Investing in properties you can rent out and make additional income from sounds rather easy in theory. While there’s no arguing that real estate investing is a very lucrative business, being a rental property owner isn’t as simple as showing up every month to collect the rent.
In order to succeed as a property investor, there are some key factors to keep in mind as things can get rather challenging. Here, five tips for first-time landlords that will help set you up for success in the world of real estate investing.
Know the rental laws in your area
First things first, before you’re able to put up a “for rent” sign for your apartment, you want to make sure that you understand your rights and the rights of your future tenants. For starters, first-time landlords should read the Fair Housing Act and make sure they understand the process of eviction before they accept any applications from potential renters.
Rental laws vary from city to city, so you want to make sure you get familiar with laws that apply to your area. This should be your top priority as it will help you protect yourself while also avoiding any fines and liability – issues that could emerge if you don’t adhere to certain housing laws.
Select the right property
Finding the right property is a vital step in the process, and it involves some serious market research. This isn’t an easy task, especially if you’re new to the real estate business and don’t know what to look for in a property.
This is why it pays for first-time landlords to find a reputable property investment company in the area that can help them select the best property for their needs while avoiding some common rookie mistakes along the way. Working with the experts in the field will ensure that you get valuable pieces of advice that will save you time and money in the long run and help you start off in the black instead of red.
Advertise your rental property online
Once you’ve selected a property you plan on renting out, it’s time to tackle the marketing part of the process. Most renters go online when apartment hunting, so it pays to post your rental on one of the apartment listing websites. Take some time to come up with an eye-catching and impressive rental listing description to ensure you attract more potential tenants to your page.
Add as many photos as you can, provide enough information for your listing, and make sure to include basic details such as the location and rent price. Don’t completely forego the traditional way of advertising either. Have your friends and family spread the word and print out flyers you can use to market your rental unit and increase your chances of finding the best tenants for your rental property.
Tenant screening is a must
Now that your rental listing is online, you can anticipate rental applications. Whether you’re a seasoned property investor or just starting out in the real estate business, your main goal should be to find trustworthy tenants whom you can trust enough to hand them the keys to your property. For that to happen, you will have to perform extensive tenant screening to ensure that the individuals you’re working with are people you can get along with.
That means conducting a criminal background check, running a credit check, as well as getting references from tenants’ previous landlords. You also want to make sure they can pay the rent on time and whether they agree with all the lease terms. Always perform the screening, no matter how reliable the person may seem, what car they drive, or how much they make as this can save you a lot of hassle in the long run.
Make sure you have a written lease agreement
Aside from making sure you rent to the right tenants, you also want to make sure that they sign a written lease agreement. As stated in the previous tip, as trustworthy your prospective renters may seem, you need to remember that this is your business, and as such, you want to minimize and eliminate any risks when it comes to rental property use.
Trusting the other party to comply with rules that aren’t written or documented in any way simply isn’t the right approach for a first-time landlord – or any landlord for that matter. Even if you’re renting to a friend or an acquaintance, always have them sign a written lease agreement. That way, they’re obliged to abide by the rules and ensure their actions are in line with the conditions stated in the contract.
Property investment is a profitable business, no doubt about it. However, make no mistake – being a landlord is a full-time responsibility, contrary to popular belief of it being a source of passive income. There’s a lot of things to consider, and the to-do list is quite lengthy. But if you manage to lay the groundwork, you can hope to reap the rewards later on.