There are around 43 million renters in the US, not counting family members. A market that size encourages people to try their hand at owning rental properties for the first time.
Maybe you own a house that you don’t use or you saved up money and invest it in a property. Whatever route you take into the world of rental ownership, there is a lot that first-time landlords often learn the hard way.
Keep reading for 10 tips that will help make your landlord experience smoother and more profitable over the long-term.
Renting out property is a people-oriented business. Unfortunately, the people-oriented part often overshadows the business part.
Many people avoid conflict, even when it’s the right course of action. You must develop a comfort level with confrontation because some people won’t pay their rent or pay it late.
Rent is your revenue stream from a rental property. If you aren’t firm with people about paying rent on time, you damage your own revenue stream.
The bank typically won’t take excuses for late loan payments, so you shouldn’t accept excuses either. The one exception is when a tenant communicates with you about the situation.
It’s a very easy thing for someone to get caught up in renovating fever. You can find yourself springing for marble countertops and expensive fixtures.
Before you even start renovating, do an assessment of what you can realistically charge in rent in that neighborhood. If high-end renovations won’t add to that number, stick with more modest options.
Tenant screening mostly comes down to finances, such as late payments and credit score. You should run a credit check on any potential tenants.
If it’s not forbidden by local or state law, you should also consider running a background check. While a history of criminal activity shouldn’t automatically disqualify someone as a tenant, there are some things you must consider.
For example, how old is the criminal activity? If someone committed a minor crime 15 years ago with no criminal activity since, they’re probably a safe bet. If someone trails a laundry list of felonies behind them, they’re probably not a great bet.
While tenant screening is a legal and necessary part of owning rental property, you must do it the right way. The last thing you need is a complaint that you violated Fair Housing Act rules.
Think about all the effort that goes into finding a good tenant in the first place. You must advertise the property and give tours. Then, you run credit checks and review references.
Once you sign the lease, they pay on time. They only call when an actual problem crops up. No one complains about them.
A good tenant is a lot like a good mechanic. Once you find one, you only replace them if there’s no other choice.
Offer them a lease renewal well ahead of the current lease expiring. It encourages them to commit before they get serious about making other arrangements. Assuming you’re doing your part, most of them will renew without much hesitation.
It might seem obvious, but many first-time landlords rent out a place based on a verbal agreement. Verbal agreements might prove binding, but good luck proving the terms if the tenant turns into a disaster.
Written leases or rental agreements protect everyone involved by setting out the terms on paper. If there’s ever a conflict, either party can point to the relevant section in the agreement.
Renters, especially in the Millenial set, pay for almost everything online. In fact, only 48 percent of Millenials even use checks. Not offering an online payment option can actually scare off potential tenants.
Additionally, online payments typically prove safer and more reliable than checks. An online payment processor handles the digital security and transactions typically won’t process if there isn’t enough money.
A lot of rental properties languish on the market for longer than necessary because the images of the property don’t paint the right picture. You should never manipulate images to hide the current condition.
You should hire a professional photographer to take the pictures. A pro can frame and light the images for best effect.
Established a record-keeping system from day one. Knowing exactly where you’ll store signed leases and receipts means never searching for things when you need them.
Your accountant will thank you when taxes come due. You’ll thank yourself if you must ever evict someone.
While paper gets the job done if you only rent out a few properties, the volume of documents can get overwhelming if you invest in a small apartment building. Property management software can help you automate record keeping, accepting rent, and tracking repair requests.
It’s important that you understand that property management software can have a steep learning curve. Make a point to try out demo versions of the software ahead of time. Less powerful software that’s more intuitive can prove the better choice than software with lots of bells and whistles that is difficult to use.
For some, owning rental property is a sideline from a full-time career or other business ventures. If you’re busy but own property you’d like to use as a rental property, consider using a property management service.
A property management service take over responsibility for most business operations, such as:
In exchange, you give them a percentage of the rent.
A first-time landlord must juggle many new responsibilities and concerns. Keep your focus on activities that streamline the business side of renting properties, improve tenant quality, and protect all parties.
Sterling Place Properties provide property management services in the Charleston, SC area. For more information about our services, contact Sterling Place Properties today.