5 steps to renting out your home (© Dana Hoff/Beateworks/Corbisexpressi)

In today's real-estate market, more homeowners are becoming landlords. After all, home prices are down 50% or more in some parts of the country. The thought of trying to sell in such a market can make even the most weathered homeowner's stomach clench. (Bing: What's the median home price in your area?)

If you're thinking about turning your home into a rental property and becoming a landlord to ride things out, what must you do to make it happen? Here are five steps to get you started.

1. Start updating
Once you become a landlord, it's your responsibility to provide a safe and healthful home for your tenants. Your city will likely require a home inspection before you rent out your home for the first time. Make sure your home is up to code before inspectors show up.

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In addition, an updated and clean home will not only increase your likelihood of finding a tenant, but it will also allow you to charge higher rent. How you do this will vary, depending on the condition of your home. Here are some tips to keep in mind:

  • Cleanliness is key. The cleaner your home is, the easier you can find a tenant.
  • Make sure all rooms are freshly painted.
  • Any valuable or unique light fixtures should be removed.
  • Make sure to fireproof your home.
  • Look at your plumbing; fix any leaks and toilet problems. If you're keeping the water bill in your name, install low-flow showerheads to cut down on water use.
  • If you live in an older home, make sure the electrical wiring is safe.

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  • Install smoke detectors and buy fire extinguishers for the kitchen and upstairs rooms, when applicable. You might want to install a carbon-monoxide detector, too.
  • If your home has a chimney, you might have to prove it has been cleaned in the past year.

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2. Change your home's status
You must call your mortgage company to let it know you're no longer living in the home. The company will have to grant permission for you to rent it, and a small fee may be involved. You also must change your home's status with your local municipality.

3. Change your homeowners insurance
Before your new tenants move in, you must have landlord property insurance specifically for a rental property. This is a different policy than your current homeowners insurance. Be prepared; insurance for a rental is probably going to cost more than your homeowners-insurance coverage.

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4. Decide who will manage the property
Are you going to manage the property yourself or hire a property-management firm to do the work for you? It's a big decision.

Yes, you'll save money doing the work yourself. But you'll pay for this in time and stress. Property-management firms often charge 10% of the monthly rent for their services, but they handle everything from finding tenants to collecting rent to managing repairs. Many people find it's worth the cost to have these responsibilities off their plate.

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5. Determine the rent
Knowing how much to charge for rent can be tricky. Charge too little and you lose money. Charge too much and your house sits empty.

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If you hire a property-management firm, it likely will estimate how much you can reasonably ask for your rental property. If you decide to go it alone, search sites such as Craigslist to see what others are charging for the same-sized space in your area.

Then, just as you can sell your used car on Craigslist, you can easily put your property up for rent and avoid real-estate-agent fees. You can also use Rentometer, a website that helps you determine if you're charging too much or too little for your rental.

Also, remember that most experts recommend putting aside 25% of your monthly rent income for future maintenance and repairs.

Renting out your home can be a smart move, especially in the current down market. But if you decide to go this route, make sure you're prepared for the stress and financial obligations that inevitably go along with being a landlord.

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