Many people are getting into the real estate market to earn passive income. You can earn passively in many ways, but renting property is one of the most popular options. However, being a landlord can be challenging and not only about buying the right property.
Since almost 50% of landlords manage property and units independently, you must prepare for what’s ahead. More and more people are renting living spaces, and there’s a significant growth of customers looking to live somewhere for a couple of months and move.
In other words, there are plenty of opportunities for earning additional income, but you need to do your diligence and approach the matter accordingly to get the most value possible. Here’s what you need to know.
1. Your Rental Property Is A Business
Even though being a landlord might not be your primary income source and job, it’s essential to approach your rental property like a business. You must be professional with tenants, perform through screening, and keep all your finances impeccable.
As a landlord, you must comply with local, state, and federal laws to avoid issues. Rental property and real estate investments have various regulations, so take the time to study the requirements in your specific area before doing anything. For example, as a landlord of a Nashville rental property, you should check local requirements.
Protect yourself from liability claims or accidents. One of the best ways to do this is to get landlord insurance. Anticipate and prevent problems before they happen. Maintaining your property and unit is an excellent place to start. Check if the property is safe for tenants and check things like:
- Carbon monoxide and smoke detectors;
- Moisture, debris, and mold in vents;
- External and internal pipes.
These are just some of the most common problems.
2. Vet Tenants And Create A Thorough Screening Process
Tenants are your primary customers as a landlord. Even though they are paying for the property, having bad tenants increases costs and other complications. You should be professional and polite to tenants, but that doesn’t mean you should have any requirements or standards.
Vetting and screening tenants is essential for ensuring you’ll get people who will take care of their obligations on time (rent, utility bills, maintenance) while treating your property as if it were their own. Take the time to review all applications and create a shortlist of promising potential tenants.
Check their rental background, criminal history, and financial reputation. Meet people for an interview and talk to them about your expectations. Transparency is critical for establishing a positive relationship. Interviews will help you meet people, allow them to ask questions, and voice their expectations.
3. Insist On A Rental Agreement
Even though verbal communication and agreement are generally good, you should write a written rental agreement on paper. This document clearly outlines the expectations and obligations of both parties while protecting everyone from any legal complications.
For example, if you don’t have a written agreement, you can’t prove what you agreed upon initially, even if the tenants are clearly not fulfilling their obligations. The clauses and rules must comply with local laws, so consider getting a lawyer to review your document.
The rental agreement can be different depending on local laws, the type of property you’re renting, and format but should generally include terms about:
- Parties involved and the address of your property;
- Security deposit and rent terms;
- Tenancy terms and conditions for ending tenancy;
- Included rental costs;
- Terms about pets;
- Number of tenants and everyone’s name;
- Tenancy rules;
- Landlord’s access and obligations for inspection, maintenance, and repairs;
- Property damages;
- Original signature of all parties.
As long as you have these points covered, you’ll be set.
4. Keep The Price Realistic
Setting the right price as a landlord can be difficult. Naturally, every tenant wants to negotiate and get the lowest price possible for what they’re getting, while landlords want to get the highest possible number. Research the local market and see the prices for similar units or properties.
Consider things like location, amenities, furnishings, space size, utility bills, etc. You should also be mindful of the services you’re offering tenants, like maintenance, repairs, separate entrances, exclusive terms, etc. There’s no point in going for a high price if your unit will be vacant or unoccupied.
Find the right balance between market prices and the advantages your property offers. In the end, remember that you must find good tenants to pay on time.
5. Keep Finances In Check
Since you’re approaching your rental endeavors as a business, you should closely monitor your finances. First, ask for a security deposit and get the rent for the month in advance. Include a late fee structure in your lease, meaning tenants will have to pay a fee for each day they’re late on rent.
Check rent receivables regularly, especially if you have multiple properties, and stay organized to ensure you get all payments. Understand the tax advantages and follow all the local rules and regulations to get tax deductions and reduce expenses.
In the end, keep records of rent payments and checks since proof of payment is another security asset you can use in case of unexpected events.
All the steps of polishing your property, finding tenants, drafting an agreement, collecting rent, and maintaining property are essential for landlords. If you don’t want to waste time as a landlord, do your work in advance to secure good tenants and encourage them to stay with you for a long time.