Did you know that renter-occupied units made up over 30% of the housing stock out there right now? With so many renters looking for homes, it’s a great time to think about investing in the rental real estate market. A rental can provide you with passive income now and in the future, and provide a significant return should you sell it later on.
If you are considering investing in a property, it’s important to understand that this will be a job, even if it’s not your primary one. There are many benefits to becoming a landlord, but there are things to know before you rent out your property. This guide explains 7 crucial things to know before you take that big step.
1. Before Becoming a Landlord, Research the Market
Before you fix a price on your rental, do your market research. Instead of guessing, find comparable units in the neighborhood and see how your property stacks up. Look at market trends so that you can plan not just for now, but for future rentals so that you price your unit in a way that is profitable for you, and fair for the renters.
2. Understand Housing Laws
Before you can begin the rental process, it’s important to look into your local housing laws and the Federal Fair Housing Act. Understanding these will help you avoid any discrimination and prohibited practices for rentals. It also includes protections for rentals that require modifications for people with disabilities.
3. Write a Lease
One of the most important steps for first-year landlords is to learn how to write a lease properly.
While many states will have a standard lease available online, you can add addendums and make modifications. It’s critical that you understand the rights and protections for both yourself and your tenants, so you should consider having a lawyer look over it first before handing it over to new potential tenants.
4. Find a Reputable Lawyer
On that note, don’t wait until you have issues with a tenant to search for a legal team — have them involved from Day 1 with the creation of your property’s lease. Make sure that you can get trustworthy legal advice if you have questions about evicting a tenant. Litigation Advocates will help you follow the proper procedure to protect your property and your interests.
5. Learn How to Screen Tenants
Screening tenants ranks high on the top tips for landlords because it can be a challenging and costly process to evict them should things go wrong.
Establish a procedure that checks their credit, criminal record, eviction history, and employment. It’s also advisable to get reference letters from previous landlords and employers and take the time to confirm the validity of those over the phone.
6. Get Your Property Ready For Rentals
This may sound obvious, but you should make sure that your property is in move-in condition before the tenants arrive. Take care of all necessary repairs in advance, and ensure that it has been properly cleaned. Test all smoke detectors, carbon monoxide detectors, and other required safety devices in the unit before your tenants move in.
7. Get the Right Insurance
Not all insurance policies are the same, and a standard homeowner’s policy may not cover renters. Be sure to check with your insurance company first before signing a lease. Often there will be a rate increase if you decide to rent out your property, and you may need to factor that cost into the rent ahead of time.
Bonus Landlord Tips
While owning a rental property is a business, it’s important to remember that you are dealing with real people, not just numbers. Learn how to deal with tenants in a fair and understanding way, and you could reap the rewards in the long run. Having a good relationship with them can build trust and benefit both of you.
And unless you are incredibly handy and have a working knowledge of plumbing and electrical systems, you will want to have a list of professionals that you can call in case something breaks. Alternatively, you can hire a property management company to be the liaison between yourself and the tenants. They can handle everything from rent collection and rentals to repairs.
Things To Avoid
Just like anything else, being a landlord is a learning experience — which means you will make mistakes. One of the top ones to avoid is letting tenants deduct from the rent, whether it is for doing repairs, painting, or updates themselves. Always hire professionals for any issues and keep the tenants out of it for legal and safety reasons.
And while it is good to have a positive relationship with your tenants, make sure to draw a line between your business and personal relationship. Do not get too emotionally involved or drawn into their problems. Be careful with making rent concessions, and never loan a tenant money.
Ready To Become a Landlord?
If you were wondering how to become a landlord, now you have the basic steps to start your journey! While there are many points to consider, like having the right insurance, legal team, and lease — the potential profit and experience of becoming a landlord are worth the effort.
Once you have your resources and tenants in place, be sure to continue to take care of your property and protect your long-term investment.
Want to keep expanding your knowledge with other relevant topics? For more useful tips and tricks, check out the rest of this site for other helpful articles.
