and limits as a landlord.