How to be a Landlord in California
Ready to turn your home into a money-making rental property? Becoming a California property manager could be the perfect opportunity for you. The average rent for a one-bedroom apartment in California’s top cities runs from roughly $1,830 on the low end to $2,900 in renter-heavy areas like San Francisco. 45% of California’s residents are tenants, so demand for quality rental properties has most homes on the market for an average of 26 days as of March 2022.
Below is a list of the California cities ranked from most to least expensive monthly rent on average for a one-bedroom unit:
- San Francisco: $2,900
- San Diego: $2,390
- San Jose: $2,360
- Los Angeles: $2,250
- Oakland: $2,060
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Wondering how much money a California rental property can earn you? Enter your property’s information into our rental property calculator to get started!
How to Become a Landlord in California
1. Preparing Your California Rental Property
Popular California rental properties feature updated appliances, air conditioning, open floor plans, and smart safety upgrades. Equipping your rental unit with these sought-after amenities will allow you to increase your rent from the base level to something that will earn you a pretty profit — perhaps enough to cover your mortgage payments if all goes well! The rental market is currently hot, so don’t be afraid to pull in a local real estate agent to find your perfect investment property.
Best Practice: What should you charge for a month’s rent? First, determine the rental price that works best for your own budget, then look at nearby rental properties in that price range. If your property is nicer (such as having upgraded appliances, better features, etc.), you can raise the rent. If it falls short of the nearby properties, make strategic changes to bring it up to par. Use our free rent estimate report to see what current pricing is like in your neighborhood.
2. Review California Landlord-Tenant and Rental Laws, Then Draft Your Rental Agreement
As a first-time landlord, you need to review California’s landlord-tenant laws. As in all things, knowledge is power. Knowing which responsibilities fall to the renter and which fall to you will help you comply with state and local laws surrounding landlord responsibilities.
Next, you’ll want to draft your rental agreement. If you’re stressed about ensuring all the proper disclosures are in place, we offer California-specific forms to make becoming a landlord easier than ever.
Best Practice: Familiarize yourself with California’s landlord rights, tenants’ rights, and the fair housing laws in your city to make sure that you are always in compliance. These laws differ from county to county, so make sure to understand what those laws are in your area.
3. Advertise Your Rental Property
When it’s time to advertise your rental property, you can save time and money by listing your rental online. While a ‘for rent’ sign can bring in a handful of phone calls, creating an attractive rental property profile with high-quality photos will help to reach and entice potential tenants across the entire city.
Don’t: Use photos of cluttered or unstaged rooms since that may drive prospective tenants away.
Do: Open windows and turn on lights to make rooms appear large and bright.
Best Practice: Make sure that your property is clean and empty (or tidy and staged) before taking photos. These real estate photography tips can help you get great photos without the professional price tag.
4. Find the Perfect Tenant
With California’s high demand for rental properties, you’ll likely receive multiple rental leads. Choosing the right tenant from the start will make being a landlord that much easier. Tenant screening services allow you to see valuable renter information — like their eviction history and credit report.
Reviewing prospective tenants’ rental applications is just the first step in finding your ideal renter. Don’t be afraid to ask for references from previous landlords to get a better sense of how the applicant acted during their tenancy and whether or not they were able to receive their full security deposit back.
Best Practice: Combine the rental application, credit check, and background checks using our online tool, which was designed with landlords like you in mind. Also, don’t forget to follow all federal laws regarding fair housing. According to the U.S. Department of Housing and Urban Development (HUD), “It is illegal to discriminate in the sale or rental of housing, including against individuals seeking a mortgage or housing assistance, or in other housing-related activities. The Fair Housing Act prohibits this discrimination because of race, color, national origin, religion, sex (including gender, gender identity, sexual orientation, and sexual harassment), familial status, and disability.”
5. Landlord Check-Ins & Maintenance
Wondering how often landlords can inspect a property in California? Actually, random inspections aren’t allowed in California. However, a landlord can visit the property to make repairs or maintenance, to show the property to potential new tenants, if they think the tenant has abandoned the property, or in the event of an emergency.
Your lease agreement should clearly define when and how often maintenance will be performed at your rental property. Additionally, make clear what repairs you’ll cover as a landlord and the time limit to complete said repairs. California law requires that tenants wait a reasonable amount of time after making a repair request (typically between one and thirty days) for the repairs to be completed.
Best Practice: Include maintenance and repair information in your lease so that your tenant knows exactly what to expect from you. Also, make sure to follow any local and state laws regarding repairs. We recommend purchasing landlord insurance (and requiring your tenant to carry renters insurance) in case any major repairs pop up.
Bonus: Learn About Taxes on Rental Income in California
Rental income in California is treated as regular personal income and taxed accordingly. However, your operating expenses like mortgage interest, pest control, property taxes, and yard maintenance can reduce your taxable rental property income.
Best Practice: Keep receipts for all of the services for which you pay to maintain your rental property. That way, you’ll be prepared to maximize your deduction when tax season rolls around.
Becoming a landlord in California can be a great way for you to make passive income. Online landlord tools allow you to advertise your rental, accept applications, run tenant screening reports, receive payments, and communicate with tenants without driving all over town. California’s rental industry is booming — so don’t miss your opportunity to jump into the profitable landlord game!
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