Yes, you can rent out your house. Renting a home you own is legal in every state, but the moment a tenant moves in you stop being just an owner-occupant and become a landlord, and that shift triggers duties under your mortgage, your local rules, your insurance policy, the tax code, and federal fair housing law. Handle each one before you collect the first month’s rent.
Get Your Lender’s Sign-Off Before Anything Else
If you still owe on the mortgage, your loan servicer is the first call. Most conventional mortgages include an owner-occupancy clause that requires the property to be your primary residence. Renting it out without telling your lender puts you in breach of the loan agreement, and the Garn-St Germain Depository Institutions Act lets lenders include a due-on-sale clause allowing them to demand full repayment of the remaining balance when the property’s use changes without prior written consent.1Office of the Law Revision Counsel. 12 U.S. Code 1701j-3 – Preemption of Due-on-Sale Prohibitions
In practice, lenders rarely call the loan the day you list the property, but the softer consequences still bite: higher interest rates, reclassification of the loan, or foreclosure in the worst case. Some servicers approve the switch on a written request. Others require you to refinance into an investment-property loan at a higher rate. Either way, get it in writing before you advertise.
Check Your HOA and Local Zoning
Your lender’s blessing does not override your neighborhood’s rules. Homeowners associations often use restrictive covenants to cap or ban rentals. A common version is a rental cap that only lets a set percentage of units be leased at any one time. Breaking the rule can bring daily fines or an action to stop the rental, so read your CC&Rs first.
Municipal zoning is the second filter. Cities designate land for residential, commercial, or mixed use, and a property zoned strictly for single-family occupancy may not be eligible to convert into a multi-unit rental. Some cities also cap the total number of rental permits in a given area. Your local planning or zoning department, usually through an online portal, will tell you how your property is classified.
Switch to Landlord Insurance and Line Up the Paperwork
Standard homeowners policies typically exclude tenant-related incidents. Once you rent, you need a landlord or dwelling-fire policy, often called a DP-3, which covers the structure on an open-peril basis. Personal liability and medical payments are usually separate endorsements. Premiums run higher than a homeowners policy, though the exact number depends on the property and insurer.
Before applying for any permits, gather these:
- Your property deed and tax records, which prove you have legal authority to lease the home.
- A written lease that names every adult tenant, sets the term, and states the security deposit. Many jurisdictions cap deposits at one to two months’ rent.
- A lead-based paint disclosure. Federal law requires every lease for a home built before 1978 to include a specific lead warning statement and a copy of the EPA’s lead hazard pamphlet.2Office of the Law Revision Counsel. 42 USC 4852d – Disclosure of Information Concerning Lead Upon Transfer of Residential Property3eCFR. 24 CFR Part 35 Subpart A – Disclosure of Known Lead-Based Paint Hazards Upon Sale or Lease of Residential Property
- A designated local contact person if your city requires one. Many jurisdictions insist on someone local who can receive legal notices and respond to emergencies, especially when the owner lives out of the area.
Register the Rental and Pass Inspection
A lot of cities and counties require landlords to register the property and hold a rental license or permit before a tenant moves in. Applications typically go through the local housing authority or city clerk’s office, online or by mail. Fees vary; ask your local government for the exact amount.
After you file, most jurisdictions schedule a habitability inspection. A building inspector checks the property against local safety codes, including fire exits, electrical systems, plumbing, and working smoke and carbon monoxide detectors in sleeping areas. Failing the inspection means a repair list and, usually, paying for a re-inspection. From application to final permit commonly runs a few weeks.
Skipping this step is expensive. Many jurisdictions fine unregistered rentals by the day, and some courts will not let you file an eviction against a nonpaying tenant if you do not hold a valid rental permit. Register before move-in and both problems disappear.
Report the Rent and Track Your Deductions
Every dollar of rent you collect is taxable income. Individual landlords report rental income and expenses on Schedule E (Form 1040).4Internal Revenue Service. About Schedule E (Form 1040), Supplemental Income and Loss Rent goes into gross income for the year you receive it, and so do advance rent, lease cancellation payments, and any portion of a security deposit you keep because the tenant broke the lease.5Internal Revenue Service. Publication 527 (2025), Residential Rental Property
What You Can Deduct
Most ordinary costs of running the rental come off against rental income. That includes mortgage interest, property taxes, insurance premiums, repairs, advertising, property management fees, and legal or professional fees. You can also depreciate the building itself, not the land, over 27.5 years using the straight-line method, spreading the deduction evenly across the recovery period.5Internal Revenue Service. Publication 527 (2025), Residential Rental Property
Loss Limits and Extra Taxes
When expenses exceed rent, the resulting loss is generally a passive activity loss. You can deduct up to $25,000 of that loss against other income each year if you actively participate in managing the property, meaning you make decisions like approving tenants and setting rent. That $25,000 allowance starts phasing out when modified adjusted gross income passes $100,000 and is gone entirely at $150,000.6Internal Revenue Service. Publication 925 (2025), Passive Activity and At-Risk Rules
Higher earners may also owe the 3.8% net investment income tax on rental income. It kicks in once modified adjusted gross income exceeds $200,000 for single filers or $250,000 for married filing jointly.5Internal Revenue Service. Publication 527 (2025), Residential Rental Property
The 14-Day Rule
Rent your home out for fewer than 15 days in a year and use it yourself the rest of the time, and you do not need to report the rental income at all. You also cannot deduct any rental expenses for that period. Cross the 15-day mark and every dollar becomes reportable.7Internal Revenue Service. Topic No. 415, Renting Residential and Vacation Property
Screen Tenants Without Breaking Federal Law
The Fair Housing Act makes it illegal to refuse to rent to someone because of race, color, religion, sex, familial status, national origin, or disability.8Office of the Law Revision Counsel. 42 USC 3604 – Discrimination in the Sale or Rental of Housing and Other Prohibited Practices That covers advertising, showings, lease terms, and every step in between. Whatever screening criteria you use, whether minimum income, credit score, or rental history, they have to be applied the same way to every applicant.
Running a credit or background check requires a permissible purpose under the Fair Credit Reporting Act. The cleanest route is written authorization from the applicant before you pull the report.9Office of the Law Revision Counsel. 15 U.S. Code 1681b – Permissible Purposes of Consumer Reports If you deny the application based on anything in that report, you owe the applicant an adverse action notice. It has to name the reporting agency, state that the agency did not make the decision, and explain the applicant’s right to dispute errors and get a free copy of the report within 60 days.10Office of the Law Revision Counsel. 15 U.S. Code 1681m – Requirements on Users of Consumer Reports Skipping the notice invites lawsuits and statutory penalties.
Criminal history is a separate trap. There is no federal time limit on reporting criminal convictions, but some state and local laws impose lookback limits or forbid blanket policies that automatically reject anyone with a record.11Federal Trade Commission. Tenant Background Checks and Your Rights If you factor in criminal history, apply it the same way every time and check your jurisdiction’s rules.
A No-Pets Lease Does Not Cover Assistance Animals
A blanket no-pets policy in your lease does not apply to a tenant with a disability who needs an assistance animal, whether that means a trained service animal or an emotional support animal. Federal fair housing rules require you to make a reasonable accommodation, and you cannot charge a pet deposit or pet fee for the animal.12HUD.gov. Assistance Animals
You can ask for documentation linking the disability to the need for the animal when neither is obvious. Denial is allowed only in narrow situations, such as when the specific animal is a direct threat to others’ safety that no other accommodation could resolve, or when granting the request would cause significant physical damage to the property.12HUD.gov. Assistance Animals
Keep the Property Habitable and Respect the Tenant’s Space
Once someone lives there, you have an ongoing duty to keep the place safe and livable. Most jurisdictions recognize an implied warranty of habitability, meaning working plumbing, heating, electrical systems, and structural integrity, regardless of what the lease says about repairs. Fall short and tenants may have the right to withhold rent or pursue other legal remedies.
Your ability to walk into the property also changes. Most jurisdictions require at least 24 hours’ written or verbal notice before a non-emergency visit, and entry should stick to reasonable daytime hours. A real emergency, such as a burst pipe or gas leak, is the exception. Following those limits keeps the tenant relationship functional and keeps you compliant.
Should You Put the Property in an LLC?
Holding a rental in your personal name means a lawsuit from a tenant or visitor can reach your personal savings, other real estate, and other assets. A limited liability company creates a legal separation between the rental business and your personal finances, so typically only assets owned by the LLC are exposed. Own multiple rentals, and putting each in its own LLC keeps a claim against one from spreading to the others.
The trade-off is state filing fees and annual reporting requirements. You may also have to refinance the mortgage into the LLC’s name, and transferring title can trigger the due-on-sale clause on your existing loan.1Office of the Law Revision Counsel. 12 U.S. Code 1701j-3 – Preemption of Due-on-Sale Prohibitions Talk to a real estate attorney and your lender before you file the paperwork, so the liability protection actually outweighs the added cost and complexity.