Being a landlord comes with great responsibility. Make no mistake of that. It might seem like an easy way to make a little extra income, but there’s a good bit more to renting out your home than just collecting a rent check each month. Being a landlord requires time, money, and the ability to deal with tenants fairly and with a level head. Here are eight things you should think about or research before you make the final decision to become a landlord.
Location of the Property
We all know that “location, location, location” is the one of the most important things in real estate. Finding a great deal on a fixer-upper is always nice, but if it’s not in a location where people tend to rent, you might be hard pressed to find a tenant. Look for properties near universities, hospitals, desirable neighborhoods, public transportation, corporate campuses, and even some military bases. These are areas that attract a large number of renters, so finding someone to rent your place should be a little easier.
It’s a smart idea to study federal, state, and local laws and regulations before you decide whether or not to become a landlord. Pay careful attention to things like zoning ordinances and homeowners or condo associations. Some properties might be located in areas that don’t allow rentals. Look for any special fees or taxes you may have to pay as well. Other laws regulate things like tenants’ and landlords’ rights and responsibilities. They may also spell out what items are required to be covered in the rental agreement.
Even if you’ve read all the books and websites and gotten all the necessary forms in order, it’s a good idea to consult a real estate attorney or your trusted Realtor® for a little advice. They can provide feedback and suggest any changes or additions to the rental agreement that might further protect you or your tenant further on down the road.
How to Enforce Rent
Say you have a tenant who’s regularly late with the rent. Or maybe you have one who always pays on time but suddenly loses their job; they promise to pay all the back-rent once they find a new one if you just cut them a break for a month or two. Do you have a plan for any of these situations? How will you enforce rent and guarantee that you don’t lose money on tenants that don’t or can’t pay on time? You should also have a plan for collecting rent. With so many online options these days, this is more convenient than ever, so there’s no excuse for tenants to be late with rent.
Screening Potential Tenants
How will you screen potential tenants to make sure they’re who they say they are? You’ll need to run background and credit checks on all prospective tenants, as well as contacting their previous landlords for references. Will you pay for background checks each time? Will you hire a property manager to take care of keeping the property rented? Either way, it’s incredibly important to know who you’re renting to and whether or not they can actually afford the rent they’re agreeing to pay.
Maintenance Plans and Emergency Funds
It’s inevitable—something in your rental property is eventually going to break. The key to keeping tenants happy is having a maintenance and repair plan in place before something needs repairing. If you’re happy to be the handyman for your own property, go for it, but realize that it could mean a lot of side work and back-and-forth depending on how many rental properties you own. If you’re not so great with that sort of thing, look for a few trusty repair companies to keep on speed dial. As far as routine maintenance like yard work, decide whether you’d like tenants to keep up with it, do it yourself, or hire a lawn care company. You’ll also need to make sure you have enough money set aside in an emergency fund to cover any major repairs quickly, keeping your tenants happy and safe.
A standard, printed-from-the-internet lease will never be completely perfect for any landlord and tenant relationship. There are lots of details to think about. For example, will you allow pets? What kinds? Will there be a pet fee or deposit? Will you allow the tenant to have overnight guests for more than a couple of nights without charging a fee? What about parking spaces? Usage of pool and other recreation areas? Is there an extra fee for that too?
Don’t forget you’ll need to inspect the property periodically. Stipulate in the lease how often you will inspect the property. The tenant has the right to quiet enjoyment, which means that the landlord cannot just pop in anytime they feel like it unless there’s good cause. A landlord must notify the tenant in advance. When the tenants move in, do a walkthrough with them to establish a baseline and document any previously known issues. Then when you do your regularly scheduled inspection, you’ll have a benchmark to work from.
As you can see, there’s quite a bit more to being a landlord than turning over the key and cashing rent checks. Being a good landlord takes commitment, planning, patience, and organization.