Becoming a landlord can be a lucrative career move. It lets you earn regular rental income from your property. However, it’s not for everyone. Being a landlord is a big responsibility, and you must ensure your tenants and property are well taken care of.
Here are eight tips to help you get off to a good start as a first-time landlord:
1. Set a Competitive Rent Price
The goal of setting the rent price is to maximize profit while remaining competitive. That means you want it to be high enough to cover your property expenses and more but low enough that you still attract interest from potential tenants.
To identify the right rent price, research the local rental market. Find out what similar nearby properties are renting for and set your rent accordingly.
Once you have a rent price in mind, list the property on rental sites like Zillow and Apartments.com. From there, wait for interested renters to reach out. Adjust your rent price as needed.
2. Hire a Property Manager
Not a handyman or a people person? You can always hire a local property manager to handle the property maintenance and tenant management for you. They usually charge 8-12% of the rent of whatever units they manage.
For example, Houston property management company Green Residential manages rentals across Austin and Houston, Texas. So if you’re investing in that area, you can outsource the property management to them.
3. Screen Tenants Carefully
Before accepting a tenant applicant, be sure to carefully screen them. This means running a criminal background check and credit check as well as requesting references from previous landlords. Beware of any potential red flags, such as a history of evictions, late payments, or bankruptcy.
You don’t want to end up with a problem tenant who fails to pay rent, pays late, damages your property, or refuses to leave.
4. Craft a Robust Lease Agreement
A lease agreement protects you and your tenants by detailing what each party is responsible for and what the consequences are for not holding up your end of the agreement. It should include the monthly rent amount, tenancy length, late payment fees, and rules regarding pets, smoking, utility payments, and more.
Start with a free online lease agreement template. Then customize it to your liking. Have a legal professional review the contract to ensure it protects your best interests and complies with local landlord-tenant laws. Finally, have both parties sign the contract to make it legally binding and give you peace of mind.
5. Require a Security Deposit
Another way to protect yourself as a landlord is to take a security deposit from new tenants. This way, if they cause damage to your property that requires repair or don’t meet the terms of the agreement in other ways, you can take the cost out of their security deposit.
Just make sure to research and adhere to landlord-tenant laws that govern security deposits. For example, there may be an upper limit to how much you can require (e.g. one month’s rent) and how you can (and can’t) use the money. As a rule of thumb, keep the security deposit safe and separate from your other money so you don’t spend it on unauthorized things.
Provide each new tenant with a move-in checklist. This is a document that lets them record the condition of the property when they walk through for the first time. That way, they aren’t held responsible for damage or wear and tear that existed prior to their occupancy.
The move-in document can also include information regarding garbage disposal, laundry services, receiving mail, and any other building amenities—everything the new tenant needs to know about their new home.
7. Invest in Landlord Insurance
Accidents happen. You never know when your rental business will be hurt by a natural disaster, a problem tenant, or other unforeseeable circumstances.
This is where landlord insurance comes in. It can help protect you against property damage, personal liability for a tenant who is injured or sues you, and more.
To get the best landlord insurance policy, call around and compare quotes. Yes, it’ll add to your property expenses, but you may need it someday. As they say, it’s better to have it and not need it than to need it and not have it.
8. Set Aside a Repairs and Maintenance Budget
Homes deteriorate with time. From leaky faucets and broken light fixtures to roof damage and foundation cracks, there’s a lot that can go wrong.
To fight this, you must put aside funds for adequate property repair and maintenance. Then when something comes up, you’ll have the money to hire a contractor to fix it. Keep track of all your maintenance and repair expenses so you can write them off on your rental real estate taxes.
First-time landlords have a lot to learn, but if you follow these steps, you’ll be off to a good start!