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Renting property may seem like an ideal source of income. Many people think it merely involves buying homes, finding people to live there, and collecting the rent. The truth is, there’s so much more involved. Rental properties can be a lucrative income, but you’ll need to do some research and ask yourself some hard questions to be sure you’re ready for the commitment. Here are five things to know before becoming a landlord.
1. Have the Necessary Resources
You will need to have a number of resources at your disposal in order to be a competent landlord. Time, a strong financial foundation, and connections are just some of the resources to consider. You should be prepared to treat this venture as a real business. You’ll want to talk to a financial professional to be sure your finances are in order. Not only do you need to be able to afford to buy property, but you also need money on hand to maintain and repair it. Tenants will expect their home to be in good shape. In addition, it’s imperative that you are able to pay your own expenses if tenants are unable to make rent.
You’ll need time and the ability to handle maintenance issues. If you don’t have the talent to handle home repairs on your hand, you’ll have to contract with outside companies to take care of things. Having a network of connections will be helpful in these cases. You don’t want to find yourself wishing you’d known these things before becoming a landlord.
2. Know Local and State Regulations
You’ll definitely need to understand the state and local ordinances and laws related to real estate. Not complying with them could land you in serious trouble. Inspections, fees, policies, and codes are all issues that apply to owning and renting properties. There are also certain requirements every lease should abide by. You don’t want to find out during a dispute that you were lacking. Such mistakes could truly cost you.
3. Consult with Professionals
Because there are so many things to know and consequences for errors, you’ll want to consult legal, financial, and real estate professionals for advice. This upfront investment could save you money, time, and difficulty in the future. A real estate lawyer can let you know if your lease covers your interests and meets requirements. Establishing a relationship with an experienced lawyer now will benefit you in the event you ever need to take a tenant to court. As noted, it’s also important that you know what’s involved in maintenance issues that are common to owning property. If you’re not handy around the house or don’t have time in your life to make emergency repairs, consulting with maintenance professionals and establishing a relationship in advance is recommended.
4. Screen Your Tenants
You should have a proper vetting process in place before accepting tenants. You want to be sure they are creditworthy, can comfortably afford rent, and don’t pose a danger to you or the neighbors. Running a tenant criminal background check and credit check are wise moves on your part. You can hire an agency to help make this process easier. Knowing this information in advance can prevent future issues.
5. Be Prepared for Tenant Problems
Even with the best screening process, you’re bound to run into issues with your tenants. Being a landlord requires being skilled in interpersonal relations. Your tenants are human. Even the best ones make mistakes. Unfortunately, some may end up not being well-intentioned at all. Be sure to include important clauses in your lease such as whether pets are permitted or what the procedure is for making changes to the property. You can then fall back on this information in the event of violations. Go over the property with tenants prior to move-in in order to complete a check-list of its condition. You can refer to this list later should the tenant do any extensive damage during their time there. Be prepared to handle issues as they arise.
These guidelines should help you to feel more prepared for becoming a landlord. It’s a big responsibility to rent property, but some research and planning can make the process smoother for everyone.