So, you’ve decided to become a landlord and make a living off… well, living. You provide the living space, and people pay you every month to live in it. Shouldn’t be too difficult, right?
Unfortunately it takes more than just owning a property to be a successful and profitable landlord. Here are seven things you should know if you plan on being a successful landlord.
1. Renting out a property isn’t as easy as it seems.
If you think landlords just sit around all day while the cash flows in, you might want to reconsider. Owning a rental property requires a large amount of hard work, planning and, above all, patience.
You need to be flexible, and adjust your schedule to accommodate prospective tenants. You need to know how to deal with different personalities, and be ready to endure confrontation when necessary. You may need to perform repairs at the drop of a hat, resolve disputes, and even pursue legal action against delinquent renters.
And eviction isn’t as easy as it sounds. With strict legal guidelines to follow, you could be in for quite a fight if you end up with a bad tenant. (You may want to save yourself the hassle and hire a property manager.)
2. You’ll need to make the property secure.
You can’t just have a vacant property and have someone pay you every month to sleep there. You need to address certain security matters before you can legally lease your property. Your property will most likely need working smoke detectors connected to the main power supply with a battery back-up. Chances are you’ll also need to maintain your rental property to particular building regulations pertaining to cleanliness and reasonable security, which can include items such as working door locks and window latches. And if your property has a swimming pool you’ll need to know the strict legal requirements, including regulations around perimeter fencing.
Note: These laws vary from state to state, so check with your local Residential or Tenancy authority.
3. The lease agreement.
You should also talk to your local Residential or Tenancy authority about what you need in your lease agreement, and then get it checked by a property lawyer. This document protects your rights as a landlord, and so it needs to be watertight in case a tenant violates any of the terms. Paying a lawyer to get your legal documents in order now could potentially save you a lot of money (not to mention stress) later on.
4. Document the condition of the property.
Before any tenants move in, have your property professionally inspected. Make note of any damage or other important findings, and make whatever repairs are necessary to bring it up to code. (It might even be worthwhile taking photos for your records.) Always have the tenant complete and record their own inspection. Once they’ve noted any additional problems, both parties should sign an agreement stating the condition of the property when the tenant moved in. This way, when the tenant vacates the property you are able to fairly determine what, if any, damage was caused during that lease period.
5. Never take a renter on their word.
Trust is a wonderful thing. Unfortunately, it’s a luxury you can’t afford as a landlord. Always run extensive background checks on any prospective tenants, and take the time to contact references and complete a credit check. Don’t jump at the chance to rent out your property to the first person who comes along. Remember, tenants are basically investments, and if they can’t be trusted to treat your property well and pay their rent on time, the investment will be a bad one.
Choose your tenants carefully. A bad tenant is worse than no tenant at all.
6. Know and understand the law.
The laws that govern interaction between tenants and landlords are generally neutral. However, in specific situations you may find they favour one party over the other. Make sure you’re familiar with these laws, and keep up-to-date with any changes. Also keep in mind these laws may vary between states, so if you have any issues contact a local property lawyer.
7. Do your part (and then some).
If you’re going to be a landlord, do everything in your power to be the best one possible. Keep up with any maintenance, and handle any repairs or complaints in a timely manner. Set fair rental prices, and don’t charge more than the property is worth. When it comes time to renew their lease, reward good tenants by maintaining the existing rental price or offering terms that may suit them better (e.g. a month-to-month or a six-month lease agreement) .
Most importantly, make sure you’re always available if they need you for anything. Treat your tenants well, and chances are they’ll stay in your property – and keep that rent coming in.