Are you starting a path in rental property investing?
Being a landlord is a demanding job. There are going to be many responsibilities, depending on the number of rental units you have. Even though you face numerous tasks, the prospect of receiving regular rental income is alluring for many.
You’ll make things much easier when you learn as much as you can before buying your first rental property. Researching, asking questions from established landlords and studying the basics will get you far.
In this article, we’ll go over the main recommendations on how you can raise the chance of making your first landlord experience a successful one. Follow these tips to fulfill your maximum potential as an investment property owner.
Find the Right Rent Amount
One of the main challenges you face is getting the monthly rent amount right. This payment shouldn’t be too low nor too high. When the rent is too low, you won’t reach the true income potential of your rental property.
Setting the rent too high has disadvantages as well. Your tenant turnover rate will go through the roof because your renters will constantly find better deals, leaving your property at the first opportunity. Moreover, you’ll have a much harder time filling your property with new renters.
Comparative market analysis is the solution. This analysis strategy will help you gain an understanding of what other owners ask for similar properties in the same area. You want to align your price according to market averages to maximize the return on investment.
Cut Tenant Turnover
Try to keep your tenant turnover as low as possible. The turnover reduction is essential because an empty property will generate running expenses without providing any compensating income.
Offering incentives for long-term tenancy is one approach that can help in minimizing tenant turnover. When you provide lower rent in exchange for lease renewals or fixed long-term agreements, you’ll enjoy clear financial benefits in return.
Another way to reduce frequent move-outs is to be an excellent landlord. Practice proactive communication, respond to tenant requests at first notice and take steps to provide a great quality of life in your property.
Enforce the Lease Terms
Creating a solid lease agreement is important. However, following through by enforcing the various rules is the next crucial step. You can be an understanding person, but you cannot start ignoring breaches of your agreement.
When you get too friendly and lax about enforcing the rules, your renters could start taking advantage of you. For instance, it’s completely fine to have a grace period, but you need to take decisive action after this period ends.
The other side of this coin is taking responsibility for your actions as well. As a landlord, you should always provide a habitable property for your residents and abide by all the laws and regulations that govern landlord-tenant relationships.
Perform Tenant Screening
Finding great tenants isn’t always easy. It’s essential, as the right tenants will pay rent on time, follow the rental rules and treat it as their own property. How do you find these people?
The answer lies in proper tenant screening procedures. By conducting a thorough screening, you remove the unfit applicants from your list of potential tenants. An efficient screening involves finding the answers to these questions:
- Has the applicant been evicted in the past?
- What is their current employment status?
- Can the person provide references? Past employers and/or landlords?
- Do they have a criminal record?
- What does a credit check show about their financial discipline?
Whenever you conduct tenant screening, you need to be sure that you comply with the Fair Housing Act (the FHA). Under this federal statute, you cannot exclude a person based on color, religion, sex, race, familial status, national origin nor disability.
Create Comprehensive Lease Agreements
A lease agreement provides the legal basis for the relationship between you and your tenants. These documents need to cover as much ground as possible to protect your interests as a landlord.
Make sure to cover the following areas in your agreement:
- Rent payment amount, time and method
- Tenant’s responsibilities
- Landlord’s responsibilities
- Late payment fees
- Rules regarding pets
- Smoking policy
- Evictions
- Any unique requirements that are legally sound
Examine the Option of Professional Property Management
First-time landlords are usually surprised at self-management being such a significant commitment. When you have to do all the tasks by yourself, things can get a bit overwhelming at times. In addition to regular tasks, you need to respond to emergencies like floods and fires.
The decision to hire a professional property management company changes all of that. An experienced and knowledgeable team of professionals will take care of maintenance, repairs, rent collection, tenant screening and property marketing.
You’ll enjoy a degree of freedom, being unthinkable when you have self-management responsibilities on your shoulders. We recommend you weigh the pros and cons of getting property management services in light of your budget and daily schedule.
The Bottom Line: Practical Recommendations for First-Time Landlords
Starting your rental property journey is exciting, as there is potential for earning substantial passive income. You can use this extra income to make further investments, take steps to make your dreams come true or cover existing financial responsibilities.
The simplest approach is hiring a professional property manager. You’ll cut out any worries that come from self-management. You’ll need to meet a recurring management fee, but it’s a small price to pay for a stress-free landlord experience.
Self-managing is an option when you have enough free time. You’ll need that time to learn everything you can about managing your rental property and handle all your responsibilities as a landlord.