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If you plan to rent out your house, you are not alone. More homeowners are becoming landlords as they wait out the struggling housing market or they see the growing rental market as a source of income.

Luckily for you, the timing is right.

"Rental vacancy for the third quarter of 2012 is forecasted as 3.7 percent, and anything below 5 percent is a landlord's market," said Walter Molony, spokesman for the National Association of Realtors. There is a pent-up demand of would-be renters, especially college grads who returned home to live with their parents.

An oversupply of homes means potential tenants can be picky. Here are steps you can take to successfully rent out yours.

Follow the rules. Check your municipal and homeowners association covenants to make sure you can rent out a house in your neighborhood. Renting is not always allowed.

Be sure to review landlord laws. Chicago, for example, has the Chicago Residential Landlord Tenant Ordinance, which dictates landlord do's and don'ts. "These laws change, so check them yearly," warned Blake Townsley, operations manager for The Touchstone Group, a property management firm in Chicago.

Many Chicago suburbs host mandatory landlord classes and require landlord licenses. Mount Prospect, for example, offers a free six-hour landlord seminar. The license costs $75 per year per single-family house.

Check your town's building code. It might say your house must have hardwired smoke alarms and/or a sprinkler system. If the laws changed since you bought your house, now is the time to bring the house up to code.

Hire professionals. You can go it alone, but more homeowners are hiring real estate brokers to help, said Linda Carrasco, a broker with Re/Max Unlimited in Palatine and a certified property manager.

"For about one month's rent, we determine the rent fee, list the house on the (multiple listing service), screen tenants, do criminal and background checks on them and draw up the lease," said Carrasco. "If you want a renter who will buy the house later, we can write the lease with an option to buy."

If you decide to screen potential tenants on your own, gather references and check their credit histories.

Consider hiring a property manager if you don't have what it takes to evict bad-apple tenants or cannot be available 24/7 for emergencies. Expect to pay about 8 percent of the rent, said Townsley. So if your house would command a $2,000 monthly rent, you would pay $160.

Prepare your home. Hire a home inspector or contractors to make sure your house's systems are in working order. Think Murphy's Law: If something can go wrong, it will happen after the tenant moves in. Find it and fix it first.

Clean the gutters, replace the furnace filter and light bulbs, and load the water softener. Then set up a home-maintenance "visitation" schedule with your tenant.

The better your house shows to renters, the more rent you can charge. Paint the walls, replace grimy carpeting and restore curb appeal, just as you would when selling the house.

Remove your belongings so the tenant has room for her belongings and yours are not subject to theft or misuse. Remember that well-publicized stash of stuff that Rahm Emanuel left in his house when he rented it? "That was not the norm," said Townsley. "Usually you get your things out of the house."

Renters insurance. Instead of homeowners insurance, which covers liability, the property, the house and its contents, you need landlords insurance that does not cover the contents.

"Then, typically, you require the tenant to provide proof that he has renters insurance to cover his belongings," said Janet Patrick, hotline director at the Illinois Insurance Association. If you plan to rent the house furnished, tell your agent to make sure your furnishings are covered, she said.

To check out insurers, go to illinoisinsurance.org.

Legal avenues. Hire an attorney for your first foray into the land of leases, where legal pitfalls abound, advised John O'Brien, a real estate attorney in Arlington Heights. "You don't know what you don't know, so an attorney can make sure you have the right documents," he said. They include those covered by law, such as lead-based-paint disclosure, and those that cover every landlord-tenant agreement you can imagine, from pets to length of lease.

Sure, you can download many legal forms online. "But they're not Illinois-specific," said O'Brien. "And they don't cover every 'what if?'"

Set a competitive rate. Before you post your rental price, find out what other landlords in the area are charging. Compare your house to theirs.

"Most homeowners sell themselves short because they don't know how much houses are renting for now," said Townsley.

The rental price has nothing to do with your monthly sum of mortgage, taxes and insurance. It has everything to do with the size, location and condition of the house.

"Some homeowners think it's just about square footage," said Townsley. "But a well-maintained house that shows well and has high-end finishes will rent for a premium."

Courtesy:  ChicagoTribune.com

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