While becoming a landlord can be a lucrative business decision, it also comes with its fair share of stresses. Use this guide to prepare yourself for the steps ahead and understand exactly what you’ll be getting yourself into.
- Understand Your Timeline
Does it make financial sense for you to become a landlord? If the answer is yes, then proceed, but if you’re not sure, double-check your reasoning before you take the plunge. Also understand that turning a profit from a rental isn’t instantaneous. Making money will occur eventually, but it could be months or years before you actually see the returns you’re expecting. If you’re patient, you’ll experience the benefits that come with a great rental property; if not, landlord-ship is probably not for you.
- Prepare Your Contract
A well-written contract can be the make or break component of a successful landlord/tenant relationship. Ensure you protect your interests by crafting an iron clad contract that will protect you should the relationship run sour or an accident occur. Decide whether you will be working with a leasing contract or rental agreement. Rental agreements run on a monthly basis, and leases bind tenant and landlord for a set period of time. Make sure you cover the standard lease provisions when crafting your contract, including duration of lease, names of landlord and tenants, rent expectations, utilities expectations, amenities, deposit info, pet policies, subleasing policies, and late penalties for starters. A simple Google search will provide you with example lease agreements that are easy to emulate.
- Understand the Regulations
Just as other businesses must understand the regulations enforced by local, state, and federal governments, so too must a landlord. Make sure you understand the legal issues, regulations, and other local laws that may affect your rental property and be prepared for any legal consequences that could be levied against you. An obvious regulation is the Congress-enacted Fair Housing Laws barring discrimination of any kind when selecting a tenant, but the list of other regulations and proper protocol is long. Each state has different specifications, and your city or county may have further regulations that must be followed. A simple online search can help you get started, and ensure you don’t have any legal issues surprise you later on.
- Property Management
Will you need a property manager? This is a question to ask yourself before getting started. Property managers can serve as an invaluable resource; they can help you market your rental, deal directly with tenants, and help you deal with any issues that arise during a rental, be it eviction or anything else. While using a property management company can help you with the daily grind and take a lot of responsibility off your plate, their services are not cheap. Fees start at 10%, but can easily cost more depending on the company chosen and the services rendered.
- It’s Not a Hobby
Understand that becoming a landlord isn’t a hobby that you can do whenever you feel like it; unless you decide to hire a property management team, you’re responsible for everything that happens at any time. Should a pipe burst, you’ll need to get over there to inspect and figure out the best course of action. Should the A/C break in the middle of summer, it’ll be on your shoulders to fix the problem. Understand that you’ll be on call for every little detail, and be expected to right the issue immediately. Owning a rental property in close proximity to your personal home is ideal for this reason, as getting over to right the wrong is done quicker and without a huge inconvenience to you.
- Don’t Let in a Bad Apple
Don’t let all your hard work go to waste by starting out with a terrible tenant, and be sure to protect your investment by checking their credit history and previous rental history. To make it easy on yourself and give you peace of mind, use something like Smartmove tenant screening to make sure those you let live in your property have great credit history, ensure they don’t have a criminal past, and find out if they have ever been evicted. It’ll save you a huge headache. You also may want to consider using a site like Zillow over Craigslist to avoid getting any spam.
If you’ve decided to become a landlord, prepare yourself for the daily stresses and make key decisions before you rent out your property. Take the time to find the right tenant, think about hiring a property management company, and have your finances in order.