If you are renting out property for the first time, there are some things you should know. This guide lists 7 essential tips for a first time landlord.
The amount of renters across the country is ballooning as young people become disillusioned with the idea of owning a piece of property. Given that fact, savvy investors are flooding into the landlord game, hoping to earn sizable returns that outpace conventional money-making vehicles like the stock market.
While first time landlords certainly have the potential to win big in real estate, doing so isn’t as easy as buying a property and waiting for the checks to roll in.
There are a lot of moving parts to consider when you’re managing a rental unit. Below, we break down what we think are the seven most important things to keep in mind.
- Treat Your Property Like a Business
Get into the rental game to make money. Don’t do it to create a cool pad people will blog about, to be able to brag about owning multiple properties or any other reason.
Some investors don’t know this but rental unit margins aren’t large. Because of that, you’ll need to maximize your profit by making a series of business-focused (and sometimes hard) decisions to avoid going upside down on your investment.
- Get Familiar With Renter’s Rights
Depending on the state you own property in, your tenants may be armed with a slew of rights that may complicate your relationship. Your understanding and complying with those rights is integral to your ability to stay out of trouble and to collect rent.
Talk to a real estate attorney or get self-educated so you don’t fall into any legal traps.
- Learn How to Screen Tenants
A single month of rent delinquency can create severe financial hardship for first time landlords. The best way to avoid that is to have a stringent screening process that will help you find qualified candidates.
Typical rental screening requirements include income, credit score, rental history and criminal records.
- Keep a Beat on Your Market
Rental prices fluctuate year to year. You must keep a beat on what your market looks like so you’re never over or undercharging for rent.
Overcharge and you’ll run into vacancy. Undercharge and you’ll be leaving money on the table.
- Require Renter’s Insurance
While your home owner’s insurance policy will cover most property damages, lapses may exist. Renters that damage your property in ways that fall outside of your policy coverage can use their personal renter’s insurance to fill the gaps.
Without renter’s insurance, renters will have to pay for damages out of pocket which they may be unable to do.
- Consider Property Management
If everything we’ve suggested you manage sounds like a lot, choosing a property management company could be a great move. A qualified property management company will do everything from managing maintenance requests to screening tenants.
In exchange for their services, they’ll take a percentage of your unit’s monthly rent.
- Plan on Expanding
One rental unit is fine. One hundred is better.
When you get into the rental game, do so with the intention of expanding your empire so eventually, your rental cash flow can replace and exceed your full-time income!
Are You First Time Landlords Ready to Get Started?
Getting into real estate can be intimidating but believe us when we say that whether you’re rich, middle class, or even short on cash, there are simple ways to get started investing.
We hope our tips for first time landlords make your journey simpler and we invite you to learn more about properties on our blog!
