You’ve bought an investment property and are ready to find tenants, cash rent checks, and start earning money. You may be wondering where to start, though, and if so, you are not alone. There is a steep learning curve for being a new landlord, but with the right tips, you can watch your business soar.
Being a good landlord can be a rewarding experience, both relationally and financially. It takes a wide range of abilities, though: organization, diligence, people skills, tech aptitude, and the knowledge of how to get your business off the ground.
This guide will help you prepare for your new role as a rental property owner. It starts with the basics you need to get started and includes the essential tips you need to succeed as a new landlord.
4 Steps to Getting Started as a New Landlord
There is a lot to do when you become a landlord. Your rental property is a business, and you need to ensure that you’re ready to be a small-business owner. Work through these essentials to get started:
1. Set Up a Bookkeeping System
You need to report the rent you collect as income to the Internal Revenue Service (IRS), but you also get to subtract your business expenses from that income. Paying someone to paint your rental properties, buying a rake to maintain the lawn of your rental property, advertising your rental, and countless other costs are all deductible. Set up a bookkeeping system to track these expenses.
2. Consider Professional Property Management
New landlords need to consider how much time they can devote to their properties. You’ll need someone to advertise for tenants, screen applicants, and show the property to people. Someone will have to take on yard maintenance and repairs. Someone also has to be in charge of collecting the rent? Decide what you want to do on your own, and outsource the rest.
3. Invest in Tools to Help
The right tools can help you run your new business. Look into applications to help with bookkeeping, invest in tools that streamline the tenant application process, or look for ways to simplify tenant background checks. Digital tools can save you time and optimize your workflows.
4. Research the Fair Housing Act
The Fair Housing Act bans discrimination in the housing market based on race, color, religion, sex, disability, family status, and national origin. New landlords should review the terms of this law and figure out what applies to them to ensure compliance.
You can start actively managing your property once you have these essentials in place. This is just the beginning, though. You can never be complacent as a landlord, and ideally, you should keep learning and improving your approach every day.
7 Critical Tips to Be a Successful Landlord
You need to manage your properties carefully to ensure you get the highest return and protect the condition of your properties. One thing that should always be on your mind is the visual appeal of your property because if that is subpar, it will be a struggle to rent it out. Here are some more tips to bolster your success:
1. Act Like a Business Owner
You have invested a lot of money into your property, and you need to treat your new endeavor like a business. Don’t agree to rent to your best friend’s cousin at a discounted rate or hand the keys to someone just because you like their vibe. Carefully research all prospective tenants to ensure they will pay the rent and take care of your property.
2. Research Market Rent Rates
Don’t just pull a number out of thin air. Spend time researching market rent rates in your area for your property type. Choose a rate that covers your costs and hopefully brings in some profit, but to be competitive, make sure it is based on the average rent for your area.
3. Raise Rents Carefully
You may want to implement annual rent increases, because ensuring that your rent keeps pace with inflation helps keep your expenses from exceeding your rental income. You also need to avoid raising the rent too aggressively, however, if you want to hold onto your existing tenants. Quality tenants are a rare commodity, and keeping them happy reduces turnover, saving you money in the long run.
4. Create a Detailed Lease
Your lease should be highly detailed, spelling out your expectations for your renters concerning rent payments, late fees, lease term, renewal options, property maintenance, allowed property alterations, and renter’s insurance.
5. Make a Pet Policy
Be proactive about creating a pet policy, or you may end up with a property overrun with cats, damaged by dogs, or full of noisy exotic birds. You can charge a pet deposit or a monthly fee, limit the number of pets, or make other rules to protect your property. Keep in mind, however, that you may have to allow service animals even if you establish a no-pet policy.
6. Implement a Tenant Screening Process
Your tenants are your livelihood. You may not be able to pay your bills if your tenants refuse to pay the rent, and in a worst-case scenario, you may have to spend a lot of time and money evicting them. You need responsible tenants so that you can minimize this risk, and a background check helps you learn as much about prospective tenants as possible.
7. Do Regular Walk-Throughs
Not all tenants are going to be careful with your property. They may cause damage, or they may forget to tell you about routine maintenance needs. Protect your property by scheduling annual or even biannual or seasonal walk-throughs.
Checking on the property helps you ensure that your tenants aren’t causing damage, and it also alerts you to potentially damaging issues such as leaky pipes, missing roof shingles, clogged gutters, and more. Landlords need to be proactive about maintenance if they want to ensure their properties don’t fall into disrepair.
These tips help you avoid unpleasant surprises. Take some time to think about the type of renters you want, consider the responsibilities you need them to handle, and, above all else, always treat your rentals like a business. Planning and being serious about your property will help you avoid financial losses and hassles such as evictions.
Common Pitfalls for New Landlords to Avoid
Being a landlord isn’t always an easy job, but with the right approach, owning rental properties can be a lucrative and rewarding experience. Try to avoid these common pitfalls if you want to be as successful as possible:
- Forgetting to run background checks on prospective tenants
- Not requiring renter’s insurance
- Making verbal agreements, instead of using written contracts
- Failing to enforce the rules
- Wasting time by not investing in tools that help streamline your processes
You need to ensure that you choose the best tenants possible to be successful. These people live in one of your most expensive assets, and you should vet them as carefully as you would if they were moving into a bedroom down the hall in your home.
Streamline Workflows With Our Innovative Application Platform
RentSafe provides tenant-screening tools for new landlords. Our program allows you to create a custom application that tenants can fill out and submit online. They can also add co-applicants and upload documents. Landlords can quickly run background checks from our platform to learn as much as possible, and a convenient dashboard makes the process transparent for all concerned.
You deserve to be successful as a new landlord, and we can help. Contact RentSafe today to learn more.