Are you thinking of becoming a landlord in the near future?
Purchasing a rental property comes with the potential to create an additional stream of income. You can use this passive income to fund your everyday life or make further investments. Not to mention, there is a great potential for growth and long-term wealth.
That said, it's important to remember that landlords have numerous responsibilities that cannot be neglected. You need to ensure the property's habitability, respond to emergency repair requests, and take care of the financial side of things.
In this article, you'll learn everything you need to know before becoming a landlord. After grasping this knowledge, you can be more confident when facing the challenges and joys of managing your first rental property.
Find the Right Rent Amount
Determining your monthly rent payment is a harder task than it may seem. As a first-time landlord, it's quite easy to fall into the common trap of overcharging or undercharging your tenants.
Overcharging your renters results in a higher tenant turnover rate. Sooner or later, your tenants are going to realize that they are overpaying for your rental property. This means they'll move into another property and you'll have a harder time filling your rental units with quality tenants.
At the same time, undercharging isn't an ideal situation either. When you are undercharging your tenants, you'll leave money on the table every month. You'll fail to realize the true income potential of your property investment.
The solution to both of these problems rests in comparative market analysis. This is how you will find out what your monthly rent should be. You'll learn about the comparable rental properties in your area and how much the owners are charging from their tenants. Then, you can use this knowledge to set your rent amount close to the average.
Learn about Relevant Legal Aspects
Rental ownership is tied to many laws and regulations on the federal, state, and local levels. You should aim to understand the main ideas and rules connected to these statutes. You'll lower the risk of having to deal with expensive legal problems at later times.
These are some of the top legal aspects that you should familiarize yourself with:
- Rent collection, late fees, bounced checks, and missed payments
- Evictions: learn how to file for eviction and what constitutes an illegal self-eviction
- Different types of inspection: move-out, move-in, drive-by, emergency-related, etc
- Landlord's entry and the timeline for advance notices
- Rules regarding the security deposit: limits, deduction, return, and storage
Implement All the Rules
Make it known to your tenants that you enforce all the rules spelled out in your lease agreement. Some first-time landlords believe that being strict about rules makes you an unfriendly or unpleasant rental owner.
However, these rules have been put in place for a reason. The clauses in your agreement protect your investment and your interests as a rental property owner. When you are starting to ignore violations, your tenants can start taking advantage of your tolerance.
Pick the Right Renovations for Your Property
Beginner landlords tend to renovate their rental properties in ways that may be hard to justify for old-timers. You should always treat your rental property as an investment. That means every dollar that you put into your investment should get you a bigger return than that initial amount.
However, there are many types of renovations that won't demand a high enough rent to properly explain the investments. For instance, putting brand new granite countertops in a kitchen makes sense only if the property is located in a neighborhood where people have the money to pay for upscale touches. Otherwise, you are just offering premium amenities at a discounted rate due to the local rental market situation.
Conduct Tenant Screening
Tenant screening is a crucial part of rental property management. You need to screen your applicants in order to pick renters who are more likely to pay rent on time, follow the rental rules, and take good care of your property.
Among other things, you should make sure that your renters hold steady employment and don't have a criminal record. It's important to get references from past employers and landlords as well.
Team Up with Professional Property Managers
Self-managing your rental property may become an arduous task. There are so many responsibilities and duties that you have to juggle on a daily basis. Most landlords stand to benefit from the services of a professional property management firm.
Hiring a reputable company eliminates your landlord's stress and worrying thoughts. You can stop dealing with problem tenants, advertising needs, legal matters, and other hurdles of rental management.
When you pick the right company, you can be sure that they grow your property as if it were their own. The years of experience and hands-on knowledge will ensure that you get the best return on your rental investment.
The Bottom Line: Essential Tips for First Time Landlords
Becoming a landlord for the first time is exciting. But with all that excitement comes a variety of practical tasks and duties as well. You need to understand the legal aspects, determine the right rent amount, and choose improvements that bring back the best return on your investment.
A team of professional property managers can help to make your property investing journey much easier. Consider hiring a trustworthy company with experienced professionals to earn back top dollars from your rental purchase.