If you have a property sitting idly and not being used by anyone, renting it out to a tenant can serve as a great source of extra income. Or perhaps you are looking for a way to make money and thought of investing in some rental property. Whatever the reason may be, becoming a landlord is not as simple as it sounds. Many may think of it as an easy process: buy properties, find tenants, get money every month. However, the reality is that there is so much more that must be done before you can start renting properties out to people. At the same time, the rental market is just like any other market–it fluctuates from time to time and has its good and bad times.
Becoming a landlord certainly comes with advantages, but the responsibility that comes with the job is often forgotten. Similar to how you would do some research before starting a business, start by learning about what it takes to become a landlord. Before you jump into the role, make sure you understand what you are getting into and what you should consider. There are many things to know and consider–from getting landlord insurance to learning how to handle house problems.
If you have been thinking about renting out some properties but are hesitant about becoming a landlord, reading through some of these things may help you decide. It may be a tough job, but as long as you follow the right procedures, you can commit yourself to the role.
The first part of becoming a landlord is buying rental properties, and even with this step, you have to be strategic. Familiarize yourself with the market trends, so you know how much properties cost and know what places tenants look for. Ideally, it would be advisable to find a location near you, so that you can visit the place from time to time to check on it and ensure that things are going smoothly.
Though a close location will be convenient for you, you also have to think about the location that tenants want. Things like access to public transportation and nearby groceries or convenience stores, for instance, are usually attractive options for them. Having excellent amenities may also be a plus factor, which can raise the value of the property.
Learn About State Laws
Renting properties to tenants comes with legal requirements mandated by each state. Thus, make sure you check on your state laws to learn about what you have to do. Apart from state-specific laws, there are also general rules that you need to follow as a landlord. For example, you should charge a security deposit, which acts as a safety net for you if your tenant is unable to pay on the due date. You should also make sure your property is vacant on the moving date that you agreed on, so the tenant can move in without problems.
Additionally, it may also benefit you to get landlord insurance. This is not necessarily required by law but may be required by your mortgage lender. Either way, this insurance policy protects your property investments from damage, risks, or unexpected events. If your property is damaged from a disaster, for instance, your insurance can help cover the rebuilding costs. Some landlord insurance types may also protect you from tenants who fail to pay their rent, so it will help to learn about your coverage options.
Craft a Maintenance Plan
Even though you are renting your properties out to other people, you still have to keep them in good condition to make sure they are livable. Likewise, you also want to make sure you can perform necessary repairs or fixes as early as possible to avoid inconvenience for your tenants. As such, having a maintenance plan is crucial, so you know what to do if a tenant suddenly calls you up and tells you the roof is leaking, or the doorknob is broken. In these cases, it will be useful to have a handy repair company in your contacts, so you can easily schedule a repair when the need arises.
Think About Capital Expenses
As a landlord, a large chunk of your finances will likely be spent on buying rental properties. However, you also have to remember capital expenses or the costs you will incur to keep your properties livable for many years. Though these expenses may not be significant in the first few years, there will still come a time when you need to do some significant fixing–a broken roof, perhaps, or some new appliances. In any case, you should be ready for these expenses as they arise.