Are You Ready to Become a Landlord? a Guide for First Timers
As you prepare to rent out your home or property, you might be feeling a little apprehensive about that which you are ready to undertake. It's good that you are apprehensive because being a landlord comes with some responsibilities of which you might not have already considered.
If you are ready to take this very important step, you are hopefully doing so for all of the right reasons. There will be some risks involved but nothing you can't handle if you have the right mindset to be a landlord.
The following information should provide you with a Landlord's Guide to Renting. If you follow the following 8 steps, you can maximize your rental income and hopefully minimize the headaches that come from being a first-time landlord.
Setting Your Rent
It goes without saying that you want to get as much monthly rent as possible. However, there are market forces with which you have to deal.
It's not about getting the highest rent possible, it's about getting as much as you can, as quickly as you can. If you set your rent too high, you might have trouble finding tenants, especially if you leave no room for negotiations.
Start with the average rent for the neighborhood and begin working the numbers from there. If you can offer better amenities and a premium location, maybe you can get more than the average. If not, price your property at average levels.
Rennovations, Yes or No?
New landlords have a habit of thinking renovations will add enough value to demand a higher rent. That's not always the case. While renovations might add to the selling value of the property, that doesn't always translate to higher rental rates.
You have to be logical about the correlation between renovations and rent. If your rental property is in a family residential area, adding a pool might make sense. If the area appeals more to seniors, a pool might not add value. Focus on your target group and only select renovations that people in that group would value.
Prepring for Maintenance Costs
As a new landlord, you need a clear understanding of the exact maintenance for which you have responsibility. The age of your rental property will go a long way in determining how likely you are to encounter maintenance costs.
Each month, you will be collecting rent. The best way to protect yourself from maintenance surprises is to set aside a statutory portion of your rental income each month to cover such costs. Over a year's time, you should have enough set aside to cover major plumbing or electrical issues.
Finding the Right Tenant
Nothing can destroy your desire to rent property faster than a bad tenant. One bad tenant can result in a lot of headaches and significant damage to the property.
The tenant selection process should start with a comprehensive application. You should take the time to dissect the application for potential problems. What you are looking for is quality tenants who have a history of paying their rent on time and taking care of the property as if it were their own.
To find tenants who fit this bill, you need to do financial and criminal background checks. You also need to follow up with references to ensure your prospective tenants are who they say they are in the application and interview.
Write an Ironclad Lease
The landlord/tenant relationship comes with legal responsibilities. You need to create an ironclad lease agreement that clearly defines your responsibilities and the responsibilities of the tenant. The more clarity your lease offers, the less likely you are to encounter disputes in the future.
Best Ways to Collect Rent
Collecting rent does not have to be a hassle. It's fine if you prefer a face to face meeting for the purpose of collecting rent. However, it might be more efficient for you and your tenant to set up a bank to bank relationship that automatically facilitates the payment of rent on time.
Treat Rental Property as a Separate Business Venture
For tax reasons and best business practices, it's best to treat your rental property as a separate business. That means keeping detailed accounting records of all financial transactions, communications, and repairs. This information will prove invaluable in the future when you need to set new rent expectations.
Dealing With Tenant Issues
Over time, you will likely encounter a dispute or two with your tenants. At all times, you should engage with your tenants professionally as part of a business relationship. You need to always enforce the lease as written and be ready to pursue legal remedies if circumstances dictate you do so. The last thing you need is a tenant that is always trying to take advantage of you. If you communicate you mean business at all times, they will likely respond in kind.
Hopefully, you can use this Landlord's Guide to Renting as the basis for making your experience as a landlord as fruitful as possible. As a landlord, you have an obligation to yourself to make sure you perform properly as a landlord You also need to do whatever is necessary to protect the value and rentability of your property at all times.
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