What All First-Time Landlords Should Know

Becoming a landlord for the first time can be a daunting experience. It could be that you are an accidental landlord and want to be successful with your first “house for rent by owner.” Or, you may have purchased your first investment property to earn passive income. Whatever the case, being a landlord is an excellent way to build wealth if you are willing to do the hard work. 

Most first-time landlords start as private owners with one individual unit. However, being a successful landlord involves more than just finding a tenant and collecting monthly rent. You also have to consider your legal obligations, screen potential tenants, handle disputes, and quickly fill any vacancy that occurs. 

Unfortunately, many first-time landlords make critical mistakes when renting out their first units. This could be renting the property to a bad tenant, failing to keep up with maintenance requests, or making mistakes when evicting a delinquent tenant. To help you avoid those types of mistakes, here are five tips for making your first “rent by owner” property a success.

What is rent by owner?

Rent by owner is a common term used to describe a private individual who is a landlord who typically has only one or two units. When houses are advertised as “rent by private owner,” it means that the tenant will deal directly with the owner rather than a real estate agency or broker. 

There are advantages of marketing your rental property as a house for rent by owner. One major advantage is that many renters actively search for such rental units, and using this term can make your unit appear in the search results.

It can also help your listing stand out against the competition with other renters, as some tenants prefer having a closer relationship with the landlord over dealing with a “faceless” organization or agency. 

Five tips for becoming a successful first-time landlord 

Simply being a rent by owner landlord is not always enough to set you apart. A private owner who rents a property may also want to provide services that other private landlords fail to deliver. This may help to increase the chances of success.

For example, you can offer online payment options, have repair contractors on call 24/7, and provide landscaping services—all of which can set you apart from the competition.

In addition to offering extra services, there are a few other ways you can make renting out your first unit a success. These include: 

1. Treat your landlord role as a rental business

It’s important to remember that as a private owner who rents out properties, you are running a business. You have legal obligations to meet, and you must maintain business relationships with your tenants. 

For example, it’s OK to work out a payment plan with a struggling tenant, but you should be sure to establish rules and follow through on late payments and fees. At some point, you may even have to evict someone you like if the tenant has fallen behind on rent payments. You should also always be prepared to consult with lawyers, accountants, and insurance companies so you know what to do when things get complicated. 

Hiring a property manager may also be out of the question if you only manage one unit. In order to treat being a landlord as a rental business, you will have to get up to speed on learning how to manage a property successfully—and that includes finding the right tenants for your property.

To find quality tenants, make sure to:

  • Have a thorough tenant screening process
  • Do background checks on prospective tenants
  • Contact previous landlords to get references
  • Ensure the lease terms have clauses about pets, payment methods, cleaning, maintenance, and late fees
  • Check employment records

2. Manage the rental property properly

Being a successful landlord means more than simply ensuring your tenant pays rent on time—you also have to manage the property. This is an intrinsic part of renting out your own properties.

In addition to property management, it is vital to ensure that you always act in line with the law with respect to your tenant’s rights. Landlord-tenant laws are extremely important, and, as such, you need to be aware of your legal obligations. These include holding the security deposit, keeping the property inhabitable, and respecting the “Covenant of Quiet Enjoyment.” It is also vital to check federal and state laws regarding rental properties. 

Acting in accordance with the law isn’t the only requirement, though. You also need to do what you can to keep the tenants happy. This includes:

  • Keeping the rental property well maintained
  • Being quick to resolve disputes
  • Respecting your tenant’s privacy
  • Offering a pet-friendly rental unit, if it makes sense for your property
landlord guide ad

3. Decide on a method to collect rent

Offering your tenant uses a suitable online method to pay their rent will help keep your cash flow healthy. It is best to avoid accepting rent checks or cash payments because they can cause a number of problems.

For example, checks can go missing or be held up in the mail, and they also take a long time to process. Paying rent by cash is also problematic, as you don’t have a reliable paper trail. 

Related: Is it time to ditch your rent checks?

That’s why most successful landlords use a dedicated rent payment app that is easy to navigate for their tenants. These electronic payment methods are secure and ensure that you always have proof of payment. Plus, many rent collection apps have landlord-friendly features, like the option to split rent payments between roommates, make flexible rent payments, or process rental applications. 

But should you use digital wallets like PayPal, Zelle, or Venmo to collect rent? While these digital payment methods are acceptable for making online payments, they are not great for landlords. For example, you can’t block partial payments, which could hamper attempts to evict a non-paying tenant. 

4. Keep the rental property well-maintained

It’s extremely important to keep your property maintained, but maintaining a rental property is more complicated than keeping up with your own home. For starters, the safety standards in a rental property are typically more stringent. For example, there may be state regulations on smoke and carbon monoxide detectors. 

You also must ensure that the tenant has access to heating, hot water, and garbage collection. You may also have to ensure that there is no asbestos or lead-based paint in the building, which are health and safety hazards that must be dealt with. 

While you may put up with leaky faucets at home, your tenant may not—and other minor issues may cause unhappy tenants, too. As a successful landlord, you must always be willing to keep up with the repairs—no matter how minor—to keep tenants happy.

To ensure your tenant’s safety, you should also perform routine checkups of the premises to ensure everything is in order. It is also vital to have a good maintenance schedule to prevent expensive repairs. 

Some tips to maximize your rental income include:

  • Consider allowing pets and require tenants to pay a pet deposit.
  • Carry out regular market research and calculate market rent accordingly.
  • Reduce vacancy periods by building an excellent reputation.
  • Consider offering short-term rentals.
  • Always screen tenants and carry out credit checks

5. Get landlord’s insurance and require renters insurance

If you have a “home for rent by private owner,” you must also have landlord insurance. This protects you from hefty building repair bills and legal fees if damages occur to the property. This type of insurance coverage also covers the cost of temporary housing if your tenant can’t live in the unit while repairs are ongoing.  

It is also a good idea to require your tenants to obtain renters insurance. You should have a clause in the rental agreement to ensure that tenants take out insurance. This protects a tenant’s property in the event of a fire, flood, or break-in. It also saves you from lawsuits if someone injures themselves in the rental—even if it was the tenant’s fault.

Final thoughts

Regardless of whether your rental property is being used for extra income or as your only source of income, it’s vital to manage your rental business correctly. 

Before your first tenant moves in, it’s necessary to sign the lease agreement, collect the first month’s rent and security deposit, and conduct a rental inspection with the new tenant. 

This way, you can run a successful rental property business, even if you only have one unit. 

2021-12-07 23:10:02

Source link

Recommended Posts