The secret’s out — there’s never been a better time to become a new landlord. Thanks to the chaos caused by COVID-19, the rental market is super hot, and rents are soaring. Becoming a landlord means more than buying a property and handing over the keys to a tenant, though.
If you’re thinking of buying rental property or you want to rent your home, then it’s important that you have an in-depth understanding of everything that comes along with being a landlord. If you’re feeling overwhelmed, don’t worry, we’ve got you covered. Read on for an in-depth guide to becoming a landlord!
1. You Don’t Have to Do It All Yourself
Landlords are typically thought of as someone who takes care of all aspects of a rental property. They market the property, screen the tenants, and fix stuff when things break.
In today’s world, however, landlords can be as active or as passive as they want to be. In fact, many landlords utilize the services of property management companies to handle the day-to-day activities of their rental properties. In exchange for a fee, rental companies handle everything from marketing to repairs, the only thing you have to do is make the payment.
You also have the option of hiring your own property staff if you have several units that you manage. The only downside to this is that it will cut down on your profits, but it’s worth it to save on stress.
2. Credit Checks Are Mandatory
This might seem like an obvious thing to keep in mind when you want to rent property to new tenants. Credit checks, along with previous landlord references, are a great way to determine if a potential tenant is a good fit for your property.
Along with credit scores, you’ll also want to collect information about their net monthly income. Ideally, your new tenants should bring in at least three times the amount of the rent you’re charging. If they don’t have enough income or credit history, then you can consider allowing them to have a guarantor for their apartment.
3. Criminal Background Checks Are Critical
Credit and income history aren’t the only things you need to worry about when screening new tenants. You also want to run a criminal background check.
Landlords have some amount of responsibility for the people they allow to live in their apartments. That doesn’t mean you have to deny every application with a criminal history, though. If someone has a significant criminal background, and they pose a risk to your other tenants, then it’s important to determine whether it is a good decision to allow them to rent your property.
4. Don’t Skimp on Marketing
You might have the best rental property in the world, but it won’t matter if you don’t take the necessary steps to get the word out about it. That’s right, marketing is just as important in property management as it is in retail sales.
Thankfully, there are a ton of different ways you can market your property. Classic examples include listing your for rent property on rental websites like Zillow and Apartments.com. You can also create social media pages for your rentals so you can interact with potential new tenants.
Social media pages are also a great way to advertise specials and special events, too!
5. You Need to Know the Fair Housing Act
The Fair Housing Act is a federal law that governs how landlords rent and manage their properties. Except for very narrow exceptions, the Fair Housing Act applies to pretty much every landlord operating in the United States.
It protects potential and existing tenants from discrimination on basis of a number of protected classes. For example, a landlord cannot deny housing to someone because they are disabled or homosexual. It is also illegal to try to get someone to move out of your property because they are a member of a protected class.
Violating the Fair Housing Act has major implications. Be sure to brush up on your knowledge of it before speaking with prospective tenants.
6. Don’t Forget State and Local Laws
The Fair Housing Act is not always the only law that you need to adhere to when it comes to renting out properties. Many states and local jurisdictions have laws on the books that take tenant protections to another level.
For that reason, it’s important for you to reach out to legal counsel before you list your rental property for rent. A good attorney can help you navigate all of the laws to make sure you’re in compliance with them. It might be a big expense, but it’ll save you a ton of money in the long run.
7. Your Lease Terms Are Important
If you’re a new landlord, it’s super tempting to grab a boilerplate lease agreement from the internet and use it for your rental properties. While boilerplate lease agreements can get the job done, they aren’t optimized for your personal needs.
Instead of doing that, spend some time with your attorney to draft a lease agreement that represents your interests and is in compliance with local laws. Once that lease agreement is complete, it’s important to know it inside and out so you don’t have any surprises when it comes to your tenants.
8. Decide Who Covers What
Speaking of the terms of your rental, one thing you might forget about is who is going to cover utilities. Some landlords roll the cost of utilities into the rent rate, while others prefer to have the tenant pay their own utilities. You need to decide which utilities you’re willing to cover before putting your rental on the market.
A furnished executive rental, for example, should come with all utilities included, even television and internet. Standard rentals, on the other hand, typically have tenants cover things like electricity and water. Be upfront about utilities before signing a lease with a tenant, and be sure to require proof that your tenant has signed up for utilities at move-in.
9. Renter’s Insurance Should Be Mandatory
As much as we’d like to avoid it, the truth is that accidents happen to even the most diligent of renters. Sometimes those accidents are incredibly expensive. For that reason, it’s important to require that all of your renters carry renter’s insurance.
Renter’s insurance protects you and your tenants from financial liability due to things like water damage or fires. It can even cover things like theft. It’s in the best interest of everyone involved.
To ensure that you know your tenants are carrying insurance, ask them to list you as an interested party on their policy and to provide you with a copy of their policy when they move in.
10. Maintenance Responsibilities
Maintenance is probably the biggest responsibility you’ll have as a landlord. Every landlord has a responsibility to keep their rental properties in habitable condition. This means ensuring that your tenants have a place to live that is free from pests, has hot water, heat, and in some jurisdictions, air conditioning.
Failure to make repairs, especially ones that make a property habitable, can land you in some serious hot water. If your tenant files a maintenance request, make sure to respond to it promptly, and keep them up to date about the status of the repair. The better your communication, and the faster you act, the happier your tenants will be.
11. Handling Complaints About Neighbors
Every lease has an explicit or implied right to quiet enjoyment of rental property. Taken literally, this means that your renters shouldn’t have to deal with things such as excessive noise from neighbors. It also means that they shouldn’t have to deal with harassment, or damages to their personal property because of their neighbor’s actions.
If you own the neighboring unit, then it is your responsibility to reach out to your tenant’s neighbors to stop the issue. This can be done through phone calls or through a letter posted to their door. If the issue continues, then you need to take progressive actions to stop the problem.
12. Evictions Happen
All the tenant screening in the world can’t prevent evictions from happening altogether. If you find yourself at a point where you need to evict a tenant, then it’s important to seek out legal counsel to ensure that you follow the right steps. Most evictions begin with a demand for payment or for a certain condition to be corrected.
If they do not correct the issue, then you can file for eviction with your local court. If you intend to carry out the eviction, then you cannot accept any form of payment from the tenant until they have moved out of your property and received their final statement.
13. Lease Renewals
Once the initial lease term is over, you have a few options. First, you can allow the tenant to stay in the property without an active lease on file. In that case, the terms of the old lease would apply, but the tenant would not have to stay in the property for a defined amount of time.
The second option is to renew the lease for a set amount of time. This might include a rent increase if the market rent on your property has gone up since the tenant first signed the lease.
14. Month-to-Month Rentals
Some landlords allow tenants to go month-to-month but do so at a significant premium. It is not unusual to tack on a fee of $150-$250 per month to go month-to-month. This helps protect you in the event that the tenant moves out unexpectedly, and you have to turn over the apartment quickly.
15. Resident Retention Strategies
Landlords generally prefer to keep existing tenants rather than having to look for new ones. That’s because marketing and turning over an apartment is a considerable expense, especially when the rental market is sluggish. For this reason, you always need to be thinking about what you can do to keep your existing tenants.
Sometimes, all that you need to do to keep tenants is to provide excellent customer service and keep the property in excellent condition. The more responsive you are to their needs, the more likely they are to stay with you.
16. Apartment Turnover Considerations
Your lease agreement probably says something about how the apartment must be returned to you. In most cases, the lease states that the apartment must be returned in the same condition in which it was received. That seldom happens, though.
You will need to have connections with cleaning agencies, carpet cleaners, and painters, at a minimum. All of these people come together to make your property look brand new at the end of a tenancy. Other businesses to consider making connections with include flooring companies, window companies, and appliance wholesalers.
17. Sending Out Statements and Deposit Refunds
Once you’ve completed your turnover, it’s time to send out a statement of your former tenant’s security deposit or a refund of their deposit. If you have completed any work on the apartment after they moved out, be sure to save copies of the receipts and send them out with the statement or refund.
Each state has laws regarding how long you have to get the statement or refund to the former tenant. Be sure that it is sent out by that time or you can face stiff penalties.
Do You Dream of Becoming a Landlord?
Becoming a landlord is easily one of the best ways to earn passive income.
That doesn’t mean that the process of renting out property is completely passive, however. It’s important to make sure that you have a deep knowledge of the rental process from start to finish. With a little bit of research, you’ll be well on your way to running a successful rental property!
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