Owning a rental property can be an excellent long-term investment that provides long-term equity creation and current cash flow. While there are plenty of benefits that come with investing in real estate, becoming a landlord does come with new responsibilities and challenges. For those first-time landlords, there are various dos and dont’s to follow that can help you be a great first-time landlord and improve your long-term return on investment.
Do Execute a Quality Lease Agreement with Tenants
A lease agreement is one of the most important agreements you will sign as a landlord. A rental lease agreement will outline all of the lease terms including rent, when payment is due, and a landlord-tenant checklist that will outline maintenance responsibilities for both parties. It is essential that the rental agreement includes all necessary information in the lease or rental addendums, is enforceable, and complies with local rental laws. You can find basic rental deals online that offer a quality form you can work off of.
Do Screen Your Tenants
When you sign a lease with a new tenant for your rental property, you are making a big commitment and placing much trust in this individual. If you have a bad tenant that does not care for your property, does not pay rent on time, or causes issues for neighbors, it could create a lot of long and short-term problems. Due to this, you should always complete a tenant screening before allowing them to move in. A landlord-tenant screening service can help screen these tenants for you. The rental tenant screening will run a criminal and civil background check, verify their employment and check on past references. This should help give you comfort that you are leasing the rental unit to someone you can trust.
Do Treat it Like a Business
If you are going to purchase a real estate investment property, it is essential that you treat it like a small business. This should include being diligent about property selection, choosing tenants, providing an excellent experience to anyone living in the property, and ensuring you are keeping all of your expenses and receipts organized. You will also want to ensure that you speak with an attorney or accountant about the possible tax implications of the investment.
Do Your Research When Buying a Property
It is very important that you are diligent when you are going to make a real estate rental property investment. You will want to find a property that will have plenty of demand from renters. This should include looking for assets near public transportation, shopping and dining locations, and other areas that come with demand. By looking at current rental real estate listings in the area, you should get a sense of what a reasonable asking rent is. The potential income should then be compared to all expenses, including your mortgage, property taxes, insurance, maintenance estimations, and other costs, to assess whether it is a good investment for you.
Don’t Skip Out on Insurance
When you are going to invest in any type of real estate, you will always want to know that it is properly covered with insurance. It is important that you choose a rental plan that is designed for landlords, as opposed to getting just a standard homeowner’s insurance policy. A quality rental property insurance policy will provide you with coverage for your assets and will also offer liability insurance, which can offset some of the risks faced by property owners. In the lease addendums, it would also be wise to add a provision requiring the tenants to maintain their own renter’s insurance plan as well.
Don’t Overextend Yourself
Anyone that has invested in a rental property can find that there are times when it is a lot of work. While you may go months without hearing from a tenant, there is always a chance that you could be hit with a surprise maintenance request or will need to market the property again if the tenant chooses to move out. If the rental property is not located near your home or you do not have the time to manage the property yourself, hiring a manager can be a good idea. Property management companies can offer a variety of services that will help lease, manage, and care for your property. While it will come with an added expense, it could save a lot of time and stress. Plus, property management expenses are tax deductible!
Don’t Avoid Maintenance and Repairs
One of the largest expenses that you can experience as a property owner are maintenance and repairs. No matter what condition the property is in when you buy it, rental property maintenance will be needed along the way. While it can be a big cost, you should do your best to complete them on time. Completing maintenance and repairs when needed can help more significant repair needs from forming in the future. Further, you will be providing better service to your tenants. If you avoid repairs for too long, your tenant can start to restrict rental payments and you could be in violation of the lease.
Investing in a rental property can be a great long-term decision. While there are a lot of advantages that come with owning real estate, it can also come with a lot of work and responsibility. For a first-time landlord, there are various tips to follow that can help you run and manage your investment property.