When you purchase a home, you make a mental judgment about how long you plan to live there. If the time frame is relatively short, e.g., less than five years, it usually doesn’t make sense to purchase. But sometimes our mental judgments are wrong, or life circumstances force us to move away unexpectedly. It might be because of a job loss, a big promotion, or a family emergency; regardless, you suddenly find yourself with a home that you either need to sell or find a way to rent it out.
Renting Out Your House When You Move to Another State
Renting out your home is not for the faint of heart. Letting strangers move into your house (a significant financial asset) is a scary prospect. You can do it though, just don’t jump in without thinking everything through and protecting yourself legally and financially.
1. Use a Realtor
If you have had your home on the market with a Realtor but haven’t had any acceptable offers, that same Realtor can help you advertise the home for rent.
Most real estate agencies will help prospective buyers find homes to rent in an area they want to live in while they save up a down payment or get comfortable with the area.
You can expect to pay a fee to the Realtor of 1 month’s rent for a 12-month lease that they set up for you. Some agencies will also handle all of the property management for you: accepting rent checks, scheduling maintenance, and so on.
2. Use a Property Management Company
Alternatively, you can hire a Property Management company to do all the work for you.
This option is similar to using your real estate agency except that property management companies exist only to rent out the property for owners.
Real estate agencies really would rather sell a home and may not do as good of a job finding you a renter. The property management company’s fee is usually a percentage of the total rent each month (ranging from 8% to 12%) plus all or part of the first month’s rent.
3. Do It Yourself
Lastly, you can try renting the property out on your own.
I say as a last resort because unless you are a real estate and leasing pro, this option can be tedious and risky. Not having enough experience can expose you to liability and financial loss if you don’t screen your renters well. A bad tenant can damage the property or even destroy the home.
Secondly, if you are living in another state, it can be a big hassle to do all the work — e.g., get the home shown to potential renters, get the paperwork signed, and accepting payment each month. Any problems that come up will require a call to you, and you will have to track down the appropriate maintenance company to take care of the problem.
However, if you can successfully find good renters you will save yourself all of the fees that a property management or realtor might charge you to rent the property for you. It’s the classic trade-off of doing something yourself to save a buck versus paying someone else to do it well.
Many states and counties publish information for landlords and tenants that contain all the rules and regulations. It is highly recommended that you obtain this from your State or Local government.
Kevin Mulligan is a debt reduction champion with a passion for teaching people how to budget and stay out of debt. He’s building a personal finance freelance writing career and has written for RothIRA.com, Discover Bank, and many others.
What about asking a friend (who lives in the same city as your house) for help? Cheaper than a professional.
Great article. Last year we renting our our home in Chicago and moved to denver. Before then I never though I would have to worry about this topic. With housing being so bad in the US renting has become a very common practice if you need to move.
Make sure you find out what your local renting laws are. Have a lawyer draft a re-usable rental agreement. Each locality will have different rental laws. Also, some cities will have inspection fees between tenants or require you to place a bond with the city.
I recently was in this situation, and you also need to be aware of the tax consequences of doing this. Because I receive the income in another state, I need to pay state income taxes of that state (I don’t know if this applies to all states, but in my particular situation it does). I also need to apply for a business license of some sort, because I am planning on renting the home for an extended period of time. My CPA told me if it was only for a year or two it may not be necessary, but because… Read more »
I would have to agree that one would need to find out about local renting laws and maybe go with a property management company.The fee is worth it as it takes the hassle out of renting.
Great article! I work for a property management company and, while obviously biased, would argue (as you seem to) that a PM is the best way to go. As you suggest, renting your own home while out of state is very difficult and can be a huge headache, while having a realtor take the job will likely mean they have their focus on other tasks. You reference an article up there about how to find a PM. I recently wrote an eBook on this topic that I am sure your readers will find useful. It can be found at https://www.activerenter.com/rent-it-blog/74-questions-ask-hiring-property-manager… Read more »
Hi, I am actually coming from the person that wants to rent a home from someone out of town. How do I make sure it isn’t a scam, since the renter wants a down payment first? How do I know this isn’t someone in another country trying to scam for money? How can I protect myself and my money if this is a scam?
Thank you for your time.
How can I look at or find a place to rent in another state?
Thanks, it could be helpful to mention that in many states, people also need to register their home as a rental as well as getting a business license.