Key Takeaways
- Before becoming a landlord, individuals should give careful consideration to the amount of commitment and responsibility they are about to take on.
- Rental property owners should understand the difference between serving as your own landlord, or hiring a property manager.
- Be sure to check out the steps on how to become a landlord, as well as landlording tips and tricks.
Making the decision to purchase a rental property is a big one, and if this is your first time, then certainly you must be wondering how to become a landlord. There are few “landlording school” programs available, if any, and first time landlords may feel that they need to take the sink-or-swim approach. However, as is the case for many situations, there is an approach of conducting as much research as possible, whether it be online or networking with experienced mentors. Below you will find a discussion of how to be a landlord, as well as new landlord tips and tricks.
What To Consider Before Becoming A Landlord
Before researching steps on how to become a landlord, individuals should first and foremost carefully deliberate whether or not becoming a landlord is truly a good fit. Although it can provide individuals with many benefits, being a landlord is a large responsibility and commitment, and should not be taken lightly. Perhaps an examination of some of the benefits and potential drawbacks of landlording can help elucidate the gravity of this decision.
Becoming a landlord comes as a result of acquiring property, with the intention of renting it out, which in itself is quite the accomplishment. Whether you invest in a single-family or multi-family property, landlording is synonymous with a long-term investment strategy that can helping bring in steady, recurring income. Simultaneously, the property will typically appreciate in value over time, in addition to bringing in rental income. A first time landlord might find that they quite enjoy the activity, and transition into landlording full-time as a profession. The responsibilities involved can help individuals develop critical management skills and invaluable business savvy over time.
Aforementioned, those considering becoming a landlord should also give careful consideration to potential downsides or limitations that are often associated with the profession. For starters, owning one or more properties that serve as the home of tenants is a significant responsibility. The condition, functionality, and management practices of a property should protect the safety and well-being of tenants. This includes having a working knowledge of and adhering to landlord-tenant codes and regulations. The activities associated with landlording can be extremely demanding and time-consuming as well. Some example include managing tenant turnover and screening, collecting rent, dealing with any problematic tenants, addressing maintenance issues, and managing all of the associated paperwork. In addition, landlords are expected to maintain a sizeable emergency fund for unexpected events. Perhaps most importantly, investors should think about the considerable opportunity costs involved with being a landlord. The amount of time spent on managing rental properties equates to the amount of time lost in pursuing other investment opportunities.
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Landlord Vs Property Manager
If the discussion of positives and negatives associated with landlording left you with a major headache, perhaps one of the best tips for being a successful landlord is the idea of not being a landlord at all. While some property owners opt to manage properties on their own, many individuals make the decision to hire a property manager or property management company.
If you learned anything about how to be a landlord from the discussion above, it should be that it is a time-consuming activity that should be treated like a business. If you do not have the necessary skills or the time to manage a property, perhaps hiring a property manager is the best decision for you. Property managers can be hired to carry out all landlording activities on your behalf, such as screening tenants, collecting the monthly rent, responding to maintenance requests, and managing leases and paperwork. Property owners should expect to dedicate a sizeable portion of their income, roughly 10 to 20 percent, to pay for property management services. However, this expenditure can be financially justifiable when thinking about how much time and energy can be freed up.
How To Be A Landlord In 6 Easy Steps
- Decide on a location and property type.
- Familiarize yourself with landlord-tenant regulations.
- Screen potential tenants.
- Sign a tenant onto the lease.
- Manage the property yourself or hire a property management company.
- Ensure the proper maintenance of the property.
Picking the right market in which to own a rental property can make or break your success as a landlord. First, it is imperative to select a market where rental units are in demand, and show a history of having had been in demand. Having any vacancies in your property can make your rental income take a hard hit, and the best way to lower this risk is purchasing property where there are plenty of prospective tenants. In addition, choosing the right type of investment property should also be a factor. For example, it would not make financial sense to operate a luxury apartment building in a lower income area, where local residents would not be able to afford the rent. Future landlords should also decide the number of units they would like to have in their multifamily property, ranging from duplexes to buildings with ten or more buildings.
One of the most important new landlord tips is dedicating time to become familiar with landlord-tenant laws in your area. Those who choose to operate a rental property while being in the dark about these laws are just waiting to get slapped with a lawsuit. These laws exist to protect both the landlord and the tenant, including clauses about leases, security deposit limits, the eviction process, and fair housing laws, to name a few. Because these regulations represent a complicated web, landlords may find it beneficial to seek legal counsel. Landlords should also be prepared to spend a lot of time and effort in screening potential tenants, as well as signing new tenants onto leases. In order to find tenants, the rental unit needs to be advertised and marketed, so much so that a good number of promising candidates can be identified. Next, these potential tenants should be thoroughly screened and vetted, before signing them onto the lease.
It should be apparent by now that managing a rental property can be quite time-intensive and tedious. As discussed in the previous section, new property owners should make the important choice between managing the property themselves, or hiring a property manager. Although a portion of the rental income will go towards paying for property management services, property owners can avoid being a landlord while relying on the property manager’s skill set and expertise. Once all these steps have been executed, a property owner’s main responsibility will be ensuring the property upkeep and maintenance of the property. This serves two main purposes: to protect the safety and well-being of tenants, while protecting the building as it appreciates in value over time.
14 Landlord Tips And Tricks
- Make use of property management software: Any type of investor should make use of available software and technology. Use software to save time, minimize errors, and reduce the need for physical paperwork.
- Require renters insurance of all tenants: Requiring tenants to have renters insurance helps to protect yourself and your tenants in case any damages exceed what landlord insurance can cover.
- Set up an LLC: Setting up an LLC for each property you own can help shield your personal assets in the worst-case scenario of a lawsuit.
- Document your property’s condition in detail: Taking plenty of photos and videos before renters move in, and then after you move out, helps you to catalog physical evidence on the condition of the property, as well as prove any damage that has been done by tenants.
- Put security deposits in a separate account: Security deposits belong to the tenant, and not the landlord, from the get-go, and should be kept completely separate from rental income.
- Respond to repairs as soon as possible: Attending to repairs promptly not only helps to address the needs of tenants, including their safety, but helps to preserve the value of your property.
- Schedule routine property inspections: Scheduling routine inspections helps you keep an active role in maintaining the value and safety of the property. Be sure to provide tenants with at least 24 hours’ notice.
- Add a pet clause to your lease: Pets can unfortunately cause extensive damage to your property. Be sure to include a clause about whether or not pets are allowed, size and breed, and whether or not you will charge a refundable pet deposit or monthly pet rent.
- Build a strong network of contractors: Owning a rental property is synonymous with having to respond to a plethora of maintenance, repairs and upgrades. Having a group of contractors you can rely on will help you meet demands quickly, while resting assured that good-quality work will be completed.
- Perform thorough tenant screenings: Tenant turnover is a significant expense for landlords. Implementing a thorough vetting process for prospective tenants can help lower your turnover rate in the long-run.
- Set up cash reserves from the start: When setting up a loan or financing to acquire the property, many landlords will forget to include a cash reserve in their budget. Make sure to make this a priority in anticipation of emergencies or unexpected repairs.
- Find an experienced landlord as a mentor: Being a landlord is never easy; identifying an experienced landlord who can serve as your mentor can help you gain access to unlimited landlord tips and tricks.
- Consider payment instead of eviction: The eviction process can be costly, especially if the process is dragged out via eviction court. The legal process and judicial process can be financially draining, not to mention your ability to fill your unit will be delayed. Consider paying your tenant to move out rather than going through the eviction process.
- Choose renovations that increase rent prices: Owning multi unit properties is unique because the rent prices are factored in when evaluating the value of the property. When you have room in your budget for renovations or additions, choose projects that will justify increases in the rent price, and thus increases the value of your property.
Becoming a landlord is no easy feat, and if you gathered anything from this “how to become a landlord” guide, it is that any amount of tips for being a landlord can be found helpful. Landlording should be treated as a business operation, regardless of whether you choose to be a part-time or full-time landlord, or even elect to hire a property management company.
Do you have experience serving as a landlord? What are some of your best landlord renting tips that you can share? Feel free to discuss your tips or tricks below:
