So, you think you want to be a landlord? With the decline in homeownership over the past few years, the rental market seems to be holding strong; however, before you jump in, you need to know that property ownership is a lot different than being a landlord, so you’ll want to make sure you’re aware of a few basics, as well as what you’ll be responsible for. Here are a few tips to help get you started.
How to determine returns
While managing a property can potentially be profitable, you’ll want to make sure you do your homework before investing. If you haven’t already purchased property, you’ll not only want to research the current market, you’ll want to know which areas and locations will have the highest returns. Additionally, you’ll have to factor in how much you’ll need to charge in order to cover the expenses of maintenance, property taxes, the mortgage and the like.
The importance of screening tenants
While you may not have to live with them or see them every day, you don’t want just anyone occupying your property. Poor credit, a history of eviction or criminal offenses, or employment are details you should want to know before handing over the keys to your property. Make sure you run a background and credit check, which should give you a solid idea of the person applying. In addition, why are you moving, why is your monthly employment, how many people will be living on the property and asking if they can provide references from employers or previous landlords are also good questions for landlords to ask potential tenants.
The necessity of being in close proximity to the rental property
It’s best if you live close to your property so you’ll be able to check in from time to time, assess repairs, or show the space to possible renters. If this kind of thing doesn’t sound so interesting to you, than you may want to consider hiring a property management company to take care of the those kinds of day-to-day details. However, if you are planning on being your tenant’s primary contact for any sort of issue, you probably won’t want to have to drive more than an hour to check out the problem or to supervise any sort of maintenance.
Learning the law
Depending on the state you live in, there are specific landlord-tenant laws which cover issues from access level, deposits and anti-discrimination. It’s important that you read the fine print as many new landlords skim housing laws and often miss some very important details that could potentially lead to legal disputes in the future. Make sure you know how much notice you need to give renters before showing up to inspect the property or how many days renters should be given to gather their belongings should you need them to vacate. Fair-housing violations go way beyond just discrimination, so make sure you’re aware of the details that pertain to your state and don’t end up in a trap.
How to enforce timely rent payment
Make sure you set a good precedence when it comes to paying rent. Tenants should know exactly when rent is due, where it should be delivered, what form of payment is expected and the consequences for not paying on time. It’s usually good practice to require tenants to pay a late fee should they fail to deliver or for checks that bounce. Cultivating healthy relationships with renters doesn’t mean you have to be miserly, you just don’t want to get into a situation where you begin allowing partial payments for someone who lost a job and end up getting in tight financial situation yourself. Be friendly, but be firm.