Have Realistic Expectations
Renting out your property is not going to get you rich quickly. Typical landlords see a 5% return on their investment, and renting property comes with many expenses. You will still need to maintain the property, pay taxes on it, get it ready for renters, pay for insurance, and deal with other types of expenses, sometimes unexpectedly. Being a hands-off landlord is a sure way to incur property damage and decrease the value of your investment, so be sure you understand the commitment involved.
Understanding the rental market in your area will help you to determine if you can rent your home and still make money. Carefully evaluate all of your expenses, including mortgage, insurance, maintenance, property management fees (if you choose to use these services), and other costs. Then examine comparable properties in your area to see current rental prices. Some markets support higher rental prices than others, so be sure you understand what is happening where you are.
Make Sure Everything is Clean, in Working Order, and Safe
Tenants will take their cue from you as the landlord. If you expect them to keep the property cleaned and maintained, then it should be clean and in good shape when you rent it out. Be sure to fix any mechanical or cosmetic issues before you rent the property. Inspect all appliances to be sure everything is working properly, and give the entire house a thorough cleaning. Document any known problems before tenants move in, so you’ll be prepared for move-out inspections later. Be sure all smoke detectors are in working order with fresh batteries and that there are fire extinguishers on every floor and in the kitchen. Tenants will be more at ease when they feel safe.
If you are renting your property furnished, be sure to inspect all furnishings before tenants move in. Make sure everything is clean and in good repair, and document the condition of all furnishings for future reference. Furnishing appliances is a great way to charge a higher rental price, so be sure all appliances are serviced and clean before tenants move in.
Know The Legal Responsibilities of Being a Landlord
You will need to know and understand the specific landlord-tenant provisions in your state to protect both yourself as well as your tenants. These laws and regulations cover many property management issues, including security deposits, landlord inspections, move-out notices, and other applicable rules. Federal laws related to anti-discrimination and habitability are also applicable, so don’t forget to read those provisions, as well.
You will need to notify your mortgage holder as well as your insurance company of your intention to rent your property. You may have to meet specific requirements with your mortgage company, and your homeowner’s insurance policy will require some changes. These will protect you as well as those who are financially responsible for the property.
Negotiating all of the legal aspects of being a landlord can be difficult, particularly in some states. You may want to consider a property manager or at the very least use an attorney to assist you in designing a lease for your property. Your lease agreement should be tailored to your situation and include language about anything you deem to be important for the property.
Get Help Managing Your Property
Unless you live very close to your rental property and have the knowledge and expertise to manage the property yourself, you may consider hiring a property management company to help you. Property managers typically charge 4-12% of the rental price, and their services can be invaluable. Most property management companies will help you screen potential tenants, collect rent, manage issues of maintenance or repairs, and deal with problems that may arise.
When acting as your own property manager, it can be easy to allow your tenants to break the rules in the interest of being friendly or kind-hearted. Be sure you are firm with payment deadlines and expectations for your lease. Treating your tenants with respect can go a long way toward a healthy landlord-tenant relationship, too. A property manager can take this worry off your mind by handling all financial transactions and enforcing the lease as needed.
Make Smart Choices About Tenants
Selecting good tenants is your first line of defense as a landlord. Be sure you have a quality application to help screen your candidates, and conduct a criminal history and background check on anyone you are considering as a tenant. Always check references with previous landlords, as well. Interview anyone you are considering, as you want to be comfortable interacting with them.
If you are not using a property management company, you can use the services on an online tenant-screening service to help you screen potential tenants. Credit scores are a helpful tool for determining if a tenant is likely to pay their bills on time, but this should not be the only tool you use to screen potential tenants. Make yourself aware of the specific landlord and tenant rights in your area to be sure you are treating everyone fairly according to the law.
When considering whether to rent a property, there are many factors to be aware of. By doing your homework and understanding your rights and responsibilities, though, you will be better prepared to rent your property and start your journey as a landlord.
