Buying a house to rent out isn’t just about collecting monthly checks. It’s about managing people, maintaining a property, and staying ahead of laws that change faster than your renter’s Wi-Fi password. In 2025, renting out property in the U.S. is more competitive, more regulated, and more profitable-if you know how to do it right.
Why Real Estate Rental Still Works in 2025
After the housing boom of 2021-2023, many thought rental demand would drop. It didn’t. In fact, the U.S. is short nearly 4 million rental units, according to Harvard’s Joint Center for Housing Studies. Cities like Austin, Atlanta, and even smaller markets like Raleigh and Nashville are seeing rent growth above 5% annually. Why? More people are choosing to rent-not because they can’t afford to buy, but because they want flexibility. Remote work means people move every 2-3 years. Gen Z and millennials aren’t chasing homeownership like their parents did. They’re chasing convenience.
If you own a home, a duplex, or even a basement apartment, you’re sitting on a cash flow machine. But only if you treat it like a business.
How to Set the Right Rent Price
Setting rent too high? You’ll sit empty for months. Too low? You’re leaving money on the table. The key is matching your price to local comps, not your mortgage.
Start by checking Zillow, Rent.com, and Apartments.com for similar units in your neighborhood. Look at properties with the same number of bedrooms, similar age, and same amenities. Don’t just take the average-look at the median. That’s what most renters actually pay.
Example: In Brooklyn, a 2-bedroom apartment with in-unit laundry and a balcony rents for $3,100-$3,500. If your place has no laundry and a shared yard, aim for $2,700-$2,900. Don’t add $500 just because you renovated the kitchen. Renters pay for location and function, not aesthetics.
Also, factor in utilities. If you’re including water and trash, add $75-$120 to your rent. If tenants pay for everything, you can go slightly lower. Transparency builds trust.
Tenant Screening: Don’t Skip This Step
One bad tenant can cost you $10,000 in lost rent, repairs, and legal fees. Screening isn’t optional-it’s your first line of defense.
Here’s what works in 2025:
- Run a credit check (minimum score of 620)
- Verify income (3x the rent is the standard)
- Check rental history (call previous landlords, don’t just take references)
- Do a criminal background check (only for violent or property crimes)
- Use a licensed screening service like TransUnion SmartMove or Rentberry
Never accept a tenant without a signed application and a non-refundable screening fee ($30-$50). This weeds out tire-kickers and shows you’re serious.
Pro tip: Ask for proof of employment via a recent pay stub or employer contact. Don’t trust screenshots of pay apps like Cash App. Real income shows up on bank statements.
Lease Agreements: Protect Yourself
A handshake and a text message aren’t enough. You need a legally binding lease. Use a state-specific template from a real estate attorney or a trusted platform like Rocket Lawyer or LawDepot.
Key clauses to include:
- Security deposit amount and return policy (must follow state law-max is usually 1-2 months’ rent)
- Rules on pets, smoking, subletting, and noise
- Who pays for repairs (plumbing, HVAC, appliances)
- Notice requirements for entry (24-48 hours in most states)
- Consequences for late rent (grace period, late fee caps)
Never handwrite your lease. Typed, signed, and dated copies go to both parties. Keep a digital backup. If a tenant claims you never gave them a copy, you lose in court.
Property Maintenance: The Hidden Cost
Most new landlords think maintenance is a minor expense. It’s not. Budget 1% of your property’s value each year for upkeep. A $300,000 home? That’s $3,000 a year. That’s $250/month.
Common repairs you’ll face:
- Water heater failure (avg. cost: $800-$1,500)
- AC unit breakdown (avg. cost: $1,200-$3,000)
- Leaky roof or foundation cracks (avg. cost: $2,000-$10,000)
- Broken locks or door hinges (avg. cost: $150-$400)
Set aside a maintenance fund. Don’t use rent money. Open a separate bank account. Even if you don’t spend it this month, you’ll need it next year.
Also, build a network of reliable contractors. A good plumber who shows up on time is worth their weight in gold. Keep their numbers saved. Don’t wait for a burst pipe to Google "emergency plumber near me."
Property Management: Do It Yourself or Hire Help?
Managing a rental takes 5-10 hours a month. That’s time you could spend working, sleeping, or doing anything else. If you’re not willing to handle calls at 11 p.m. because the toilet’s overflowing, hire a property manager.
Property managers charge 8-12% of monthly rent. For a $2,500 unit, that’s $200-$300/month. Is it worth it? If you work 50 hours a week, live out of state, or hate dealing with angry tenants-yes.
But if you’re local, organized, and don’t mind being on call, you can save that money. Use apps like Buildium or Avail to automate rent collection, maintenance requests, and lease renewals. They cost $10-$30/month and cut your workload in half.
Tax Benefits You’re Probably Missing
Rental income is taxable-but so are your expenses. You can deduct:
- Mortgage interest
- Property taxes
- Insurance
- Repairs and maintenance
- Utilities if you pay them
- Property management fees
- Travel to the property for inspections
- Depreciation (this is huge-spread the cost of the building over 27.5 years)
Example: You earn $30,000 in rent but spend $22,000 on expenses and depreciation. Your taxable income is $8,000. That’s a massive difference.
Keep every receipt. Use a free app like QuickBooks Self-Employed or Stessa to track everything. Talk to a CPA who specializes in real estate. Don’t rely on TurboTax alone.
What Not to Do
Here are the top 3 mistakes new landlords make:
- Skipping tenant screening to fill the unit fast
- Not having insurance (liability and property damage coverage are non-negotiable)
- Ignoring state and local laws (like rent control in NYC, CA, or Oregon)
Also, don’t be a landlord who shows up unannounced. Don’t threaten eviction over a late payment. Don’t accept cash without a receipt. These aren’t just bad practices-they’re legal risks.
Where to Find Good Rental Properties in 2025
If you’re looking to buy your first rental, focus on markets with:
- Population growth (no decline in the last 5 years)
- Job growth (tech, healthcare, logistics)
- Low property taxes
- Strong rental demand (look for areas near universities, hospitals, or transit hubs)
Top markets in 2025: Phoenix, Tampa, Charlotte, Boise, and Atlanta. Avoid overpriced cities like San Francisco and Manhattan unless you’re buying a luxury unit with long-term tenants.
Look for properties built between 1980 and 2010. They’re modern enough to attract renters but not so new that they’re overpriced. Avoid fixer-uppers unless you’re a contractor. Renovations eat cash fast.
Final Thought: It’s a Business, Not a Hobby
Rental real estate isn’t passive income. It’s active income with long-term rewards. The best landlords don’t just collect rent-they build relationships, stay informed, and plan ahead. They know that a well-maintained property with a reliable tenant is worth more than a fancy listing with a bad credit score.
If you’re ready to start, pick one step: screen a tenant, calculate your first property’s cash flow, or call a local real estate attorney. Don’t wait for the perfect moment. The market won’t wait for you.
Can I rent out my house if I still have a mortgage?
Yes, but check your mortgage agreement first. Most lenders require you to inform them if you plan to rent. Some may require you to switch to a landlord loan, which usually has a higher interest rate. You can’t rent out a home under a primary residence loan without permission-it’s considered fraud.
How much should I save for a rental property down payment?
Most lenders require 20-25% down for investment properties. Some programs offer 15%, but you’ll pay higher interest and mortgage insurance. A 20% down payment gives you better rates and lowers your monthly payment, which improves your cash flow. Don’t go lower unless you have strong emergency savings.
What’s the best way to handle security deposits?
Store the deposit in a separate interest-bearing account, as required by law in most states. Return it within 21-30 days after the tenant moves out, minus deductions for damage beyond normal wear and tear. Provide a written itemized list of deductions. Failing to do this is a common reason tenants sue.
Do I need rental insurance?
Yes. Standard homeowner’s insurance doesn’t cover rental properties. You need landlord insurance, which covers property damage, liability, and loss of rent if the unit becomes uninhabitable. It costs $1,000-$2,500 per year depending on location and coverage. Don’t skip it.
Can I evict a tenant for not paying rent?
Yes, but you must follow the legal process. You can’t change the locks, shut off utilities, or harass the tenant. First, send a formal notice (usually 3-5 days to pay or quit). If they don’t pay, file an eviction lawsuit in court. Only a sheriff can remove a tenant. Skipping steps can lead to lawsuits or fines.