Becoming a landlord is a great way to run a successful business and earn a sizeable income. However, everyone may not be suitable for the role. It has its flip side, too, just like everything else in life. For a first-time landlord, research and homework are key to being prepared and of course, successful. Otherwise, you may have to face monetary and property losses, legal issues, among other problems, which you didn’t anticipate.
It’s a given that there are many factors to look into, such as policies for pets and guests, keeping your property and surrounding areas neat and well-maintained, selecting the perfect tenant, and dealing with tenant issues, behavioral and otherwise. In other words, you have a lot to deal with, but it’s nothing that proper study, planning, and taking steps at the right time can’t solve.
We’ve compiled thirteen steps that will make the role easier to handle and help you become a successful landlord:
1. Research landlord-tenant laws and the local rental market
Do some digging and find information on landlord-tenant laws, the local rental market, and seek advice from experienced landlords.
- Read up landlord-tenant laws: Read the local landlord-tenant laws thoroughly because they’re the most stringent and take precedence over federal and state laws. At the same time, know the local, state, and federal laws related to being a landlord so that you’re well-informed.
- Local laws: They deal with structural requirements, such as facilities, water, and heating services. It could include laws about rent hikes, tenant eviction, and security deposits.
- State laws: These deal with evictions, housing standards, repairs and maintenance, landlord’s entry into tenant premises, and security deposits. They are subject to changes from time to time, so remember to keep abreast of the latest updates.
- Federal laws: Federal laws deal with landlord duties relating to health and environmental hazards. Landlords must comply with the Civil Rights Act that doesn’t permit any race-based discrimination. They must also follow the Fair Housing Act, which doesn’t discriminate based on color, religion, age, national origin, familial status, disability, and gender.
- Research the local rental market: Do some homework on the local rental market. Find out critical information such as the range of rental rates, the housing unit types, and the frequency of vacancies. An added information source is rental ads.
- Seek landlord advice: Forge friendships with local landlords who’ve been in the business for a while and can offer you crucial advice. Though they’re your competitors, you may find some helpful ones and use their tips to your benefit.
In conclusion, it may be wise to acquire copies of documents on rules and guidelines you can refer to generally or in a specific situation.
2. Get landlord insurance
Whether you own one property or several, landlord insurance can be a lifesaver, or in this case, a property saver. It goes without saying that you wish to protect your property from damage, don’t you? Here’s where landlord insurance makes its entry.
You may have heard of homeowner’s insurance too, but it won’t safeguard your property while the tenant’s living on it. Landlord insurance is pricier but better and more flexible because it can be customized to suit your requirements.
Landlord insurance covers multiple things including liability, which will protect you in case a tenant decides to sue you after getting injured on your property. It includes alternative accommodation cover that gives tenants another place to stay if your property becomes uninhabitable due to damage. It also contains standard home insurance aspects that deal with insurance for buildings, cable, and underground pipes.
Last but not least, it covers the loss of rental income. In this situation, you may get back the income you lost for non-payment of rent by the tenant due to property damage (which includes fires, storms, vandalism, or theft).
3. Evaluate the costs of owning rental property
Before renting out, it’s necessary to set a budget that helps you decide the amount you’ll pour into your property and the returns you expect. Else, it defeats the purpose of buying property and getting into the renting business, doesn’t it?
As a landlord, some of your crucial rental costs include maintenance and repairs, mortgage payments (monthly), property management, insurance, and utilities. While you’ll need to bear the costs of maintaining a rental property, you’ll end up paying less taxes on them.
Finally, you can minus the interest payments on your mortgage (rental property) and these costs:
- Advertising
- Insurance premiums
- Depreciation
- Losses resulting from thefts or deaths
- Regular maintenance and repair costs
- Property taxes
- Travel expenses
- Fees paid to maintenance personnel
4. Ready the property and fix the rent
Before you list your rental property for rent, make sure it’s clean and in a livable condition. We believe first impressions count, don’t you? Check each room and figure out what changes need to be made, whether it involves painting, recarpeting, adding new appliances or furniture, fitting a new floor, fixing holes in walls, and so on.
Something else you need to take care of before renting out is deciding the value of your property. Keep in mind the local market rental rates, the state of the property, and the amenities you’re providing to figure out the rent you wish to charge.
Make sure to set a rent that’s neither too high that tenants can’t afford it nor too low that it just about breaks even. You need to make room for profit. After all, it’s a business you’re running, not a charitable organization.
In the end, talk to local landlords and seek tips from them, or browse through rental portals like Cirtru to determine how much rentals in the area are charging. Then compare it with yours to gauge the difference, if any.
5. Advertise the property
When the property’s been spruced up, your next step is to put it up where potential tenants can view it. Create a listing for your rental house that includes essential information, such as the rent, security deposit, specific lease terms, number of bedrooms and bathrooms, square footage, amenities and appliances included, pet regulations, and income expectations.
Remember to upload several clear and beautiful photos of your property, both the inside and the outside, so that potential tenants can envision if your property’s where they see themselves living.
In the digital age, we have numerous websites and apps, both free and paid, that you can use to post your property details.
You could also use newspaper classifieds, military and student housing websites to ensure that your property reaches a local market. Finally, you have Craigslist, which has been around for over 25 years, and is still used by potential renters. It’s a good idea to stay vigilant though, given the number of scams it’s been associated with over the years.
6. Screen the tenant using a standard procedure
Once you start receiving rental application forms, you’ll need a foolproof screening process to ensure that you get only the best among hundreds of applicants. You don’t want to end up in a situation where your hastiness in getting a tenant results in their eventual eviction! Every landlord wants a well-behaved tenant who makes timely rental payments and takes care of the rental space as if it were their own.
So, while carrying out the screening process, remember to do a background check that delves into these details:
- Tenant’s credit history and credit score
- Tenant’s criminal history and public records
- Tenant’s income validation and employment history and status (current)
In the end, be sure to comply with the Fair Housing laws. For a more detailed and accurate procedure, you could consider the services of tenant screening companies.
7. Create a detailed lease agreement
The lease agreement is a contract that highlights the tenant and landlord’s rights and responsibilities. It’s a critical document because it ensures that both parties know what’s expected of them and they comply with the terms and conditions, failing which they can expect to deal with legal complications.
When you create the lease document, the following elements must form a part of the agreement:
- The property address
- The landlord’s name
- The tenant’s name
- The rent amount
- The security deposit amount
- The period of the tenant’s stay on the property
- Expectations and duties of both parties
- Other fees
- Lawyer’s fees in case of disputes
- Insurance liabilities
- Late fees in case rent is delayed
- Utility charges
Keep in mind that the list here isn’t comprehensive and may differ from case to case.
8. Ensure tenants fill out a condition report
As a landlord, one of your key responsibilities is to conduct two walk-throughs, one during the move-in and the other during the move-out. Why’s this so important? Let’s find out.
During the move-in walk-through, hand over a condition report to the tenant to fill out. Have them inspect every inch of the rental from top to bottom and note down any defects or damage that needs to be repaired. Make it a point to inspect every room.
Repeat the same process when tenants move out. The details will help you fix whatever requires repair before your new tenant sets up their home on your property.
To sum up, the reason behind the exercise is to be aware of damaged items in your property that your tenant may or may not be responsible for. If the evidence points toward them, you can take it out of their security deposit. But if the documentation, images, or videos indicate otherwise, you need to return the entire security deposit to them after they move out. Again, refer to the state and local laws for accurate information.
9. Remember to document everything
Verbal commitments don’t work today because they involve trust, which is in short supply. So, it’s always wiser to have everything in black and white.
Whether it concerns any changes to your lease agreement, any additional contract that you and your tenant decide to draw up, or anything else discussed in person or on the phone, they need to be on paper.
To conclude, should there be any legal hassles at the end of the day, the court always looks for and demands documented evidence to reach a verdict.
10. Collect rental payments online
Today, you’re not likely to find many landlords who collect rents from tenants in person. Honestly, who has the time? Being a landlord, you have many tasks you need to perform professionally, not to mention personally. So, door-to-door rental payment collection hardly seems like a practical thing to do.
Also, when all payments from buying everyday items to booking tickets to making hotel reservations are made online, it doesn’t surprise us that most tenants prefer to pay their rent the same way. Among the many apps available today, we have Venmo, PayPal, Apple Pay, and so on, which your tenants can use to transfer the monthly rent amount to you.
On the whole, an excellent alternative for your tenants is to set up an automatic payment system where the money’s deducted from their bank account and lands directly into yours. It’s a win-win situation and eases one of your biggest worries, so go for it!
11. Encourage tenants to get renters insurance
Interestingly, renters insurance benefits both the tenant and the landlord.
Besides safeguarding your tenant’s belongings in case there’s a fire, flood, or theft, it includes liability protection in a situation where your tenant’s visitor falls and injures themselves.
It also covers instances where your renter or anyone they know, including family, friends, and pets, destroy your property. Finally, it includes financial support if your rental’s damaged and you need to find alternative accommodation for your tenants.
Among the policies that you set, such as those for pets and guests, include one that requires your prospective tenants to purchase renters insurance to be perceived as eligible.
12. Communicate openly with tenants
Once your tenant signs the lease agreement and moves into your property, don’t erase them from your memory except when the rent is due. Seek to establish a working relationship with them that’s friendly, respectful, polite, and just, but also assertive should the need arise.
Most tenants cite communication issues with their landlords because of the lack of it. Connect with them now and then, through phone or email, and let them know you’re there to help them resolve any problems with the rental. Another complaint by tenants is the time taken by landlords to handle a maintenance or repair request.
Don’t delay in responding to such requests because you could save yourself from legal hassles that tie into your property upkeep. Finding good tenants in metros like NYC, San Francisco, Los Angeles, San Diego, could also be a challenge. After all, if you’re callous about your own property, why would people want to pay to live in it?
On the whole, by being in touch with your tenants, you can also share important information with them, such as when the lease is up or when they need to give you notice for moving out or renewing the lease. Should you choose to conduct a market study, which reveals that your rent doesn’t match those charged by similar rentals, you could discuss this with your tenant and ease them into a rent hike.
13. Inspect your property regularly
Once your tenant starts living in your rental property, your responsibilities aren’t over. In fact, they’ve just started! One of the most important duties of a landlord is to inspect their properties in person at regular intervals.
Although landlords are advised to inspect their properties at least once annually, it makes more sense to check them every six months. This serves two purposes: one, it helps you keep track of upkeep issues, and two, it draws your attention to any clause breach in the rental agreement.
Conclusion
So, do you think you have what it takes to become a successful landlord? We believe you do! Do everything in your power to ensure that tenants aren’t dissatisfied with you or the property they’re living in. In a word, if your tenants are satisfied with the rental space they call home, its maintenance, and the amenities provided, it guarantees a prolonged stay and more income. On the other hand, unhappy tenants indicate fewer new tenants, increased move-outs, more vacancies, and little or no rental income.
