Whether you are relocating for work, buying your next home, or holding onto a property as a long-term investment, turning your house into a rental can be a smart move. It also changes your legal, tax, and insurance picture overnight. Many first-time landlords in Novi, Plymouth, and across Southeast Michigan learn these lessons the hard way.
Here are seven things to handle before a tenant ever gets the keys.
1. Address your Principal Residence Exemption (PRE)
In Michigan, your home's Principal Residence Exemption exempts it from local school operating millage of up to 18 mills. According to the Michigan Department of Treasury's PRE guidelines, a property that is rented or leased does not qualify, and an owner must rescind the exemption no more than 90 days after the home stops being their principal residence. The form is the Request to Rescind Principal Residence Exemption (Form 2602), filed with your local assessor.
Missing this step can lead to penalties and back taxes, so budget for the higher tax bill when you run your rental numbers. Talk to your tax advisor about how this affects your specific property, and read up on the tax benefits available to landlords while you are at it.
2. Switch to the right insurance policy
A standard homeowner's policy is generally written for owner-occupied homes. Call your agent before move-in and ask about a landlord or dwelling policy that covers the structure, liability, and loss of rental income. It is also smart to require tenants to carry renters insurance in the lease. Some owners also hold rentals in an LLC for added liability protection; our guide on how to transfer a rental property to an LLC explains the process.
3. Check your city's rental rules
Some Southeast Michigan communities require rental registration, licensing, or inspections before a property can be occupied by a tenant. Requirements vary city to city, so check with your local building or code enforcement department before you list.
4. Get your security deposit process right
Michigan's Security Deposit Act is specific. The deposit cannot exceed one and a half times the monthly rent, and there are required notices, a move-in inventory checklist, and strict deadlines at move-out. The short version: the paperwork matters as much as the dollar amount. For a broader overview of your obligations, see our guide to Michigan landlord-tenant laws.
5. Use a Michigan-specific lease
A generic online lease often misses Michigan requirements, including language required under the Michigan Truth in Renting Act. Your lease should clearly cover rent, late fees, utilities, snow removal and lawn care responsibilities, pets, maintenance requests, and move-out procedures.
6. Screen every applicant the same way
Set written screening criteria before you advertise, such as income, credit, rental history, and background, and apply them consistently to every applicant. Fair housing laws apply to you as a landlord, and Michigan also prohibits source of income discrimination for landlords with more than four units. Our tenant screening best practices walk through how to build a consistent process.
7. Decide who will manage it
Rent collection, 2 a.m. furnace calls, vendor coordination, inspections, and legal notices all take time. Some owners enjoy self-managing. Others would rather have a professional team handle it. If you are weighing the two, compare self-managing vs. hiring a property manager. Either way, decide before your first tenant moves in, not after the first emergency.
The bottom line
Renting out your home can build long-term wealth, but only if it is set up correctly from day one, starting with setting the right rental rate. JMZ Management helps homeowners and investors across Oakland, Wayne, Macomb, Washtenaw, and Livingston counties price, lease, and manage their rentals with a real-time owner portal and a local Novi team.
This article is for general information only and is not legal or tax advice.
Get a free rental analysis for your Southeast Michigan home at jmzmanagement.com/freerentalanalysis or call 248-284-6990.
CONTACT US to learn more about professional property management in Michigan.
