Jan. 17, 2019
If you’re thinking of investing in real estate to turn it into a rental property, there are a few things you should know before diving in. Being a landlord is a lot more than just sitting around collecting rent and making a huge profit. For example, you’ll have to review credit reports of prospective tenants, process rental applications, draft rental agreements, maintain the rental property, and follow up with tenants should any issue arise – just to name a few responsibilities.
Here are five tips that may make your life as a landlord a little easier:
Screen Prospective Tenants Thoroughly
Properly screening your prospective tenants can be a huge boon for your rental business because it may help lower the risk of expensive evictions and other problems.
Ideally, you should do a credit check for landlords so that you can gain a full understanding of your possible tenant’s financial background.
With a credit check, you can glean information about a potential renter’s financial health such as:
Applicants’ credit history
A prospective tenant’s risk factors (a large, unpaid debt, for example)
National and statewide criminal records
If you end up allowing a tenant to rent from you, keep all their information in one place with apps like Landlord Studio.
If you choose to purchase a home that’s in foreclosure, make sure you know what you’re signing up for with this sometimes complex investment option. A smart buyer will consider a variety of factors before signing a deal.
Elements to consider when you’re buying foreclosed property:
Surrounding area: Is the neighborhood around the area well-maintained? Are other homes also in foreclosure in the area?
Home maintenance: Has the home been properly maintained? Is the property up to building codes? Is the home in an overall good state?
Dealing with current residents: Will you be leasing to the current residents or will you evict them?
While there are positives to investing in property under foreclosure, there are also considerable risks you may want to take into account.
Consider Older Tenants
Older adults are some of the best tenants you could possibly have. They are usually more responsible and tend to have more savings than the younger crowd. With younger tenants, you might have issues with partying, drinking, and property damage more than you would with older residents. However, make sure you’re following anti-discrimination laws when you are screening potential tenants.
Move-In and Move-Out inspections
As a landlord, you should do a walk-through with your new tenants and make sure to take photographs. This will help ensure your tenants don’t leave the property damaged and then try to claim later that the damage was preexisting.
In addition, it’s a good idea to have your possible tenants fill out a sheet making note of any damage to return to you so you can sign it.
Create a Strong Rental Agreement
A good rental agreement protects both the landlord and the tenant. In the rental agreement, you should have all the conditions and terms of the lease outlined in clear, concise language. Here are a few things you should include on your rental agreement:
Names of everyone living on the property
Terms of tenancy (for example, six months or year lease etc.)
Rent and deposit
How will rent be paid? By what date?
Will you let your tenants use a website like Cozy or Venmo to send rent?
When is the deposit due? How does the tenant get it back at the end of the lease?
As a landlord, there are a lot of different aspects of renting that you will be in charge of including collecting rent, establishing a habitable environment for tenants, and taking care of required maintenance as outlined in the rental agreement. However, by taking certain precautions like setting up a robust screening process, you can better protect yourself and be on your way to creating a real profit.