ou’ve finally bought your first rental property and now it’s time to fill some vacancies. Owning property is a great way to earn extra income and develop your net worth. However, becoming a landlord comes with a lot of responsibility. It can be intimidating, especially if it’s your first time owning a rental. Here are some tips to help you avoid some common mistakes made by first-time landlords.
Research, research, research
This may seem like an obvious tip, but many first-time landlords make this mistake. You are a novice in the world of real estate, so it’s vital to be diligent in researching. Be sure you understand the demand of your market and how much you can charge for rent. Ask yourself relevant questions. Is this fixer-upper worth the investment and why? How much will I need for a down payment? Is my potential rental in an area that is appreciating? These are just a few questions you need to answer to help you learn how to be a successful, strategic landlord.
Maintain a business mindset
Your rental property is a business with legal obligations you must follow. Although it may be hard, you will need to separate business from emotion. You can work out a deal with a struggling tenant, such as a person who just lost their job, but it’s important to set boundaries like late fees so that tenants paying rent past due doesn’t become a habit. As a landlord, you’ll consult with lawyers, accountants, and insurance companies, so take their advice when dealing with complex situations.
As a business owner, you should work towards maintaining a great reputation. Don’t fulfill the stereotype of the greedy landlord who doesn’t care about their tenants. Set up practices that will keep your tenants happy. For example, have an organized system for handling maintenance requests and hire a reliable handyman, plumber, and locksmith who are available on call. Similar to any other business, word will get around if you aren’t trustworthy or professional, which will only hurt you in the long run.
Learn how to manage the property properly
Successfully renting out property goes beyond just filling vacancies. To thrive, you’ll have to learn how to manage your property effectively. Consider the following to manage your property properly:
Understand rental laws and know your rights
You need a basic knowledge of landlord and tenant rights so you can protect yourself. You should know about security deposit rules and tenant notice laws, as well as any inspections and licenses you might need. You also need to make sure your lease is legal within your state because laws vary by state. You can start by doing your own research, but you might want to consult with a lawyer to ensure you are fully informed.
Determine how you want to collect rent
You should use an online system to handle payments. It’s a quick and convenient way to maintain a digital paper trail. Avoid accepting checks and cash for rent payment. If a check bounces, you’ll need to pay a non-sufficient funds fee and contact your tenant for viable payment. Accepting cash is dangerous because it is harder to keep a paper trail and you don’t know the source of the cash. Of course, some landlords have rules for accepting cash to get around this. For example, some landlords only accept cash in person. They also count the money in front of the tenant and write a receipt. By using an online payment portal, you can avoid these situations altogether.
Evaluate if you should be pet-friendly
There are a lot of risks to allowing pets to live on your property. Potential damage to the property, noise complaints, and dander getting trapped in the carpet are a few of these risks. However, to offset the damage, you can require a pet deposit or pet rent (depending on the laws in your state). Pet-friendly rentals are in high demand. You could get even more interested tenants by allowing pets and that could lead to fewer vacancies. Realistically assess if you want to deal with responsibilities that come with allowing tenants to have furry friends.
Discover new ways to increase income beyond raising the rent
If you did your research, the value of your property should appreciate, meaning that you might want to increase rent in the future. In the meantime, find out how you can earn extra income on your property. For instance, you can install a vending machine in a common area, rent out storage space, or lease a billboard if you have a larger building.
You should protect yourself (and your wallet) from any potential liability claims by purchasing insurance. Landlord insurance will protect you from financial loss caused by natural disasters, accidents, and other issues associated with your property. Depending on the laws in your state, you might want to require tenants to purchase renter’s insurance which will help you avoid a lawsuit if a renter’s items are damaged. Renters insurance is fairly affordable, and most tenants are willing to pay for it because they know their items will be protected.
If you are scrambling to locate paperwork or emails, you will just create a constant headache. If you don’t stay on top of recording revenue and expenses, you won’t be able to determine your property’s profitability. Here are three ways to help stay organized:
Save and record all events and paperwork pertaining to your property. This includes any items you purchase, vendors you pay to service the property, applications, receipts, etc.
Create a digital paper trail
If you have any handwritten paperwork, digitize it so you can search for it easily later on. Most leasing offices handle leases, payments, maintenance requests, and more online.
Hire an accountant
Research and hire an accountant that has experience filing taxes for landlords. Accountants can also advise you on how to organize your expenses, how much you should pay yourself, and tell you what documents you will need for filing taxes.
Set Office Hours
To help maintain professionalism —and peace of mind— let your tenants know what days and times you are available. Even if you’re living next door in a duplex, set this boundary to avoid any unwanted communication at inappropriate hours. Of course, if there is an emergency you should respond as soon as possible.
Sell the ultimate living experience
When looking to fill vacancies, consider placing décor and furniture in the unit. Staging an apartment helps potential tenants envision their new home. Your property photos will stand out in an online listings services and leave a lasting memory. When showing a rental, make sure the apartment smells fresh. Odors can make even the most impressive properties undesirable. Airing out the apartment, getting the carpet cleaned thoroughly, and adding a fresh layer of paint can help eliminate odors. You can also light some scented candles about 30 minutes before a scheduled tour for an added touch.
Take photos before and after renting
Be sure to take photos before new tenants move in and make note of any preexisting issues during the move-in walkthrough. This way, if you have to repair damages when tenants move out, the photos can help you justify withholding the amount from the security deposit.
Many people believe the best teacher in life is experience, but hopefully these landlord tips will help you make the right decisions. Continue to strive towards running a reputable business, and before you know it, you may even own multiple apartment complexes! Good luck.