During the busy rental season you may find that you’re being pulled in multiple directions. If you want to stay on top of things, you will need to have your process and policies set before you jump in the middle of it. This includes how you will handle a variety of fees. Before things get too crazy, take a few minutes to consider the following about rental fees and deposits:
Application Fees – Application fees are legal in many states and will help to ease the burden of the tenant screening process from the landlord. Local laws will dictate if they are allowed and if there are any restrictions, but this article gives you an overview of what you should expect with application fees and what they may be used for.
Non-Refundable Fees – There are certain fees that you may charge as a landlord that you will not be required to return when the tenant moves out.
Pet Fees – Many renters will have a pet that they wish to bring with them. It’s possible to accept tenants with pets and keep your property safe as well. Make sure to know what you should be charging for pet fees.
Pet Deposits vs Pet Rent – A popular trend is to charge a tenant a separate rent for the pet as well. Make sure you know the differences between a pet deposit and pet rent so that you may explain that to them.
Late Rent Fees – Setting late fees will help encourage your tenant to pay on time. If there is no penalty for paying after the due date, there is no guarantee you’ll get you rent payment on time so that you, in turn, may pay bills associated with the rental.
Fees Vs Deposits – You will want to make sure that your wording is correct when you approach the subject of monies owed in your lease. Fees and deposits will differ and should not be used interchangeably. Make sure that you specify what is potentially refundable and what is not.
Security Deposits – Security deposits are an important part of keeping your rental investment safe. If a tenant damages the property, a security deposit will be what helps keep you from taking on the full burden of cost that it may take to repair it before a new tenant may move in.
What Can You Deduct? – Knowing what you can and cannot deduct from a security deposit is imperative to staying on the right side of the law when it comes to returning it.
Is it Normal Wear and Tear? – When it comes time to return the security deposit, you will need to know the difference between normal wear and tear and actual damage done. If you don’t, you may deduct something from the deposit that you shouldn’t.
When it comes to marketing your rental there will not be a one-size-fits-all approach. Different markets will look for different highlighted amenities, and your techniques and marketing strategies will need to be adjusted for that. Take a look below at a few articles and tips that LandlordStation has gathered to help you through that process.
Make Your Rental More Valuable – If you’re still in the research phase of looking for a rental property to buy, you’ll want to make sure that you keep its marketability in mind. Little things can make a big difference.
Compete Against Corporate Landlords – When your competition has the ability to hire a team of marketers and professional stagers to present their properties to potential applicants, it can feel a bit overwhelming. As a private landlord, there are certain things you can offer that your corporate counterparts might not be able to.
Marketing Without Social Media – Each market will be a little different, and you will want to carefully gauge the audience that you’re attempting to reach as potential tenants for your property. Make sure that you are aware of all of your options and don’t limit yourself.
Marketing With Social Media – Just as you shouldn’t overlook traditional marketing, you certainly shouldn’t overlook using social media to your advantage. If you do it properly, it can help you bring in new applicants.
Get Creative – When it comes to marketing your rental, you’ll want to make sure that you don’t fall into a rut that could eventually cost you renters. Get creative with your marketing plan and reach as many people as you can.
Make it Stand Out – There is something that drew you to the rental property when you bought it. When it comes time to market it to potential renters, you will want to make sure that they see what you see in the property.
Online Tools – Many potential tenants will look for their next rental online. One of the best ways to stand out against your competition is to provide them with a detailed view of the rental property. Online tools help you set up virtual tours, online floor plans, etc etc… Take advantage of every marketing tool so that you can to find your best tenant.
Determining the Fair Market Value – One of the many things that potential applicants will look for in your rental is how much you are charging for rent and how that matches up to other rentals in the area. Make sure that you understand how to determine the fair market value of your property and price it accordingly.
Streamline – Learning to streamline your process will help to free up some of your time as a landlord and property manager. Handling the process online can be a very helpful step in streamlining your rental process.
Minimizing Turnover Rates – Finding the best way to market your rental will help you find the best tenant. Once you do find that fantastic tenant, you’ll want to make sure that you keep them as long as they’re willing to stay.
Rent is a vital part of your business. If the tenant is late with it or does not pay, then it can put you in a real bind when it comes to paying the mortgage on the property or paying for repairs that are needed. You should be aware of a few details when it comes to setting, collecting, and raising rent:
Consider the Rent to Mortgage Ratio – When you first purchase your rental property you will need to have an idea how much you are planning to charge for rent. This will help you set your expectations.
Understand Rent Control – While not every area will have rent controlled neighborhoods or buildings, if you live in a city that does, you’ll want to have a full understanding of what those laws cover and how they affect you as the landlord.
Earning a Higher Rent Rate – As a landlord and property manager you will always be looking for ways to make your rental more profitable. Something as simple as better landscaping can help to bring in higher quality tenants as well as allow you to ask a higher rent price for the property.
Online Rent – Choosing to accept rent online can help make it easier for your tenant to pay you. They can set up automatic withdrawals to make sure that you are paid in a timely manner every month.
When to Raise Rent – You may have a policy in place that says if you will raise the rent with each new lease or you may make that decision as the need comes in. Choosing when to raise the rent, how much, and if you should at all may affect your relationship with your tenant, so make sure that you consider your options.
Tenant’s Rights in a Rent Increase – A tenant has certain rights when it comes to a rent increase, and those rights may depend on where the rental is located and what local laws govern the area.
Negotiating a Rent Increase – If you alert your tenant of a rent increase with their new lease, they may attempt to negotiate a lower rent from you. You will need to know some of those negotiation tactics to make sure that you are ready and so that you can make an informed decision.
Section 8 Rent Increase – When you accept Section 8 tenants into your rental, there may be a few things you’ll need to consider when it’s time to raise the rent at the start of a new lease.
Rent Responsibility if a Tenant Passes Away – There may be a time when a tenant passes away before the end of their lease. If this happens, you will want to approach the situation with care.
Signs a Tenant Will Skip Out on Rent – No landlord wants their tenant to skip out on their rent, but there are a few warning signs that you can watch for to prepare.
We live in a fast paced world, and time lost will mean money lost. If you don’t keep up with potential tenant’s expectations, they may choose a different rental over yours. One way to make sure that you are on top of things is to take advantage of online options. LandlordStation has gathered five great ways that you can take your property management online and help to speed up your process, saving yourself time and money.
Search for your rental and market it online. You can search for your next real estate investment online to help save time and find the best deal. Then you can turn around and use those same great tools to market your rental when it’s ready.
Screen your tenants online. Online applications, tenant screening, and research can all be handled from your computer. This allows you to handle things on your schedule, and when you have multiple applicants sending in their qualifications, you’ll want to make sure your process is as streamlined as possible.
Send, sign, and store documents online. It can be difficult to match schedules between your tenants and your own, but choosing to use online tools for sending documents and electronic signatures will allow you both to handle your business at hand without having the find time that you can physically meet.
Collect rent online. Waiting for a check in the mail can be tedious, but when you choose to accept rent online it may allow your tenant to set up automatic withdrawals so that you don’t have to guess if you’re receiving your payment on time each month.
Handle accounting online. Apps are a landlord and property manager’s best friend. Accounting applications on your computer and tablet can allow you to access your financial information and keep things together so that when tax season comes around that you’re ready.
An eviction will cost you in time, money, and stress. When you accept a tenant into the rental you are trusting them with your property. The key is to make sure that they deserve that trust. While you can’t see into the future, you can make an educated decision on which applicant is the best fit by running a thorough tenant screening that will give you an overview of their credit and payment histories.
Things to Know Before Running a Tenant Screening Report
What You Should Disclose to the Applicant – You should be open and honest about your policies moving into the application process. Be clear with your applicant what you expect so that you do not waste your own time or theirs.
What Information Must be Kept Private [Part One I Part Two] – Local and federal laws may dictate what you can share when it comes to a tenant screening and whom you may share it with, but there are also some common sense practices that should be taken into consideration as well.
Pre-Screening Questions – The screening process is your first line of defence against tenants that could cost you money down the way, but you can save time by going through a short pre-screening process that will narrow down your applicant pool to the ones that are truly interested
Tips on Tenant Screening
10 Points to Consider – When you go through the tenant screening process, you will want to make sure that you are looking at all of the information that you need. Don’t leave a valuable piece of information out of your process.
Screen Smarter – You will want to approach your screening process with a gameplan that stretches from your marketing techniques (and the applicants those will bring in) to the lease that you will sign with the tenant that you choose.
Don’t Miss Something Important – Screening your applicants is important, but you’ll want to make sure that the information that they’re giving you to run that screening is accurate.
How to Read a Credit Report – Credit reports are an important part of a tenant screening, but there is often a lot of information in one. You will want to know what each section means and how to interpret the information.
Understanding Negative Tradelines – You will run a credit report to make sure that you are aware of any marks against your applicant’s credit history, but to accurately assess that you will need to understand what a negative tradeline is.
Dig Deeper into the Report – There are pieces of a person’s credit history that you will want to dig deeper into if you’re on the fence about accepting them as your tenant.
How to Screen an Applicant Without a Credit History – You may receive an applicant that does not have a credit history for whatever reason. This does not automatically make them a poor choice, and there are still ways to screen them to make sure you are making an educated decision.
Investing in property for rent is a choice that more and more people are starting to make.
The fact that you are here means that you probably understand that buying property to rent makes sense as a long-term investment and may provide you with greater returns than traditional methods, thanks to the current state of the U.S. economy.
When the financial outlook for many millennials is bleak, this could be a real glimmer of hope.
However, nobody said that investing in rental property was an easy option!
The decision to make such a huge purchase is a major one, and it is not surprising that it often comes with a big side serving of stress.
The process is confusing, time consuming, and costly, with individuals often wondering where to even start.
The good news is that it doesn’t need to be this way.
Purchasing a rental property can be low stress if you follow our 5-step, no-nonsense guide.
We will lead you in the right direction to becoming a landlord, without ending up wasting your precious time and money.
Before we jump in, one thing to be clear about is that financing a rental property is different from financing a home property.
The process is similar in parts, but there are various aspects that you must be aware of.
We will cover them all in the following 5 stress-busting points.
1. Become A Rental Property Investment Master
The best way to avoid confusion, frustration and anxiety is to learn all that you can about the process involved in purchasing rental property for investment.
There are so many valuable tools readily available, including books, seminars, and courses.
So soak up as much of these as you can to be sure that you release any anxiety that may arise around being kept in the dark.
The most useful areas where you should consider widening your knowledge include:
how to choose the right location
how to assess the value of properties
the difference between types of property for rental investments (eg home units, houses, land)
current market conditions and anticipated fluctuations
long-term strategies for rental property investment
In addition to this list, it is wise to investigate the demographics of the area that you are looking to invest in.
For example, if there are lots of students compared to families, that would impact the choice you make.
When you finally find a potential investment property, your ‘training’ shouldn’t end.
Be sure to check the condition of the house or unit, taking the time to ask contractors for their opinion.
Ideally, you should gather three written estimates for work to be completed.
Knowing how much money you would you need to spend to make the rental property attractive to tenants is key in making a worthwhile investment.
Finally, you should also find out how much similar properties in the area are being rented for.
You can look at classifieds for initial information, paying attention to incentives, such as ‘one month free’.
Such offers should be considered as red flags, as they indicate that there is competition amongst landlords to find suitable tenants.
Taking this a step further, you could also speak to locals in the area where you are considering purchasing a rental property.
Why not even act as a potential tenant and meet landlords at similar properties?
That is one way to guarantee access to insider information.
All of this knowledge arms you with valuable insight and understanding of the specific circumstances of the local market that you want to invest in.
Any time invested will pay back dividends in helping you to make wise decisions about purchases.
2. Execute Zen-Like Non-Attachment
Remember what we said about a rental property vs. a home property?
This is one investment that should be led by the brain, not the heart.
Don’t rush into purchases; have patience and treat it as a business decision.
Even if you have decided that you have no time to do your homework, as recommended in point number one, you should make sure to know how much you should spend on a property, in order to boost your chances of capital growth.
To ensure that you buy at the ‘right’ price, you need to know a few things:
how much you can afford
how much similar properties are selling for and renting at
the cost to fix up the potential rental property
in addition, it is useful to have an independent valuation completed, separate to the one done by the real estate agent (who will be earning a commission depending on the final figure).
With this information you will be able to recognize a bargain when one comes along.
And with the zen non-attachment that we mentioned, you will not let your heart lead you into non-profitable choices, simply because you ‘love’ the property.
Ideally, you should be looking to pay 10-20% below the retail market value for a property.
This is where you will see larger gains in the long term, which is what rental property investment is all about.
By keeping your head in the business game, you won’t have the stress of regretting your actions for years down the line.
3. Strike Out Alone
Real estate agents are fantastic, they know their industry and local market and have access to many properties that you may not otherwise uncover.
Their advice is often invaluable to the process; but, relying on agents can add stress to the process of buying a rental property.
This may seem counterintuitive, because an agent is surely there to relieve you of the majority of the work.
That is true, however, using a real estate agent may mean that you face stiff competition from other investors when it comes to making an offer to a seller.
By doing your own marketing and dealing with a seller directly, you may be able to negotiate more aggressively and land yourself a fantastic price.
Reduced competition at negotiation and a potentially lower mortgage repayment over the years = less stress for sure!
4. Seek Guidance Around Financing
Financing a rental property is complicated business, and the stress around this will be alleviated greatly by turning to professionals for advice.
It is imperative that you understand all of the costs involved, so that you aren’t faced with a nasty surprise halfway through the deal.
There are a number of loans that you should consider before choosing the right deal based on your individual circumstances.
For a rental property, there will typically be a down payment of 20%, but there are also closing costs (including taxes and escrow) to account for.
You should note that interest rates are generally higher for mortgages on rental properties than for home properties, due to the perceived extra risk for the lenders, when you are not so emotionally involved in the investment, compared with your own property.
Non-recourse loans are of interest to some new landlords. They are defined by www.investopedia.com as follows:
“A non–recourse debt is a type of loan that is secured by collateral, which is usually property. If the borrower defaults, the issuer can seize the collateral, but cannot seek out the borrower for any further compensation, even if the collateral does not cover the full value of the defaulted amount.”
Other things to consider are whether your loan can encompass costs of initial repairs and maintenance, whether you can leverage equity from your own home, and if there are repayment penalties (which may hinder your ability to pay the loan early and save a substantial sum).
There are pros and cons to all types of rental property investment loans, and your financial advisor will be able to navigate the minefield for you.
To keep your head straight, try to look at the finances on a month-to-month basis (rental income and tax deductions compared to costs) as well as the longer-term strategy (capital gains).
Seeing the process in this way should help you to keep things clear and low-stress.
5. Hire A Property Manager
Once everything has been completed and you become a full-fledged landlord, the stresses don’t necessarily end.
In fact, many individuals report that actual ‘land-lording’ is the most stressful part.
Fortunately, this is something that you can avoid quite simply by hiring a property manager.
They are responsible for sourcing and screening tenants, performing background and credit checks.
They work in line with the law and are aware of the rights and responsibilities of both the landlord and the tenants – this can prevent much grey hair caused by inadvertently breaching tenant rights.
A property manager will also stay on top of the maintenance of the property and keep you informed throughout the year.
Yes, you will need to pay for this service; but it usually comes straight from the rent as a percentage, and this cost is tax deductible. Now that sounds worthwhile to me!
By following these 5 guidelines, you should find that investing in your first rental property can indeed be a low-stress process, which can lead to a very profitable outcome.
When you think of life as a landlord, what images spring to mind? Freedom to enjoy life while a passive income rolls in, with rent covering your mortgage payments and your capital investment growing steadily year after year?
That sounds wonderful! But as is often the case where humans are involved, perfection is not a very realistic goal. While, for the most part, being a landlord is relatively straightforward, there are times when the role can be extremely frustrating. Consider, for example, what you should do if your tenant stops paying rent? What if they damage your property and eat into your investment through their carelessness? Eviction is certainly not an easy option in these cases.
Bad tenants are every landlord’s nightmare, but there is a way to safeguard against these horror stories as much as possible – and that is through using a robust, thorough tenant screening process. The goal is to find trustworthy individuals, which will result in less hassle and fewer headaches, not to mention reduced costs. Eviction is always a last resort, and by following our 8-step guide to tenant screening, hopefully you will never have to face it as a possibility.
Why Screen Tenants?
Screening tenants for their suitability to live in your rental property is essential, as it will allow you to choose the ideal qualities in an individual, as well as avoid any red flags. The main things you will want to look out for are their ability to pay the rent (including if this will be on time), their attitudes, whether they have pets, and more.
In the Sale and Rental of Housing: No one may take any of the following actions based on race, color, national origin, religion, sex, familial status or handicap:
Refuse to rent or sell housing
Refuse to negotiate for housing
Make housing unavailable
Deny a dwelling
Set different terms, conditions or privileges for sale or rental of a dwelling
Provide different housing services or facilities
Falsely deny that housing is available for inspection, sale, or rental
For profit, persuade owners to sell or rent (blockbusting) or
Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.
In addition to these protected classes, State laws in some areas also make it illegal to discriminate based on:
Sexual orientation and gender identity
Source of income (which usually comes down to “you must accept welfare as a valid source of income”. This does not hold fast if you have an idea that someone’s income has come from an illegal source.)
In order to protect yourself from breaching these laws, it is best to avoid all questions related to these classes, and be sure not to advertise based on them either. All rental applicants should be asked the exact set of questions to ensure that you give all individuals a fair opportunity to be considered as tenants.
Our 8-Step Tenant Screening Guide
1. Basic Criteria
In order to protect yourself from ‘bad tenants’ and prevent wasting your time, it is advisable to set your absolute minimum requirements for potential tenants. This is your bottom line, and you can tailor it to your needs. We suggest the following 4 items.
Their income should be at least 3 times the rental amount
They should receive good references from past landlords
There should be absolutely no evictions in their background
They should have a clean background in terms of criminal activity.
You can go ahead and add to these, providing you don’t discriminate on any grounds covered by the protected classes. It would not be wise to waive any of these, though, if you intend to take on an upstanding individual as a tenant.
2. Pre-screening Phone Call
Once these have been established, you can start to screen individuals that would like to be considered as tenants. It makes sense to open proceedings with a pre-screening phone call, which will establish your criteria, give you an insight into what the potential tenant is looking for, and ultimately save you a lot of time in the long run.
This call should list the basic criteria and the rent terms as well as any rules on pets and smoking, for example. It is also useful to open up the opportunity for the potential tenant to ask questions, which will give you an opportunity to find out a little about them.
3. Screen in person
Once an individual has passed the pre-screening, the next step is to meet with them in person and show them around the property. This meeting serves two purposes. It allows the potential tenant to see whether they would like to live in the property, as well as what you may be like as a landlord. It also gives you an opportunity to assess the individual’s suitability. You can take clues from their vehicle, their appearance, attitude and punctuality.
4. Application Form
Once you have met the potential tenant, and you both wish to proceed, you can provide them with an application form to complete. As mentioned, the same form should be used for every candidate, in order to keep your process fair. You can choose whether to charge a fee for this, which manages expectations of dealing with you as a landlord, maintaining professionalism from the start.
The questions can be tailored to your needs, but should generally include the following 6 questions to enable a background and criminal check. The remaining are suggestions based on your own preferences.
1 Name, address, phone number, and driver’s license number
2 Social security number and date of birth
3 Current and past landlords with contact info
4 Employer and job details with contact info
5 Have they ever had an eviction filed upon them or broken a lease?
6 Release of information signature
Optional points to include:
Requested move-in date
Do you have pets?
Do you have enough cash to pay the first month’s rent and security deposit?
How many people will be living here?
How is your credit? Explain…
How did you hear about this listing?
4. Background and Credit checks
Once you have received the completed application form and a verified copy of the potential tenants ID, you can proceed to the background and credit checks. This may seem like overkill, but is an essential step in protecting your investment. It will give you an indication of an individual’s suitability by identifying their criminal and eviction history, plus any instances of fraud and their history of paying bills in the past.
It is usually easiest to use a screening service for this, and there are many to choose from. The potential tenant usually inputs their details into an online system, the data is analyzed, and you are sent a detailed analysis within minutes, with a recommendation from which a decision can be made as to whether you would like to proceed with the tenant.
If the information that is brought to light through the credit and background checks is unfavorable and causes you to reject the potential tenant, you are required to divulge this information.
“Anyone who uses a credit report or another type of consumer report to deny your application for credit, insurance, or employment – or to take another adverse action against you – must tell you, and must give you the name, address, and phone number of the agency that provided the information.” ~ www.consumer.ftc.gov
6. Call Previous Landlords
It is wise to call previous landlords to find out their experience of dealing with an individual as a tenant. The reason that we specify ‘landlords’ rather than just their current landlord, is that any issues occurring at present may result in the landlord offering up fantastic references simply to get the tenants out of his property.
In general, though, landlords are very honest and supportive toward one another.
7. Call Current Employer
Calling the current employer of a potential tenant is imperative as it gives you an opportunity to evaluate their ongoing ability to pay rent. Ask questions such as:
How long have they been employed?
Do they work full time or part time?
Is the role temporary or permanent?
All of this information will help you to make an informed decision and prevent potential hassles in the future. If the individual is self-employed, it is a little trickier, and you will have to rely on tax returns and perhaps client testimonials.
8. Additional Checks
The seven steps listed here will provide a thorough idea of the suitability of a potential candidate, but there are a few further steps that you can take if you want to dig further. Remember that in order to be fair in your process, whatever steps you take must be replicated for each potential tenant.
You can trawl social networks for an indication of ‘off-guard’ behavior
You can visit their current home unexpectedly to see living conditions and cleanliness
You can call personal references, which may be useful despite obvious bias.
Our 8-step guide will put you in a great position to make an informed decision regarding potential tenants, which should make your job as a landlord far easier in the months to come. Remember, it is best practice to send a letter explaining the reason behind rejecting any applicants, too.
How is life since graduating? You have the qualification that you worked so hard for, but how about the career that you dreamed of? What about the paychecks that you anticipated?
Chances are that life hasn’t quite gone the way that you expected. Debt is looming and you are wondering how people ever afford to enjoy the kind of lifestyle that you dream of. Reality can be a sobering experience. But, there is a potential way to escape the stress and build your wealth in a relatively fast and secure way. You may have heard stories of people in your position choosing to invest in rental property. Have you ever considered becoming a landlord yourself?
Perhaps it has crossed your mind, but the question of ‘how’ has kept you from investigating further. We want to show you that investing in rental property is something that many people really can do. With interest rates at an all-time low, and rent costs staying high, it is the perfect time to get involved. This guide will take you through the 5 steps you should follow to obtain finance, find a property, and of course a tenant.
The first step in the process of becoming a landlord is to do your homework! Don’t jump straight in to searching for property or mortgage rates before you have completed your research.
Take a look at the area in which you would like to purchase a rental property. You need to know the demographic of the people living there. Look out for popular schools, local amenities, and evidence of industry investment in the location.
You should also investigate the types of properties that are available to rent, and the kind of money that they are bringing in each month. Compare this with the average selling price to give you an indication of whether investing in the area would be profitable for you. You can take the research as far as you feel comfortable. Some new landlords even visit rental properties posing as a tenant to get the inside scoop on the local market.
The information that you gather will help to shape your thoughts on the best type of investment for you in a given area. Of course, what you can afford will also impact your choices. You may have an idea of the kind of property you would like to invest in, either a family house or unit, for example. From this position, you can start to formulate a plan and decide on the amount of return on your investment you are hoping for. It is essential to be clear about this, because aside from the mortgage repayments, you will also be required to pay taxes, maintenance, and utilities. From here, you are ready to look at the financing options that are available.
Once armed with research, many people feel motivated to search for the perfect rental property in which to invest. We urge you to hold off on that step, until you have taken the time to investigate your financing options. Do this before you find the house as it will save time and ultimately heartache!
Take a look at the many mortgage options that are available for rental properties. They will be somewhat different from the choices for home owner mortgages, but are still attractive to investors.
There are many options for actually financing an investment property, and the one that you opt for will depend on your personal circumstances. Here is a breakdown of some of the most popular financing choices for rental property:
All cash – This is where an investor uses their own cash to finance real estate purchases.
Mortgage – In this case, investors pay a cash down payment to secure a property, and then pay monthly mortgage payments
Portfolio lenders – These are a variation of mortgages that are able to offer more flexible terms compared to traditional mortgages
Federal Housing Administration (FHA) loans – These are designed for homeowners who will live in the property that is being purchased, but there is a loophole that allows an FHA-financed home to have up to 4 units. This could therefore work well if you are planning to live in one unit of a complex that will also contain your rental property
203K loans – These loans allow the investor to include the cost of home repairs and improvements into the loan amount
It makes sense to seek advice from an expert, who will help you to decide on the right choice for you and guide you through the entire process. The key thing to note is that there are many options available to suit a wide array of budgets and circumstances.
3. Search For Properties
Once you know what you are looking for and how you will afford it, you can commence your search for your dream rental property. You should have a clear idea of the kind of property that you are looking for, the essential elements that it must have, as well as your budget for upgrading the facilities. This will help you to cut through the noise and keep you on track with your plan.
Check out online listings, such as realtor.com, which promises to be “the most complete source of homes for sale & real estate near you”. You should also connect with real estate agents, who can offer great insights into the local property market.
Once you find the right property, at the right price, it is time to make an offer. If you are using an agent, your realtor will complete the offer paperwork and submit it to the seller’s agent. This will be passed on to the seller and negotiations will commence.
You should have a very clear idea of what you are willing to spend on a particular property, so remember to keep your head and stick to your limits. The purchasing point is the moment that determines the profitability of your investment. Be willing to walk away if the price is not right.
4. Final Checks
Once the offer has been accepted, the next step is to be sure that you are making the right choice by hiring an inspector to perform a complete condition inspection on the property. It is essential that any defects that may cost you money in the future are uncovered so that you can account for that.
This is also where ‘Due Diligence’ comes in. You need to be sure that your investment is not only based on ‘pro forma’ financial information – which is little more than an estimate of how it should perform. You need to know the property’s actual performance, which involves analyzing bank statements, rent rolls, and tax returns of the seller.
Only when you have access to this information, and are able to digest it and agree that you are making a sound judgement in your investment, should you proceed.
5. Find A Tenant
Once the legal process is complete and the closing date arrives, you will receive the keys as the proud owner of a rental property. But that of course does not make you a landlord! This is the time to start the process of finding a tenant.
Once again it is essential to complete this step properly to prevent stress and financial losses. You want to protect your investment, so finding the right tenant is imperative. Your first landlord duty should therefore be to put together a robust tenant-screening process, which should include an application process, plus background and credit checks. It is essential that you do not skip over this part and rush to get someone in the property so that you can start to receive rent.
Unfortunately, many of the horror stories that landlords share about nightmare tenants are true – but you can do a great deal to prevent falling victim to these issues yourself with a thorough screening process.
One Step At A Time
Although these five steps can feel daunting when you stand at the start of the process, each part is manageable, and your goal of becoming a landlord is definitely within reach. With so many wonderful online resources, professional support, and experience around you, this is one of the best times to invest in rental property.
You have a landlord’s insurance policy on your rental property, but its coverage handles the building itself and your on-site equipment.
Your tenants don’t get coverage for their personal property or liability, but they can pick up a renter’s insurance policy for this protection.
The Insurance Information Institute reports only 35 percent of tenants hold a policy, which leaves millions of people uncovered in a disaster or accident.
Your renters are the ones picking up this coverage, but you get plenty of value from it too.
Avoid Tenant Lawsuits
Your tenants may not have the resources to replace their furniture, electronics, and other personal items following a flood or a house fire.
You aren’t personally responsible for replacement costs or their living arrangements during repairs, but that doesn’t stop some renters from suing you when they can’t afford these expenses.
When your tenants have renter’s insurance, they get money to replace their property and pay for their hotel costs while they’re displaced.
They won’t waste your time and money by dragging you into court, so everybody wins.
No Attempted Claims on Your Landlord’s Insurance
Your landlord’s insurance policy costs more than a typical homeowner’s policy to account for greater risks and different types of coverage.
Your average annual cost is $986, according to House Logic, but your premium increases if you get claims filed on it.
Renter’s insurance acts as the tenant’s first option for addressing costly issues, so you don’t have to worry about any claims on your own policy.
This includes liability claims when the tenant is considered legally liable for injuries or damages.
They won’t try to get your landlord’s policy to cover it since the renter’s insurance makes the process simple.
Tenant Happiness and Financial Security
Happy tenants stick around in your rental properties, refer potential renters to your listings and maintain a good relationship with you.
Your tenants won’t maintain this satisfaction level if they don’t know how they’re going to replace essential household goods, where they’re going to live during the rebuilding process and other stressful considerations.
Renter’s insurance not only covers their apartment contents, but it also offers money for hotel and food costs incurred while their apartment is uninhabitable.
You don’t have to look like the bad guy if you can’t offer them alternative living arrangements or money to cover these expenses, as your legal liability is limited in this respect.
They won’t be over the moon from losing all their stuff and living in a hotel for a few weeks, but they will be much happier with those logistical and financial issues handled.
Renter’s insurance lets them maintain their financial stability even when the unexpected happens, so your rent still gets paid on time.
Insurance Company Handles Issues
You don’t want to play go-between with your tenant and your insurance company, but you run the risk of getting put in that position if your tenant lacks other options for financial recovery.
This position strains your relationship with your renters, especially if they lack a valid claim.
They may try to pursue their financial losses with you personally, which causes further damage.
Renter’s insurance lets you take a step back so the tenant and their insurance company deal directly with each other.
You don’t risk your solid connection with the tenant, and they get the help they need.
Accelerated Cleanup After Disasters
Your insurance covers repairs or replacement of your rental property, but it may not necessarily cover moving damaged personal property.
You don’t want a water-logged couch or burnt nightstand hanging around in your apartment.
The smell and mold can potentially lead to long-term concerns for your current and future renters.
Renter’s insurance also covers the costs of removing and disposing of damaged and destroyed house contents.
You avoid the tattered couch in the backyard or the driveway, and your tenants get back to their normal lives faster.
Renter’s insurance does not place an unreasonable cost burden on your tenants, so you don’t impact their ability to pay rent or other bills.
Insurance companies offer flexible payment options to accommodate their clients’ needs, from monthly payments to annual options.
How to Encourage Tenants to Get Renter’s Insurance
You gain a lot when your tenants maintain a renter’s insurance policy.
Educate your tenants about the benefits of this insurance product. They may not know exactly how much coverage they get with a typical policy, as well as what your landlord’s policy actually covers.
Make it easy for tenants to research this information by providing information sheets from insurance providers and share the average costs for your region.
Other ways to help the tenant is by explaining how to create a house inventory in case they need to file a claim, as well as what the differences between coverage options are.
Renter’s insurance doesn’t cost a lot, but it saves you a major headache when it comes to damages, accidents, natural disasters and theft.
Your tenants work with their insurance company to replace their stuff and pay for damages while you focus on running your property management business and maintaining excellent relations with your renters.
Learning how to manage your rental properties through trial and error can be costly in the property management business. Even if you’ve been in the business a while, there are always new problems that may pop up over time and ones that you will want to find a way to avoid long before they become a possibility. We’ve compiled ten tips below to hit the high points of managing your rentals beginning to end.
Make Sure you’re Ready – If you are looking at buying your first investment property or adding to your portfolio, you’ll want to make sure you’re financially ready to take that step.
How to Start – Starting out as a landlord can be overwhelming. There are so many small things that you should know, and possibly more that you don’t even know that you should know. Take a look at this article to make sure you’re covering what you need.
Tools of the Trade – When you’re getting ready to put your rental up for lease, you’ll want to make sure you have done the appropriate amount of research to ensure that potential tenants know that it’s the best option on the table for them. There are some great tools to help you in that research.
Tenant Privacy -During the application and tenant screening process you may gather quite a bit of information from your applicants. Some of this information will be very sensitive, such as social security numbers and other identifying information. You will need to make sure it is safe and protected.
Understanding Landlord Harassment – There may be times when a landlord needs to contact the tenant for something or even enter the home, but be careful that your actions aren’t viewed as harassing the tenants or keeping them from enjoying their home in peace, or you may find yourself in trouble.
Preventative Maintenance – From time to time a repair will need to be made on the rental home that you own, and you should have an arrangement with your tenant so that they know that they need to alert you to this. Even so, preventative maintenance can save you a lot of money in the long run.
Major Repairs – Preparing for major repairs on an occupied rental can be troublesome, but sometimes you have no choice. There are several things you will need to decide, but it’s best to work with your tenants to make sure that everyone is on the same page and you cause them the smallest amount of inconvenience possible.
Negligence Lawsuits – When you accept a tenant into your rental home it is likely that you both sign a contract, agreeing to a set of rules between you. If you purposefully neglect something in that agreement, you may find yourself at the other end of a lawsuit.
Outgoing Tenant Checklist – Tenant turnover can be a very rushed time, but you don’t want to let your outgoing tenant fall through the cracks just because you’re focused on your incoming tenant.
Selling a Rental Property – There may come a time when you decide it’s time to sell your rental property. If so, there are several things you should think about before putting it on the market.