Until lately no one even knew how many single family rentals there were in New Jersey. It took the Census Bureau, not the speediest source of information, to make it official. The Census Bureau’s Property Owners and Managers Survey, based on 1995 data, was recently updated to document the explosive growth of single family rentals.
Now a new study, one of the very few to look into the single family rental segment, is filling in the gaps. By CoreLogic the new study found that single family rentals are $3 trillion business today and account for 21 million rental units, 52 percent of the entire residential rental market. In other words, the number of single family rentals in the market today has surpassed apartments.
Single family rentals are very distinct from multifamily and they behave very differently. Unlike multifamily, millions of single family rentals are listed on MLSs by real estate brokers, many of who represent new owners in acquiring investment properties. As the for-sale inventory has trended down since 2005, the rental share rose 13.3 percent last year alone. As of the end of last year rental closings were up 11.5 percent year-over-year while prices fell 9.8 percent during the year. Demand is strong. The national average months’ supply for single family rentals was 4.5 months in December compared to 6.2 months for homes listed for sale.
While renting your single family home in New Jersey may seem as easy as posting an ad on Craigslist, we recommend that you set aside some time to prepare your single family rental before you leap into the world of finding and managing tenants. Here are seven essential steps that every landlord should take:
- Get an Insurance Policy
Purchasing landlord insurance (also known as rental property insurance) is one of the most important steps to take before renting your home. In addition to the things covered in a typical homeowner’s policy, landlord insurance will protect you from major damage done by tenants, as well as from legal actions they may take against you. Be aware, though, that rental property insurance will not cover your tenant’s personal property, they’ll need to purchase rental insurance to cover their belongings.
- Enlist an Accountant
Assuming you’re not an accountant or deeply familiar with rental tax laws, it would be wise to enlist an accountant to help you sort through the tax implications of renting your house. An accountant will help you figure out what records you’ll need to keep in order to navigate Schedule E come tax time. He or she can also help you figure out how to minimize your tax bill by helping you choose the right depreciation strategy.
- Have a Lawyer Review your Lease Agreement
A real estate lawyer can help ensure that your lease agreement does not contain any illegal provisions, while also protecting you from the financial harm that could result from tenants exploiting loopholes in your agreement. A good lease agreement will specify the ways tenants can and cannot use the property, how many people can occupy the rental, what insurance is required, who is responsible for paying utilities, and what will happen if the tenant doesn’t uphold his or her obligations.
- Establish Criteria for a Tenant
Working within Fair Housing Act guidelines, outline a set of criteria your rental applicants will need to meet, and put these down on paper to hand out to potential tenants when you show them the property. These criteria should include acceptable monthly income levels and credit scores and the number of tenants who may occupy the house. You should also lay out your smoking and pet policies.
- Get Your Paperwork Ready
Beyond the lease agreement, there are a number of forms you’ll need to have on hand before renting your house out. These include rental applications, credit check authorization forms, any disclosures your state requires, move in checklists, move out forms, and various notices to tenants.
- Get a Home Inspection
Having your home inspected by a professional will help you fix any critical maintenance issues before your tenants move in. This will help protect you from potential legal issues, while also saving you from having to answer multiple maintenance phone calls within the first few weeks of renting your property. Having home inspections both before a tenant moves in and after he or she moves out will also provide third-party documentation of any damage caused by the tenant.
- Clean, Paint, and Landscape
There’s no substitute for a through deep cleaning and a fresh coat of paint when it comes to brightening the interior of your rental home. While trendy upgrades may be optional, if you want to attract the most qualified tenants, this basic rental hygiene is required. Likewise, it’s important to make sure that the lawn and garden surrounding your rental house is neat and tidy before you post the “For Rent” sign.