To rent out an apartment, you take on a regulated role: before anyone moves in you need to set a compliant lease, make the safety disclosures federal and local law require, follow fair housing rules in how you advertise and screen, and hold the security deposit the way your state requires; once the tenant is in, you owe ongoing habitability, you need the right insurance, and you report the income on your taxes. The sections below walk through each of those duties in the order they come up.
Setting Rent and Lease Terms
Research what comparable apartments nearby are renting for. Look at current listings within a few miles that match your unit’s size, condition, and amenities. Most landlords set rent to cover the mortgage, property taxes, insurance, and a maintenance reserve while staying competitive enough to attract applicants quickly.
Pick a lease duration that fits your plans. Twelve months is the most common. Month-to-month gives you flexibility if you may want to sell or move back in. Eighteen months can lock in a reliable tenant through seasonal swings. Whatever you choose, put the start date, end date, and duration in writing.
Decide on a pet policy before you list. If you allow pets, spell out any size or breed restrictions and whether you will charge a pet deposit or monthly pet rent. Assistance animals for tenants with disabilities are not pets under federal law, which is covered below.
Your lease should also cover utilities (which services are included in rent and which the tenant pays), parking and storage (whether a space is included and its number), and late fees. Many jurisdictions require late fees to be reasonable, typically no more than five to seven percent of monthly rent, and some cap them by statute.
Required Disclosures and Rental Permits
Federal and local laws require specific safety disclosures before a tenant moves in. The biggest federal one applies to any property built before 1978: you must give the tenant a lead-based paint disclosure form and an EPA-approved information pamphlet about lead hazards. Both of you sign the disclosure, and you must share any information you have about known lead paint in the unit.1Office of the Law Revision Counsel. 42 USC 4852d – Disclosure of Information Concerning Lead Upon Transfer of Residential Property Skipping this step is expensive. The inflation-adjusted civil penalty is currently $22,263 per violation, and a tenant can also sue for up to three times their actual damages.2GovInfo. Civil Monetary Penalty Inflation Adjustment Rule 2025
Most jurisdictions also require working smoke detectors and carbon monoxide alarms, typically in every bedroom and on every level of the unit. Inspect them before each new tenancy and document that they work. Some areas require mold disclosures if the property has a history of moisture problems or prior remediation.
Many municipalities require a rental license, certificate of occupancy, or housing inspection before you can legally rent out a unit. A municipal inspector verifies that the property meets fire safety, plumbing, and sanitation codes. Fees and specifics vary by locality, so check with your city or county housing department before listing. Once you pass, keep the permit on file. Some jurisdictions require it to be displayed in the unit or renewed on a schedule.
Advertising and Screening Without Violating Fair Housing
The federal Fair Housing Act prohibits discrimination based on seven protected characteristics: race, color, national origin, religion, sex, familial status, and disability.3Office of the Law Revision Counsel. 42 USC 3604 – Discrimination in the Sale or Rental of Housing and Other Prohibited Practices Many state and local laws add protections such as sexual orientation, gender identity, age, marital status, or source of income. These rules apply at every stage, from the listing to the lease signing.
Listing Language
Your listing cannot signal a preference for or against any protected group. Phrases like “ideal for young professionals,” “no children,” or “English speakers preferred” violate federal advertising rules.4eCFR. 24 CFR 100.75 – Discriminatory Advertisements, Statements and Notices Describe the apartment, not the tenant you want: square footage, bedrooms, amenities, rent, and lease terms.
Assistance Animals
Even if your lease prohibits pets, you must allow assistance animals as a reasonable accommodation for tenants with disabilities. This includes trained service animals and emotional support animals that provide therapeutic benefit. You cannot charge pet deposits or pet rent for an assistance animal.5U.S. Department of Housing and Urban Development. Fact Sheet on HUD’s Assistance Animals Notice When the disability or need for the animal is not obvious, you may ask for documentation from a healthcare provider confirming the disability-related need. Certificates purchased from online registries generally do not count as reliable documentation.
Credit, Income, and Background Checks
Most landlords charge a screening fee to cover credit and background reports. Several states cap this fee anywhere from about $20 to around $65, so check your local rules before setting an amount. The applicant must give written consent before you pull any consumer reports, and both reports must come from agencies that comply with the Fair Credit Reporting Act.
A credit report shows payment history, outstanding debts, and overall score. A low score does not automatically disqualify someone, but it may prompt you to look into whether the negative marks come from medical debt or from repeated missed rent. A common income benchmark is gross income of at least three times the monthly rent, verified through recent pay stubs or an offer letter. For self-employed applicants, two years of tax returns or bank statements serve the same purpose. Contacting previous landlords adds context: ask about on-time rent, property upkeep, and lease violations.
Criminal history is the riskiest piece. HUD guidance warns against blanket policies that automatically reject anyone with a record. Your criteria should focus on conduct that poses a genuine risk to resident safety or property, consider how much time has passed since the offense, and allow applicants to present evidence of rehabilitation.6Federal Register. Reducing Barriers to HUD-Assisted Housing Rejecting an applicant based solely on an arrest that did not lead to a conviction is particularly risky. Violating the Fair Housing Act exposes you to actual and punitive damages, attorney’s fees, and injunctions in private lawsuits.7Office of the Law Revision Counsel. 42 USC 3613 – Enforcement by Private Persons HUD can also pursue administrative complaints with its own penalty structure.
Adverse Action Notices
If you deny an applicant based in whole or in part on information from a credit report or background check, federal law requires you to send an adverse action notice. It must include the name, address, and phone number of the reporting agency, a statement that the agency did not make the decision, and information about the applicant’s right to a free copy of the report within 60 days and to dispute any inaccuracies.8Office of the Law Revision Counsel. 15 USC 1681m – Requirements on Users of Consumer Reports Skipping this notice violates the Fair Credit Reporting Act no matter how justified the denial was.
Housing Choice Vouchers
Some applicants will present a Housing Choice Voucher (often called Section 8), where a local public housing authority pays part of the rent directly to you. Accepting voucher holders involves an inspection to verify the unit meets federal housing quality standards and a separate contract with the housing authority.9HUD Exchange. Interested in Becoming a Housing Choice Voucher Landlord A growing number of states and cities prohibit landlords from refusing voucher holders solely because of the voucher, treating source of income as a protected characteristic. Check your local laws before adopting a blanket policy.
Signing the Lease and Handling the Security Deposit
Once you select a tenant, both parties sign the lease. Electronic signature platforms are convenient and give everyone an immediate copy. On paper, have each adult tenant initial every page. The lease should include everything you worked out earlier, along with the disclosure forms above.
Collect the security deposit and first month’s rent before you hand over keys. Accept payment by cashier’s check or verified electronic transfer so funds clear immediately, and issue a written receipt showing the amount and purpose of each payment.
Most states cap the security deposit at one to two months’ rent, though limits vary. Some states set lower caps for certain landlord types or longer leases, and a few have no statutory maximum. Many states also require you to hold the deposit in a separate bank account, sometimes interest-bearing, rather than mixing it with your own funds. Failing to follow your state’s deposit rules can cost you the right to keep any portion of the deposit at move-out.
Before the tenant moves in, walk through the unit together and document every room’s condition on a written checklist. Note existing damage, wear, and cosmetic issues: scuffed walls, stained carpet, scratched appliances. Take dated photographs. Both of you sign the completed checklist and keep a copy. This is your primary reference when deciding on deposit deductions later.
Returning the Deposit at Move-Out
When the tenant moves out, most states give you between 14 and 30 days to return the security deposit, though deadlines run from as few as 10 to as many as 60 days depending on jurisdiction. If you withhold any portion, you typically must provide an itemized statement explaining each deduction, such as unpaid rent, cleaning beyond normal wear, or repair of tenant-caused damage. Normal wear and tear, like minor scuff marks or faded paint, is not a valid deduction.
Missing the deadline or failing to itemize can expose you to penalties. In many states, a landlord who improperly withholds a deposit may owe the tenant double or triple the deposit amount plus attorney’s fees. Keep your move-in checklist, photographs, and repair receipts organized so you can defend any deduction.
Keeping the Unit Habitable
Your duties do not end at lease signing. Nearly every state recognizes an implied warranty of habitability: you must keep the unit safe and fit for living, even if the lease does not say so. At a minimum that means working plumbing, heating, and electricity, structural integrity, and prompt attention to pest infestations or water intrusion.
When a tenant reports a habitability problem, you have to address it within a reasonable time. What counts as reasonable depends on severity. A broken furnace in winter needs faster action than a dripping faucet. If you fail to make repairs, tenants may have remedies that vary by state:
- Rent withholding until the issue is resolved.
- Repair and deduct: hiring someone to fix the problem and subtracting the cost from rent, usually subject to a cap such as one month’s rent or a fixed amount.
- Terminating the lease without penalty if conditions are severe enough.
- Suing for damages, rent reduction, or return of the security deposit.
Responding promptly, documenting repairs, and scheduling periodic inspections with proper notice is far cheaper than defending a habitability claim.
Landlord Insurance
A standard homeowner’s policy generally does not cover a property you rent to someone else. You need a landlord policy, often called a dwelling fire policy or DP-3, built for non-owner-occupied rentals. A landlord policy generally covers:
- The building and attached structures from covered events like fire, wind, or vandalism.
- Detached structures such as garages, sheds, or fences.
- Appliances and other items you provide for tenant use (not the tenant’s own belongings).
- Lost rental income while the property is uninhabitable due to a covered event and undergoing repairs.
Liability coverage, which protects you if someone is injured on the property and sues, is not always included automatically. Ask your insurer whether liability and medical payments coverage are built in or need to be added as endorsements. Consider requiring tenants to carry their own renters insurance, which covers their belongings and gives them their own liability protection. Common exclusions include flood damage, earthquake damage, and losses from extended vacancy, so review the policy carefully.
Taxes on Rental Income
Rental income is taxable and goes on Schedule E of your Form 1040.10Internal Revenue Service. About Schedule E (Form 1040), Supplemental Income and Loss Most expenses tied to the rental are deductible against that income: mortgage interest, property taxes, insurance premiums, repairs, advertising, property management fees, and legal or professional fees.11Internal Revenue Service. Publication 527 – Residential Rental Property
Depreciation
One of the largest tax benefits is depreciation, which lets you deduct the cost of the building (not the land) spread over 27.5 years.12Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System If the building portion is valued at $275,000, that is $10,000 a year in depreciation even though you did not spend that cash. Depreciation begins when the property is placed in service as a rental, and the IRS uses a mid-month convention that prorates the first and last years.
1099-NEC for Contractors
If you pay an individual or unincorporated business $600 or more during the year for services like repairs, landscaping, or property management, you must file a Form 1099-NEC reporting that payment to the IRS when you are operating the rental as a trade or business.13Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC Keep records of every contractor payment throughout the year so you are not scrambling at tax time.
Qualified Business Income Deduction
Landlords who actively manage their rentals may qualify for a 20 percent deduction on qualified business income under Section 199A. The IRS safe harbor generally requires at least 250 hours of rental-related work per year, including advertising, arranging leases, collecting rent, and maintenance, with contemporaneous records of those hours. The deduction was made permanent in 2025 and can meaningfully reduce your effective tax rate on rental income. Not every rental situation qualifies, so a tax professional is worth the call to confirm your arrangement meets the requirements.11Internal Revenue Service. Publication 527 – Residential Rental Property