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A rental property can give you passive recurring income and a stable future, or it can be the source of untold misery especially to a new landlord.
Many first time owners, end up having nightmarish ordeals with their investments for many reasons. For instance, they may not know how to attract or screen quality renters, how to craft self-serving rental agreements, or even how to keep the occupants satisfied and happy. As a result, such landlords end up with problematic tenants who do not pay rent promptly, are always causing trouble, or damaging the property.
If you are a first-time landlord wishing to succeed, here are a few tips to help you do that.
Provide a Quality Home
The condition of your property influences the type of tenants you attract. If your property looks outdated, dilapidated and broken, then high-quality renters will shun away from it.
Take your time to keep your units clean, durable, and appealing at all times. You can do that by performing repairs each time a tenant moves out, upgrading it using high quality materials and carrying out routine property inspections and maintenance.
You also want to make sure your property is a safe place to live in. It should comply with all the relevant housing codes, while the utilities should be in perfect working conditions. Remember this is going to be someone’s home. If you’re looking to attract high quality tenants, you need a high quality property.
Your Rental Property Is Your Business
A defining distinction between those who run a successful real estate investment and those who fail is in how they manage their rental units. Experienced landlords view their property as an investment, from which they hope to earn impressive returns. These owners handle the property like they would any other business. Only that in this instance, the renters are the customers.
Your rental property is your business. Be professional, organized and objective in all matters relating to your investment.
Familiarize Yourself With The Fair Housing Laws
A common challenge for most first-time landlords is learning the state and federal laws they need to abide by. Unless you derive pleasure out of standing in front of a judge or paying hefty fines, you need to be conversant with the Fair Housing legislations in your state.
Knowledge on matters such as the “Protected Class, will keep you from discriminating against any renter by their color, race, religion, age, sex, handicap, national origin, or familial status.
As a first-time landlord it’s essential that you educate yourself about Landlord-Tenant laws.
Don’t Jump At The First Opportunity To Fill Your Rental
When a tenant moves out of the property, the first instinct for most landlords is to find another tenant as soon as possible. In their haste, many landlords end up renting their property to unqualified tenants. Avoid falling into such a trap by being patient enough to wait until the “right” candidate comes along.
Understandably, you will be concerned about the loss of rental income. However, what is the use in hurrying to fill the units only to end up spending massive amounts of time and money on endless conflicts and repairs? Be patient, apply effective advertising strategies, and be diligent in your tenant screening.
Define Your Perfect Tenants
It is not just sufficient for you to look for renters. You should have a clear image of the type of occupants you want in your property. For instance, one with a stable income, a particular family size, as well as desirable credit ratings and tenancy history.
Most first-time landlords undermine the importance of such a step only to end up with tenants that cause them issues. When defining your ideal tenant be careful not to discriminate against any candidate. Being knowledgeable of the Fair Housing rules will prove useful here.
Price your units correctly
A primary reason why many first-time landlords struggle is their inability to charge the correct rental amount. Even though the right price of rent is relative and dependent on many factors, it is critical that you do not overprice or under price.
Overpricing will seem like a rip off to potential renters, while charging too little will be unprofitable. Fortunately, it is not impossible to determine the right range. You need to research the market to ascertain what amount similar properties are renting for.
When setting the price, also take into consideration how it will affect your financials such as fixed and variable expenses. A quick search on websites like Zillow.com, Trulia.com, and Rent.com can help you determine the going rental rate in your area.
Thoroughly Screen Prospects
One of the most common struggles for first-time landlords is their inability to vet or research the tenant before handing over the property. If you want to have a rewarding experience, never allow anyone to occupy your investment before they pass through a thorough tenant screening process.
The vetting should involve the prospects filling out a formal rental application as well as being put through credit and background checks. You should also talk with the applicant’s employer, previous landlord, and neighbors.
Proper due diligence can save you from many painful tenant headaches. If during the process you identify inconsistencies or concerns, be firm and disqualify the candidate.
Have a Legally Binding Rental Agreement
You have every right to dictate what goes in your property, provided you adhere to the state’s laws. You do this by developing a legally binding rental agreement. This legal document defines the roles, responsibilities, and liabilities of both you and your tenants. The tenant must then sign the document as a confirmation that he or she agrees to abide by those terms.
Make sure the contract sufficiently addresses elements like the rental amount, rental payment date, security deposit, pets, property usage, maintenance, inspections, tenant evictions, termination and much more. The rental agreement will you to communicate to the residents what your expectations are. But most importantly, the rental contract becomes a reliable point of reference in case of disagreements.
Set Practical Rent Collection Procedures
There is no doubt that your success as a landlord largely depends on your ability to get the tenants to pay the rent on time. You need to come up with safe and convenient methods for them to remit the rent each time it is due.
For instance, instead of encouraging cash payments you should adopt automated payment solutions. Furthermore, come up with novel ways to motivate the tenants to pay their rent on time.
Evidently running a successful rental property business involves a lot of work. Not only do you have to learn the legalities of dealing with tenants, you also have to learn how to effectively attract high quality rents. However, if you follow the tips you’ve just learnt and continue to educate yourself, you can have a very profitable investment even if you are a first-time landlord.