Real estate is a world of complexities, systems, and personal taste. It’s easy to get tripped up by the large amount of information you need to learn to be successful. While there are a ton of great books on the topic, sometimes it’s hard to pick out what you need to read and learn right away when you first start out. In this guide, I’ll help you navigate all the quirks of being a landlord so that you can be managing your properties like a pro.
Lots of people dream of becoming a landlord. Here’s what they don’t tell you: they don’t talk about the late nights and weekends spent fixing toilets or other emergencies that pop up. They don’t tell you about the amount of work, patience, and determination it takes to own land. But all the trials and troubles were worth it for me, and I hope this guide helps you be successful at land-lording in your area too!
Creating a Lease Agreement:
This is the legal document that governs the relationship between you and your tenants. It should spell out who lives on the property, how long they can live there, how much rent they’ll pay, and what happens if they break any of the rules.
Keeping the Property Maintained:
When things go wrong with the property, it’s up to the landlord to fix them. This is why most states require landlords to deposit a security deposit from tenants before they move into the property. These deposits can be used to fix damages caused by tenants or to pay for repairs due to normal wear and tear.
Being Available to Tenants:
It’s important for landlords to be available in case their tenants have problems or questions about their lease agreement or apartment. Some landlords hire property managers so that they no longer need to interact with their tenants directly. A property manager will charge anywhere from 5% – to 10% of rent collected each month, depending on how many properties they manage and the services
Screening Potential Tenants:
You’ll need to screen potential tenants before you sign any lease agreement with them — that is before you agree to rent the property. The two main things you’ll want to do are verify their income and verify their identity. The best way to hire someone to manage your rentals is by finding someone who has experience managing rentals and screening potential tenants for potential problems. It’s not enough to just find someone with a lot of experience in the industry; you need someone who has a proven track record of effective tenant screening. This means you should expect that they’ll be capable of finding and excluding bad tenants who will likely cause damage to your rental property.
Following Laws and Regulations:
Landlords must abide by a variety of laws and regulations. A few examples include:
Housing discrimination laws, restrict the basis on which property owners can deny rental applications.
Laws regulate the termination of tenancy, including how much notice is required and when, why, and how evictions are carried out.
Laws regulate security deposits, such as how much can be collected and how it must be stored.
Building codes and zoning regulations govern property maintenance requirements and whether landlords can rent space for residential or commercial purposes.
Rental agreements can’t violate certain laws, such as prohibitions against discrimination or the collection of excessive security deposits, for example. So read up on the relevant laws in your state or consult with a real estate attorney to ensure your lease complies with all applicable laws.
Keeping Records and Financials in Order:
Landlords also need to keep meticulous records of income and expenses related to their rentals — as well as financial records relating to their personal finances — so they know if they’re making money or losing it. There are many apps that help you keep track of finances, but some landlords prefer the old-fashioned methods — keeping receipts in envelopes or in a binder,
Knowing When to Sell the Property:
If you’re in a market where home values aren’t appreciating quickly, this can also be a reason to sell. If you’re stuck with a 30-year mortgage on a property and it’s going up to $10-20k per year in value, you might feel like you’re throwing away money every month on your mortgage payment.
Selling is always an option. In fact, if you’ve owned the rental for many years, selling could result in very little capital gains taxes due to depreciation recapture and the step-up basis at death.
This is why knowing when to sell is so important. There are many factors that come into play when deciding if selling is right for you at this moment or not.
There you have it! We hope this guide helps you make more money with rental properties and manage them like a pro. If you take the time to apply the tips above, we think you’ll agree that it’s well worth the initial effort. It may seem daunting at first, but land-lording really comes down to managing several ongoing routines. If you stay on course, before long your local real estate agent might be calling you to find out if you have any more homes for sale. Landlords should be in it for the long term.