It takes time, money, and knowledge to become a landlord, regardless of whether you’re thinking about renting out your current home or making an investment in a rental property.
The information in this guide will help you prepare for the responsibilities of being a landlord before you begin finding tenants and maintaining your property.
Here are the steps you need to take to become a landlord:
Purchase an Investment Property
Always check to see if an investment property, whether purchased or already owned, will generate a profit in today’s market. For the best rental property, here are some of the things you should consider:
- It’s within your financial means to purchase it.
- It’s in a good state (no major repairs are needed).
- It has the potential to yield a high rate of return.
To help you narrow down your options, here are a few more factors to consider when deciding which property to invest in:
You can walk to it from your house.
- The property is located in an area that is easily accessible by foot.
- It’s a safe place
- The city’s core is just a short drive away from the property
There are many landlords who own single-family, condominium, and multi-unit properties. For example, how much money you’ll need to borrow, how much money you’ll need for repairs, and the profit you’ll make will all be determined by the type of property you end up purchasing. If you have a large home, you may have to pay more to fix it because of its size.
Budget for Unexpected Expenses
Decide how much money you need to make from the investment property to justify the time and effort you put into it.
Set aside money for unexpected costs and missed rent payments before purchasing the property. There are a number of factors to consider when purchasing an investment property for the first time.
Rental property costs typically include the following:
- Insurance for landlords in the event of accidents, unanticipated losses, and legal responsibility
- Repair and rental maintenance
- A yearly registration fee as well as licencing and inspection fees for rental properties
- Taxation of rental income and real estate
Even if your rental property is empty, there are costs to consider:
- Payments on a home loan
- Taxes on property
- Fees for marketing and publicity
Additional costs to include in your budget:
- If you don’t do your own bookkeeping or accounting, you’ll have to pay a fee.
- Fees for managing a property
- Legal costs for a lease review or eviction
Be Aware of Landlord-Tenant Rules and Regulations
To become a landlord, one of the most important things to learn is about landlord-tenant rules and regulations. For the most part, landlord requirements vary from state to state. To avoid unnecessary litigation or paperwork, familiarise yourself with the landlord-tenant laws in your state.
Get Landlord Insurance
Landlord insurance will protect you and your financial assets in the event of a liability claim, as well as protect your property from accidents and sudden loss. Check with your insurance agency if you’re a first-time landlord and need a different type of insurance than if you were living on the property.
Tenants’ belongings are typically not covered by a landlord’s insurance, so it’s always a good idea to suggest that they buy their own.
Figure Out How Much to Charge Rent
It’s critical to set your rent at a fair price. A rent that is too low will result in a loss of income, while a rent that is too high will result in a lack of interest from potential renters. Fortunately, figuring out how much to charge for rent isn’t too difficult.
Start by comparing similar rentals in your neighbourhood, then add in the cost of utilities and prepare a maintenance budget. Consider working with a lawyer to ensure that you give the proper notice for rent increases in light of market conditions.
Only 36% of renters have the option to pay their bills online, despite the fact that 58% of them want to? It’s easy to track your rental income thanks to online rent collection, and you can even set up automatic payments if you prefer.
Advertise the Property
Listing and marketing the property is one step in the process of becoming a landlord. Ads and open houses are just some of the methods you can use to find new tenants for your rental properties. This step may seem difficult, but it’s actually quite simple because the majority of rental property marketing can be done online.
Hold An Open House
You could also hold an open house for potential tenants in addition to advertising your property on the internet.
Set up the house for the event. Potential tenants can envision themselves living there and get a sense of how much furniture each room can accommodate.
Having rental applications on hand is a good idea. In the living room or kitchen, set up a tablet with internet access to make it easier for potential renters to apply.
Conduct a Background Check on Any Potential Tenants
During the screening process, you determine whether or not a potential renter is a good fit for your property. For each applicant over the age of 18, you’ll collect rental applications and conduct credit and background checks. Throughout this process, as a landlord, you must adhere to all applicable fair housing laws.
You should be prepared to interview and screen multiple tenants for your property, given that many renters share an apartment or house with others. A renter’s history and background can be found in their rental application.
Sign Lease Agreements
Both the landlord and the tenant are bound by the terms of the lease agreement. Legal requirements must be met before signing a lease. Lease agreements should be finalised in accordance with this procedure:
Your lease can be customised.
- Take the lease to a lawyer.
- Have your tenant go over the lease with you.
- Have the lease signed and dated by you and your tenant.
- Make a copy of the lease available to your tenant, and keep a copy for yourself in a safe place.
Maintain the Property
In addition to keeping your current tenants satisfied, maintaining the property ensures that you won’t have to make major rental property improvements or repairs in the future if you decide to rent it out again. Regularly completing the following tasks should be on your to-do list:
- Control of pests
- Gutter cleaning
- HVAC repair and maintenance
- Property walkthroughs
It takes a lot of time and effort to run a rental property, especially if you’re a novice landlord. As soon as you know how to get started renting out property, it’s a different matter entirely to keep things running smoothly and make money.
Keep a record of all communications with tenants, maintenance personnel, and anyone else who comes into contact with the property.
Maintain the confidentiality of all rental applications, leases, repair invoices, and insurance policies.
Make a record of all rent and security deposit payments.
Organize receipts from utility bills, tenant reimbursements, and advertising costs into a filing system to keep track of them.