A Succinct Guide to Renting for First Time Landlords
Updated: Feb 16
Investing in property is a surefire way of letting your money work for you. But it’s important to execute the first few steps with a little bit of planning before you can expect some cash flow.
The fastest way to generate money is to rent out your property. You’ll need to manage tenants and understand how the law works in your area for this to work. It helps to plan a few years, or at least compare your long-term goals against the pros and cons of renting your property. Ask yourself these questions:
Do I have enough cash flow to take care of emergency repairs, should they arise?
Do I have the people skills to deal with difficult tenants?
Do I understand the local laws as they relate to tenants and landlords?
Do I know what my tax obligations are to the state?
A property manager who is experienced in this area can provide you with a wealth of information on developing a strategy to start in the local rental market.
Below are a few tips that will help you become a successful landlord.
Identify Your Expenses
There’s more to becoming a landlord than collecting the monthly rent. Just like any other business, you’ll have ongoing expenses – consider it the cost of doing business. You may be surprised by all the expenses once they start piling up.
Expenses such as:
Cost of acquiring a property (such as closing costs
Repairs (maintenance and emergency)
The cost of maintaining a vacant rental unit (including advertising expenses)
Buy Landlord Insurance
Insurance premiums for landlords can represent a sizable chunk of change every month. But it’s definitely worth having.
For example, certain policies provide income replacement if your tenant ends up leaving. Note that some landlords require their tenants to carry renter’s insurance. However, doing so will reduce your tenant pool.
Check for Zoning Laws
Zoning laws can significantly affect your cash flow from a property. Simply put, zoning laws are designed to separate commercial spaces from residential areas. This is to ensure that residents don’t have to live in the middle of an industrial area. Living in a commercial area can severely impact a person’s life quality.
It is also important to have a good understanding of your local zoning laws. For example, it isn’t unheard of for the government to change zone classifications for a piece of land depending on factors such as sprawling. If this happens, it could impact your ability to find new tenants. This brings us to our next point: location.
Invest in a Good Location
A good location is defined by amenities such as nearby parks, gyms, schools, public transportation, and nice views. This will also influence the value of your property and help you sell the unit out if you want. It is also vital to find affluent communities with good employment rates and commercial activity. Most first-time renters, especially younger couples who want to start a family, will find these rental units more viable for their future goals.
Screening is More Important Than You Think
Appearances can be deceiving and you can’t really judge a person’s character based on a good conversation.
This is where screening and background checking can prove to be so important. It will reveal important details about the potential client, including criminal background, prior evictions, employment terminations, and bankruptcy.
If you don’t have time for screening tenants, you can always delegate to an experienced property manager near you.
Becoming a landlord can be an exciting prospect – as long as you can manage your expectations reasonably. A few challenges should be met head-on, including the cost of vacant rental units, difficult tenants, and more.
You can make your life as a landlord easier by hiring a property manager near you. These professionals will collect the rent, maintain your property, find new tenants, and make the property attractive to new tenants so you won’t have to deal with the expense of a vacant rental unit.