Rental properties can be a fantastic way to create wealth with passive income. However, taking on the role of landlord has its complexities. It can be time-consuming and stressful at times, like any other business, and will occasionally require you to deal with unexpected challenges, such as uncooperative tenants. As with any new business venture, it’s important to be prepared before you get started with renting out your space. Here’s some ideas on how to be a successful landlord. Do you think you have what it takes?
Landlord 101: The Basics
Here are some things to consider if you want to become a successful landlord:
- Do your research. Before buying any rental properties, it’s important to research and understand the market. This includes understanding the demand for rental properties in your area, the average rental rates, and the costs associated with owning and managing a rental property.
- Choose the right property. Not all rental properties are created equal. When you’re choosing a property to buy, it’s important to consider factors such as location, condition, and size. Of these three, its condition may be the most important. Consider how much money you’ll need to invest to maintain and repair the property, and whether the rent you are collecting will end up in your pocket - or will need to be put right back into the building.
- Screen your tenants carefully. Once you’ve found a property, it’s time to start screening potential tenants. This is
a key step to protect yourself from bad tenants. Don’t let a smile or a friendly demeanor fool you. Do a thorough background check: credit scores, rental history, income, and employment history; don’t make a decision until you
feel comfortable with the prospective tenant. Then make sure everything is in writing. - Create a clear lease agreement. Once you’ve found a tenant, creating a clear lease agreement is important. This document should outline the terms of the rental agreement, such as the amount of the rent, the length of the lease, and the property's rules and regulations.
- Be responsive to your tenants. One way to be a great landlord is to listen to your tenants and prioritize their requests based on necessity and safety concerns. This typically means promptly responding to their requests for maintenance and repair and addressing any concerns they may have. Like any relationship, as a landlord, yours will be better with the tenants if there is mutual trust and respect.
- Stay up-to-date on the real estate and tax laws for the city and state in which you own the rental property. As a landlord, it’s important to stay current regarding any changes in the laws, including knowing your rights and responsibilities as a landlord, as well as the rights and responsibilities of your tenants.
- Get professional help if needed. You may consider hiring a property management company if you lack the time or skills to manage your rental properties. This can be a terrific way to free up your time and ensure your properties are properly managed.
Short-Term Rental Properties
In addition to traditional renting of a property to one tenant, you might also consider renting your property as a vacation home on Airbnb or Vrbo. This can generate even more income, especially if you live in a popular tourist destination. However, there are some important things to remember if you decide to go this route. For example, you’ll need to make sure your property is well-maintained and equipped with all the amenities your guests will need.
You’ll also need to be prepared to deal with any unexpected issues, such as property damage or guest complaints. While it is impossible to vet short-term renters in the same way you would tenants who are renting an apartment for a year or more, there are still questions you should ask prior to agreeing to the rental. For instance, how many are in the group? What is the purpose of the rental? If it’s a party for a bunch of college kids, you may want to think twice about renting your property to them for a weekend, considering the potential damage that might mean you’ll be unable to rent it again for weeks or months to come.
Preparing for Your Investment in Rental Real Estate
Renting out your properties can be an excellent way to generate earnings and build wealth over time. However, it’s important to be prepared before you get started. With these additional tips, you can increase your chances of success as a landlord.
- Be organized. As a landlord, it’s important to be organized and keep track of all your documents. Then you will always have what you need at hand - when you actually need it.
- Be proactive. Instead of waiting for problems to be reported by your tenants, be proactive. Inspect your properties regularly to find and fix problems before they escalate.
- Be fair. Be fair to your tenants and treat them with respect. This will help to create a positive rental experience for everyone involved.
Considering becoming a landlord? If you need some financial advice regarding real estate investment, or assistance with property taxes, contact Myrick CPA - we’ll ensure you have the tools you need to achieve success.
