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11 Important Considerations for the First-Time Landlord

11 Important Considerations for the First-Time LandlordPhoto from Unsplash

Originally Posted On: https://realtytimes.com/headlines/item/1046018-11-important-considerations-for-the-first-time-landlord

 

As of 2019 (the last available information), about 36% of households were renters. This number is only going up. Now is a good time to become a first-time landlord, as there are so many potential tenants out there.

People online may make being a landlord look easy, but this isn’t the case, at least not at first. Being a good landlord takes effort, and learning the ropes is a challenge.

We’re here to help. Read on for a few quick considerations and tips for first-time landlords.

1. Make (and Stick To) a Budget

Having a budget is crucial for everyone, and landlords are no exception. This is your business budget. As easy as it is to forget this, your property is your business, and you need to treat it as such.

So what goes into that budget? It will depend on your unique situation.

If you’re just starting your real estate investing journey, you may not even have a property yet. In this case, your budget includes all of the basic startup costs that landlords need to consider.

For example, how much does your property cost? What do mortgage payments look like? What about property taxes?

You’re going to need insurance, so you’ll have to factor that into your budget as well.

You’ll need to set aside money for things like maintenance and renovations, and you should always have a financial cushion to fall back on in the event of late payments or vacancies. You also need a marketing budget to fill those vacancies.

It’s not uncommon for new landlords to underestimate the costs of doing business. While it’s true that being a landlord can turn into passive income, that’s not guaranteed, and you still need to spend money to reach that point.

2. Consider Renovations and Upgrades Carefully

If your property isn’t brand-new, you’ll need to make some renovations and upgrades, if not now, then soon. Consider which ones will be worth your while.

Some upgrades and amenities are perfect for attracting new tenants, and you may be able to charge a slightly higher rent. For example, if you were to add a nice outdoor area and a community garden, many potential tenants would see that as a selling point.

Adding things like dishwashers or laundry machines in-unit will also make your property more desirable.

You’ll also want basic renovations, such as painting, floor replacement, and appliance replacement, when the appliances get worn down. Newer appliances are more efficient and will save you money in the long run.

Not all renovations will be beneficial. Don’t expect to upgrade your property and immediately be able to get new tenants who will pay higher rent prices. Make changes that you know tenants want.

3. Never Neglect Maintenance

Property maintenance is crucial. Routine maintenance will keep your property in good condition long-term and will reduce the number of emergency maintenance visits your tenants need.

You also need to respond to tenant maintenance requests as soon as possible. Emergency requests should take a matter of hours. Things that may seem like “small” maintenance problems can become catastrophic before you know it (for example, if a pipe leak turns into mold or water damage).

Establish a relationship with a local contractor, or consider doing your maintenance yourself if you’re handy.

4. Put Rental Income Toward Property Improvements

When you start making money from your property rental, you may be tempted to pocket all of it. After all, it’s your money, right?

Again, your property is your business, and you need to run it as such. That means that some of your income should go toward property maintenance and improvements.

When you spend all of that money on yourself, you’re hurting your business in the long run. Invest money in your business so you can improve it, have happier tenants who stick around, and make more money.

5. Set Aside All Security Deposits

When a tenant moves in, you’ll likely collect a security deposit. Security deposits aren’t necessary, but the majority of landlords request them.

The security deposit is money your new tenant gives you at the beginning of their lease term. That deposit will go back to them at the end of the tenancy as long as there’s no serious damage to the property.

Depending on where you live, you may have a legal obligation to set this money aside in a separate account. Even if that’s not the case, this is your best option. The last thing you want is for the tenant to move out when you don’t have their deposit to give them.

This can get you in serious legal trouble.

6. Consider Your Tenant Requirements

What types of tenants will you allow to live on your property?

You get to decide (within reason) who lives on your property. While discrimination is explicitly illegal, you can set income limits, run background checks, and request information about previous rentals.

Good landlords know that flexibility is often necessary here. For example, it would be unfortunate to miss out on a fantastic tenant who doesn’t have traditional income or a rental history because they’re a college student with a housing stipend who’s living alone for the first time.

Use your best judgment when you’re evaluating tenants. Have conversations and consider their unique situations and how they’d fit in with the rest of the community.

7. Pre-Screen All Tenants

Have you heard of pre-screening? Pre-screening is when you include tenant requirements in the listing for the rental unit. This will likely dissuade tenants who don’t qualify from contacting you and submitting applications.

This will save you time.

If a tenant who doesn’t quite qualify applies anyway, it’s likely because they know they have alternative qualifications (for example, plenty of money in the bank despite poor credit).

8. Establish a Pet Policy

Will you allow pets on your property?

Millions of Americans own pets, and it’s often in a landlord’s best interest to allow them, but this is a personal decision. You have to decide what you’re comfortable with.

Pets can cause damage (and thus, extra costs), but responsible pet owners make good tenants.

Consider charging a one-time pet fee that you can set aside in case of damage if your state allows you to do so.

9. Make Paying Rent as Easy As Possible

A long time ago, all rent payments were done via cash or check, either in-person or via mail. This is no longer the case.

While some small-time landlords prefer to accept money this way, it’s inconvenient for tenants and landlords alike. You run the risk of late payments, and your tenants may be inclined to seek housing elsewhere at the end of their leases.

The majority of people no longer use checks.

Instead, allow online payments. Using an online tenant portal makes things easier for everyone. You can even have your tenants set up automatic tenants if they choose to do so and set up rent reminders, so you lower your chances of late or missed payments.

10. Build a Rapport With Your Tenants

Too many landlords try to be completely hands-off with their tenants. While some tenants prefer that, most of them would like to at least be able to associate a face with the person who owns their home.

Try building relationships with tenants, even if that just means checking in during the holidays and responding quickly to requests and questions. You don’t have to be friends with your tenants (though many landlords have friendly relationships with tenants), but you want them to be comfortable with you.

This also makes them more likely to renew their leases.

11. Consider Working With a Property Management Company

If you have a full-time job or you’re trying to handle multiple properties at once, it may be in your best interest to work with a property management company.

Rental property management companies help landlords with things like marketing, tenant communication, the legal issues surrounding real estate investment, and more. They can make life easier for a new landlord.

Handling your own property management is possible, and it can save you some money, but having someone else show you the ropes, even temporarily, may be beneficial.

Being a First-Time Landlord Is Tough

Becoming a first-time landlord is more stressful than financial gurus on the internet make it look. You have a lot of work to do if you want to be successful and run a good property!

These tips will help you get started. Good luck on your journey.

For more helpful articles about real estate and more, visit the rest of the site.

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