Home > Real Estate > How to Be a Landlord: A Complete Guide

How to Be a Landlord: A Complete Guide

64 Views
How to Be a Landlord 57b7a2f3

While becoming a landlord requires time, effort, money, and a detailed understanding of laws and best practices, it can be rewarding if guidelines are followed to the T. Although, like most things in life, challenges and unpleasant surprises can come along, following specific steps can help you deal with them if you’re considering renting out a room in a property that you own or even buying a new one.

 

We’ve put together a comprehensive set of 11 guidelines that should help you transition to a new landlord in no time:

  1. Purchase an investment property

Before you buy a property or think of renting out the one you own, ensure that it can produce a positive cash flow under the current market conditions. Look for the following things in a rental property:

  • Whether it falls within your budget

  • Whether it’s in perfect condition 

  • Whether it promises a high return on investment

 

If you’ve looked at and found other properties to be suitable investments, consider these factors before choosing one: 

  • The property’s close by

  • The property’s neighborhood is walkable

  • The neighborhood’s safe

  • The property location offers an easy way to travel to the city’s center

 

The property type you purchase will determine how much you have to pay for it, the repairs, and the profit you end up making.

  1. Budget for unexpected expenses

Determine how much you want to earn on the property to make it worth your while. Consider unexpected costs and missed rental payments. If you’re a first-time landlord, this is critical because you might be using all your savings on the rental. The common expenses on a rental property are:

  • Landlord insurance for accidents, sudden loss, and liability

  • Maintenance and repair costs

  • Rental licensing, mandatory inspections, and yearly registration fees

  • Property and rental income tax

 

You may have to dish out money even if your rental’s vacant in the form of:

  • Mortgage payments

  • Utilities

  • Property taxes

  • Marketing or advertising fees

 

If you’re not keen on doing the bookkeeping yourself, you’ll have to hire a professional to do it, which is an added expense. Also, if you feel the need to have someone else look after your property, you’ll need a property manager who’ll come with a  price tag. Finally, you’ll have to consider legal fees for lease reviews and tenant evictions. Plan your budget carefully because there are multiple unexpected costs to look into.

  1. Understand landlord-tenant laws

A critical step in becoming a landlord is to familiarize oneself with and understand landlord-tenant laws. Since states frame these laws, they differ from one state to another. Being well-versed with the rules can prevent you from unnecessary legal hassles or paperwork.

  1. Get landlord insurance

Landlord insurance will protect your property from accidents and sudden loss and safeguard your financial assets if there’s a liability claim. Check what kind of coverage you need with your insurance company if you’re a first-time landlord. Landlord insurance generally covers:

 

  • Your property’s structure

  • Legal costs related to your property

  • Medical expenses related to your property

  • Loss of rental income if repairs are required

 

Landlords aren’t responsible for tenants’ belongings. Therefore, it’s a good idea to advise them to get renters insurance to protect their possessions.

  1. Get your property ready for move-in

Your property needs to be in a living condition, so ensure that you fix issues that need fixing and install upgrades to enhance its look and feel. When tenants move in, they’ll appreciate all the effort you’ve put in to beautify their room rentals. Here are some things you can take care of:

 

  • Clean the property: Sweep or vacuum the floors and wipe clean all the floorboards, walls, counters, and cabinets. Landscape the yard, if required. 

  • Ensure the property’s cleared all inspections: Have the smoke and carbon monoxide detectors tested and get the electrical system checked. Also, ensure all the doors and windows open and close properly. 

  • Have much-needed repairs done: Fix any broken fixtures, stairs, railings, holes, or water leaks. Make sure all appliances are in working condition and replace any damaged flooring.

 

  1. Figure out the rent to charge

Come up with a reasonable figure for rent. If you charge a high rent, you’ll lose out on tenants, while charging a low one doesn’t guarantee any profits. First, explore the rents for properties in and around your neighborhood, and add utilities and repair costs to the number to get a rough estimate. Stay abreast of changes in market conditions and get a legal professional’s help to ensure that the rent increases are shared with tenants in time.

  1. Market the rental property

If you don’t list and market your property, how will people know it exists? One of the things you can do to sell your property is to advertise it. Create a listing and post it on real estate marketplaces, websites, and apps, such as Cirtru, Trulia, Zillow, Hotpads, Roomster, Craigslist, and so on. Add some excellent photos of the rental along with features and upgrades to attract potential tenants.  The other idea is to run a rental open house. For a successful open house, you may want to stage the rental, have rental applications ready for prospective tenants who wish to fill out the form, and keep some flyers handy with photos and features of the property.

  1. Screen potential tenants

Gather all the rental applications together and run background and credit checks on all applicants above 18 to verify the information on the forms. Application forms contain information on a renter’s background and history, such as their names, phone numbers, email addresses, current and previous residences, employment and income, and prior eviction and bankruptcies. As a landlord, be sure to follow all applicable fair housing laws throughout the screening process.

  1. Get tenants to sign a lease agreement

The lease agreement outlines rules and expectations for both tenants and landlords. You need to ensure that it complies with all applicable laws. The agreement finalizing process involves the following steps:

 

  • Customize your lease

  • Get it reviewed by a legal expert

  • Go over the lease with your tenant

  • Share a copy of the lease with your tenant and put yours away in a safe place

  1. Maintain the property

The upkeep of your property is your responsibility, and you need to ensure that you do the job well to keep your current tenants happy. A well-maintained property also ensures that you won’t have to spend a penny on repairs or upgrades when future tenants move into their rooms for rent. Some tasks you should do regularly are:

 

  • Pest control

  • Gutter cleaning

  • HVAC units servicing

  • Property walkthroughs

  • Updating of landlord insurance

 

Setting aside about a portion of your rent for maintenance and other jobs is a great idea. You may want to think about keeping 50 percent of the rent aside for repairs, maintenance, taxes and insurance because many landlords follow the practice.

  1. Stay organized

Looking after a rental property is challenging and may seem overwhelming, especially for first-time landlords. But a few pointers can help all landlords streamline their business and generate profits:

 

  • Note down all your communication with tenants, maintenance personnel, and anyone who works on the property.

  • Safely store all your rental applications, lease agreements, repair bills, and insurance documents.

  • Create rent payment and security deposit receipts.

  • Set up a filing system for receipts from advertising costs, tenant reimbursements, and utility bills.

  • Have printed and digital copies of all your documents.

 

So, do you now feel confident, ready, and geared up to assume your role as a landlord? We sure hope so! Follow the tips shared here, and you’ll find yourself learning on the job once you get started. We wish you luck in your journey ahead!

TAGS
Business Module Hub