Have you decided to start a lucrative rental income with a multi-family property? Or perhaps, you’re looking to rent out space in your house to open up a passive income stream? Either way, the rental industry is ripe with opportunities for savvy and pragmatic landlords.
However, most people focus on the benefits, primarily the opportunity to create a sizable and secure monthly income. People often overlook the responsibilities, market insight, commitment and challenges of being a landlord.
If you’ve just started your journey, be prepared to make mistakes and learn from your errors. Mistakes are unavoidable, but our industry insight and tips will help you make a great start.
Start with a Solid Plan
All business ideas require extensive planning, and it’s crucial to create a solid plan backed by market research before you venture into the real estate industry. What are your expectations of becoming a landlord? Is it a side-gig or your primary source of income? Do you have the time and resources to manage all the rental properties, or will you be engaging a property manager?
Becoming a landlord accompanies an influx of responsibilities and challenges. It’s crucial to have standardized processes and staff members to efficiently deal with all responsibilities. It’s crucial to think it through and make a plan that supports your expectations and desired income goals.
Extensive Market Research
Renting out a multi-family property or a single-family home may seem like an easy route to generating a stable income stream. That’s true, but there are many complexities and legalities involved in renting out a property. Landlords often find themselves in unpleasantly stressful and unpredictable situations.
Before you rent out your property, it’s crucial to perform market research and learn about the local rental industry. Examine all your local competitors, and research competitive properties for rental rates, amenities and facilities, and other features. You can benefit from this research by offering competitive pricing, and facilities that set you apart from your competitors.
Market research is instrumental while setting a price tag on the property. The rental price must justify the amenities and facilities, it shouldn’t too low or unreasonably high. Many landlords who lack market insight tend to market excessively low rents, which is just as ineffective as higher pricing. The price must be aligned with market trends and comparative rentals.
Learn about the Legalities & Laws
It’s crucial to learn about the federal and state laws involved in the rental agreement. As a landlord, you have rights and legal responsibilities towards your tenants, and both parties are required to ensure legal compliance. As a landlord, you will find yourself wearing many hats, of which lawyer is a crucial one.
As a landlord, you must understand the legal requirements and clauses that apply to your tenant relationships. You don’t have to memorize every single clause, but it would help to understand legislation's to identify remedies in an unpleasant legal conundrum. Legal understanding will help you gain control in the relationship, and make decisions that do not invite legal trouble.
Business Management Practices
Many landlords make the mistake of treating their rental income casually, which always leads to complications and confusions. It’s vital to treat your rental property as a business by diligently recording your income and expenses. Whether you’re renting out a room, a basement or multiple properties, it’s important to apply the concepts of business management to enhance profitability.
You must keep track of your earnings and expenses, and record your taxes diligently. You can also explore avenues to increase your rental income by providing more amenities, and repurposing free space. For instance, many landlords rent out vacant parking spaces to food vendors and businesses. Many landlords charge an additional amount to allow tenants to keep pets in the property.
Robust Tenant Screening & Selection
As a landlord, you need tenants to generate an income. But that doesn’t mean you should rush into keep the first tenant who makes an offer. It’s crucial to run extensive background checks and screening before renting out your property to an individual. Tenant screening is a crucial practice that will help you identify the police records, reputation and potential risks associated with an individual.
Credit checks are another crucial and common practice, and it will provide a better understanding of how financially responsible the potential tenant is. Credit checks will also introduce you to the debt handling abilities and financial savviness to decide whether the individual will give you any trouble paying rent on time.
An interview is also vital to spend time with potential tenants and ask questions about their job, lifestyle and requirements. It’s crucial to get acquainted with potential tenants and acquire information so you can make a well-informed decision.
A Pet Policy
Do you have a pet policy for your rental property or units? Having a pet policy is crucial, because pets are unpredictable and they are a major concern for landlords. You see, pets can cause property damages and structural defects throughout the indoor and outdoor space. As a landlord, you need to consider a pet policy to reduce damage, or use it as an opportunity to increase your income.
With a pet policy, you can demand a pet deposit from your tenant as protection against any unexpected damages to your property. You can also charge a monthly rent for the pet, thereby adding more cash to your income. Interestingly, a pet-friendly property will also increase your pool of potential tenants for it’s hard to keep a pet across most rental establishments.
These are just a few tips that offer an overview of the rental market, and urge you to equip yourself with resources and information. Becoming a landlord is tough and challenging, and you will find yourself learning on the job. If you were planning to sit back and enjoy a lucrative rental income, we’re glad to burst your bubble as the job demands commitment and effort. Be sure to start with a solid plan!