How to Become a Landlord & Rent Property in PA

How to Start in Rental Property

Venturing into rental property begins with a strategic approach. If you own property, assess its rental potential by considering location, amenities and market demand. For those purchasing a new property, understand the financial implications, including mortgage requirements for rental investments, which often demand higher credit scores and down payments.

Research the rental market to determine competitive pricing, balancing potential income with the need to attract tenants. To ensure a realistic budgeting plan, prepare for additional expenses beyond mortgage payments, such as repairs, upgrades and property management fees.

Requirements to Rent Out a House

Becoming a landlord in Pennsylvania has a few essential requirements. Firstly, owning a desirable property, whether residential or commercial, is fundamental. Prospective landlords should be well-versed in the costs associated with property ownership, including maintenance, insurance and taxes.

Familiarity with Pennsylvania's landlord-tenant laws helps ensure legal compliance and foster a positive relationship with tenants. Embrace the role with resilience, understanding that while renting out property can generate income, it often requires active involvement and problem-solving. Let's dive deep into what you need to be a landlord.

What Do You Need to Become a Landlord?

There are some basic requirements you need to meet to be a landlord. One of those requirements is having property that people would want to rent out, either to live in or use for their business.

Other landlord requirements include having an understanding of the costs of owning and renting out a property, knowing landlord-tenant laws and being resilient. The money you make from renting out a house or commercial property is sometimes called "passive income," but many first-time landlords quickly find that there isn't much passive about it.

Research and effort are both a part of the process of becoming a landlord. Here's what you can do, step-by-step, to get your first property rented:

You need something to rent to become a private landlord. Whether you already own property or not will affect how long the process takes to become a landlord. For example, if you own a house and need to move for a new job or because your family has outgrown the property, you might decide to rent it out rather than sell it.

Becoming a landlord with a property you already own might be easier than starting entirely from scratch and having to buy a property to rent.

The process of getting a mortgage for a home, apartment building or commercial property you plan on using to make money is different from the process of getting a mortgage for a home you'll use as your residence. Typically, you need a higher credit score and a bigger down payment to get a mortgage for a rental property. The lender takes on more risk when lending money to investors since there is less emotional attachment to the property.

If you already own property, it can be easier to jump in and become a landlord compared to having to start from nothing.

Landlord-tenant laws vary by state and are designed to protect both landlords and tenants. For residential properties, the law often limits how much of a security deposit you can collect as a landlord and outlines what you need to do with the security deposit while a tenant lives in your property.

Landlord-tenant law also details how you can go about collecting rent, what fees you can charge if someone is late and whether you need to have a written agreement with your tenants.

Beyond your state's landlord-tenant laws, it's also important to be familiar with federal law, particularly for residential properties. For example, the Fair Housing Act prevents you from refusing to rent to people based on race, sex, family status, color, disability, religion or national origin. The Fair Credit Reporting Act dictates the information you can collect when screening potential tenants.

Finally, it's also important to understand that residential tenants have rights that are protected under the law. Knowing what a tenant has the right to expect can help you make sure you are fulfilling your duties as a landlord and build a positive landlord-tenant relationship.

Although commercial tenants also usually pay a security deposit, they have little in common with residential tenants as far as the law is concerned. There are fewer legal protections in place for commercial tenants, but you might find yourself negotiating with a team of lawyers to create a lease that works for you as the landlord and the business that will be your tenant.

Pricing your rental property fairly and appropriately is a crucial part of getting tenants. You don't want to set the monthly rent payments too low, or you risk not earning enough from your property. You also want to avoid setting the price too high, as doing so will keep people from even considering your rental.

Figuring out the best rental price for your property typically involves some research. Look at what similar properties are going for in the area, and set your price based on that. If your property has more amenities than others, such as a fitness center or pool, or free parking, you can adjust the rent based on that. If your property has fewer amenities than others in the area, you might need to lower your price to make up for the lack of bells and whistles.

When setting a price for your rental property, it can be tempting to base it on your mortgage payment. But keep in mind that there are more costs to being a landlord than just repaying your mortgage. If something breaks down in the house or if you need to replace or repair the carpet, heater or other equipment, you'll be the one to pay for those repairs or replacements.

Along with using your mortgage and the market as a guide, also consider your ongoing maintenance costs and expected expenses when setting the price.

The next step to becoming a landlord is to get your property out there. You have plenty of options when it comes to marketing and advertising your property. You can list it on a multiple listing service so it shows up on rental websites. You can also share the details of your rental on your social media profiles and ask friends and family to share with anyone who might be looking for a place to rent.

For residential properties, you can see if universities near your property have apartment listings available for students and advertise there. In the case of commercial properties, you might write up a press release about available rentals, especially if the building is new or has recently been renovated. You can also advertise commercial properties on listing services designed for commercial real estate to reach your target audience of business owners.

5. Tenant Screening

Once you have applicants, you need to screen potential renters while adhering to equal housing laws.

Here's what to do when screening potential residential tenants:

• Credit Checks: Check their credit
• Income Verification: Verify their employment or source of income
• References: Call past landlords and ask about their rental history
• Background Checks: Check their background and criminal history

The process of screening commercial tenants is slightly different but similar to screening residential tenants. You can run a credit check on either the business itself if it's fairly established or on the owners of the business. It's also a good idea to read about the company, including its financial history, and to contact past landlords, if possible. 

After you've found a tenant who meets your requirements, the next step is to put together a lease and have everyone involved sign it. A rental agreement or lease doesn't just protect the tenant or tell them what's expected of them. It also protects you as the landlord. Make sure your lease agreement is clear and easy to understand and that it covers all it needs to cover.

If you've never written a lease before, it's a good idea to get some help with lease preparation so the document does what you need it to do.

Before your new tenant moves into the rental house or commercial building, schedule a walk-through with them. Walk through the property together and make a note of any issues or concerns, if there are any. For example, note if there are any stains on the carpeting or if the stove doesn't work. You can take pictures if you wish. After the property inspection, let the tenant know if you are going to fix any property damage, such as that malfunctioning stove, then contact the appropriate companies for those repairs.

Doing an initial inspection of the property before move-in helps you avoid any headaches later on, as it lets you discover any concerns and fix them immediately. Property inspections also help when it's time for a tenant to move out. You can look back at your list of concerns and at the pictures you took to see if any damage was pre-existing or if it happened while a tenant was living in the building.

8. Check-In With the Tenant

Regular check-ins with your tenants will help you detect and quickly fix any problems that come up during their lease. Many tenants will be quick to let you know about maintenance requests that affect their day-to-day, such as a broken heater or a refrigerator that doesn't keep food cold. But, it's common for people to forget to mention smaller issues that might have less of an impact, such as a hole in the wall or a window that doesn't open smoothly. To make sure your property is in the best shape possible, and to fix issues quickly, schedule regular check-ins with your tenants. Your check-ins can be quick phone calls or email exchanges, during which you ask if there are any problems, even small ones.

Although commercial tenants are often responsible for repair maintenance and upkeep, it's still a good idea to touch base with them from time to time. You want to verify that they are addressing any issues as they come up.

What Do I Need to Become a Landlord in Pennsylvania?

If the residential property you plan on renting out is in Pennsylvania, there are some state-specific rules you need to learn to be a landlord, particularly for residential properties. Pennsylvania's Landlord-Tenant Act of 1951 outlines the rules and requirements of collecting security deposits and other payments while the Pennsylvania Human Relations Act prohibits discrimination. Here's what you need to know before you become a Pennsylvania-based residential landlord:

• Security deposit collection: You don't have to collect a security deposit from tenants in Pennsylvania. If you do, you can collect up to two month's worth of rent during the first year and up to one month worth of rent during the second year and beyond. Store the deposit in a secure location, such as a savings account. If the tenant lives in the property for more than two years, they can receive any interest earned on the deposit in the account, starting in the 25th month of their tenancy.
• Returning security deposit: When the tenant moves out, you need to return the security deposit to them unless they broke the lease, have unpaid rent or caused damage beyond standard wear-and-tear. If you are going to keep all or part of a tenant's deposit, you need to let them know within 30 days of move-out.
• Rent collection rules: Pennsylvania doesn't have rent control or limitations, so you can charge whatever you would like for rent. You are also allowed to charge tenants a late fee if they do not pay on time.
• Warranty of habitability: As a landlord, it's your responsibility to make sure that the property you rent to people is "safe, sanitary and fit for human habitation." A landlord can't rent a property to tenants "as-is" and expect them to take responsibility for heat and sanitation concerns. Before you rent to tenants, make sure you understand what's expected of you under Pennsylvania law and what a tenant can do if your property is uninhabitable.
• Pennsylvania Fair Housing: The federal Fair Housing Act prohibits landlords from discriminating against tenants based on several factors, such as race, religion and sex. Pennsylvania's fair housing rules add a few more categories to the mix, including age, the use of a service animal and pregnancy.

What License Do I Need to Rent out My House?

In Pennsylvania, licensing requirements for landlords vary by location. In Philadelphia, a rental License is necessary, while a broker's license may be necessary for broader property management tasks across the state. It's crucial to understand your specific local regulations to ensure compliance with all legal standards.

Compliance with legal standards is crucial for rental properties in Pennsylvania. That includes adhering to the Fair Housing Act, ensuring non-discriminatory practices in tenant selection. Landlords must understand and comply with regulations regarding security deposits, habitability standards and tenant rights. For residential properties, landlords need to be transparent about potential lead-based paint in older properties and ensure the installation of smoke and carbon monoxide detectors as per state requirements. Staying aware of these legal requirements helps maintain a safe, legal and comfortable environment for tenants.

Along with the rules you need to follow when renting out your property, keeping it maintained and collecting money from tenants, there are some additional regulations you might need to follow as a residential landlord in Pennsylvania.

Depending on the age of your property, you may have to let tenants know about the possibility of lead-based paint. If the property was built before 1978, federal law requires you to give all tenants a copy of a pamphlet on lead-based paint as well as information about any known lead-based paint on the property. Your lease also needs to include a statement warning about the dangers of lead and confirming that you have supplied the required documents to the tenant.

As the landlord, you can enter a property you're renting to show it to prospective tenants, to make repairs or in an emergency. Under Pennsylvania's rental laws, you don't have to give a tenant notice within a particular timeframe, such as 24 hours or 48 hours, before you can enter the property. While you don't have to give your tenants notice, it is usually considered a courtesy to provide 24 or 48-hour notice that you will need to enter their home.

Pennsylvania also has rules when it comes to smoke detectors and carbon monoxide alarms. Any residential property that has a fireplace, heater that burns fossil fuels or an attached garage needs to have a carbon monoxide alarm installed near the furnace or fireplace and each of the property's bedrooms. Rental properties also need to have a smoke alarm installed near each bedroom or sleeping area. If you own a multi-family property with more than three units, you also need to install smoke alarms in the common areas on each floor of the building.

Following Pennsylvania and federal rules as a landlord helps you keep your tenants safe and sound and can make your properties more attractive to people who are looking for a place to live.

Few landlords think that renting out property is an easy way to make money. While there are many challenges involved in being a landlord, from making sure you're following all the landlord-tenant laws of the state to making sure you've found the right tenants, there are also a lot of rewards, including the chance to earn a profit and boost your income. If you're new to being a landlord or are interested in becoming a landlord in Pennsylvania for the first time, you don't have to do things all on your own. American Heritage Property Management is a full-service property management company.

We've been working with landlords and property owners in Pennsylvania since 1981, providing excellent property management services for both residential and commercial properties.

Whether you want someone to take over the day-to-day running of your properties or are looking for help with tenant screening, lease preparation or rent collection, AHPM can be here for you. When you work with us, we make your rental our business and will work with you to make your dream of becoming a landlord a reality.

To learn more about our property management services, contact us today.