Being a landlord can be very exciting; it’s not just the first step in the real estate business but an initial effort for financial independence. You can build your real estate business based on this foundation when you buy your first property. It will bring many more opportunities for you, and you can grow it as a lucrative business for your generations.
However, if you have no experience in the real estate market, it can be a problem. Without sufficient knowledge and experience, you can make wrong decisions, which can be dangerous for a landlord. If you are a new landlord, we have collected a list of five things you must do to avoid problems in this market.
Understand the business
It is very important to understand that if you use your property as a rental unit, it is not one–time investment. A rental unit can generate monthly passive income for you, but you need to treat it as a business. If you are not prepared, it might be very challenging for you as a landlord. If you have some other business or job, it’s better to hire a property manager who can manage things for you.
If you want to manage it yourself, you need to understand that it will take time and attention. The first thing is to get information about the local laws related to landlords and tenants. You should also be aware of common maintenance problems and their solutions. It’s better to get experts' opinions about tax regulations and all the related laws. The services of lawyers are also vital to preparing a proper lease agreement. Ask the lawyer to add clauses to protect your property from damage or any bad attitude of the tenant.
Protection of your property should be your priority. It's not about your financial security but the residential safety of your tenants too. For these reasons, you must get a proper insurance policy, which is meant particularly for landlords. A standard insurance policy may not provide coverage for your investment properties. Insurance policies for rental properties cover almost all the incidents associated with rental units.
Intentional structural damage by the tenant and the inability to rent a habitable space can be the reasons to claim insurance. If you have a standard homeowner policy, you will not get coverage for such incidents. So, having an insurance policy is not enough; it's important to have the right insurance policy.
Write a proper screening process for tenants
Tenant screening is very important to avoid many problems in the future. The screening process for the tenants should be well structured and written. You can get information about the tenants with a bad credit history, unpaid rent, and property damage. Take these red flags very seriously and avoid dealing with such tenants. There are methods to deal with problematic tenants, but that can be very time-consuming and affect your monthly cash flow. So, it’s better to do proper screening before closing the deal with tenants.
However, you must understand that there are limitations to the screening too. It would help if you did everything according to the local housing laws. If you write down the screening process, you can use it as proof that you are screening tenants according to the laws and regulations. You can easily check the relevant boxes if you have a written policy. You can also avoid allegations like unfair screening and discrimination. If you have a screening criterion available in writing, you can provide that as proof if a prospective tenant accuses you of discrimination. So, create a screening policy and stick to that.
Have a vendor list ready
If you are a new landlord, you may not understand many things initially. Some things you learn with experience, and to avoid any problems, you may need to hire an experienced contractor to help you. Sometimes you don't have time for the rental property issues, and a property manager can assist you. Moreover, maintenance tasks are also challenging and require a skilled contractor.
No matter the reason, you may need a contractor or property manager. If you need it in an emergency, you may not be able to find a skilled person. You can avoid emergencies if you have a vendor list ready with you. However, every entry in your list should be thoughtful. It is like hiring an employee. Have an interview with the contractor and get all the information about this expertise. Keep in mind that this vendor may be representing you in the future, so the impression should be positive.
You can find referrals by using your professional network. Online search and reading reviews can also help to find a good contractor. Moreover, you can test the contractor with a small job and see how he completes it. You can list these tested vendors and contact them according to their expertise whenever you need them.
Have a property management software
If you manage your property, you will need appropriate tools to help you. You need to share your burden and adopt some time-efficient ways. Doing your day-to-day activities properly and timely is very important. You can use property management software for this purpose.
Key responsibilities of the landlord include preparing the rental unit and its marketing. It also includes a screening of tenants and dealing with applications. The landlord also has to communicate with tenants regularly, and maintenance activities are also part of the landlord's responsibility. Paying taxes and keeping all the monthly payment records is also a vital responsibility of a landlord. These are just some features; there can be many more too.
If you have good property management software, you can save time. The software can do all the calculations with your provided data. You can get notifications about upcoming tax deadlines and maintenance reminders. If you have all the information about rental units in one place, things will be easier to manage anyway.
Being a landlord will not be a tough job if you take care of these things.