If you are considering investing in a rental property or are ready to start renting, you need to know the ins and outs of being a landlord. Owning and operating rental property is an effective method of supplementing your income but the job does not come without some hard work. Before you dive into becoming a landlord, read on for must-have knowledge you need to have, from factoring in the landlord insurance cost to managing tenants.
Landlord Insurance Cost
Acquiring insurance as a landlord is essential to assist you in the event of an unfortunate circumstance, like property damage. Having insurance can save you thousands of dollars and is something you definitely don’t want to skimp on. When compared with homeowners insurance, landlord insurance cost about 25% more. The primary reason for this cost difference is who lives in the home.
According to insurance carriers, owner-occupied homes have fewer claims and lower average loss amounts compared to rental homes. The liability limit on landlord insurance is also much higher than it would be for homeowners insurance. Despite the higher cost, it is still smart to secure landlord insurance. The good news is that you can offset the landlord insurance cost when setting the rent for your property, so you can justify it.
Maintaining the Property (or Properties)
Landlord, standards of living vary by state but generally speaking, it is the landlord’s responsibility to provide a clean and safe home to renters. To keep up with state-designated standards, maintenance will be required. Common maintenance tasks include fixing appliances, keeping the plumbing and HVAC in good repair, and keeping safety measures in place (with adequate doors, windows, and locks).
If you manage a single property, it will likely be easier to keep up with maintenance tasks if you are handy. However, if you have multiple properties, this can become a challenge. In these cases, it’s a good idea for landlords to consider hiring a property manager. Aside from managing any maintenance requests, a property manager can help with screening tenants, collecting rent, and generally keeping an eye on properties. The cost to hire someone can vary, but again, this cost can be allocated as part of the monthly rent.
Fair Housing Laws
To protect yourself legally, landlords must abide by fair housing laws throughout the entire renting process, such as advertising your property, the rental application, and the selection process. Become acutely familiar with these laws and practice the strictest protocol by following them. While there are nationwide laws you need to abide by, each state and local area may have its own laws so do your research thoroughly.
Screening Tenants
When you begin advertising for your property, you can help prescreen tenants to save you both time by including any non-negotiables in your advertisement. Share income requirements, pay expectations (such as what is expected in the first month), and whether the property allows pets or smoking. Being clear about these expectations upfront weeds out any tenants you don’t want for your property.
To get to know the tenants and judge whether they are a good fit for the property, schedule a tour. This is a good chance to ask them questions and get a general idea of what you might expect in your relationship with them.
Once the tenant completes their application, you will need to review their credit, criminal, and eviction history. You will also have income information from them. Using this information, you can determine whether you want to rent to the candidate or pass. Choose a tenant who you feel confident can not only pay their rent but also someone who is likely to rent from you for a long time, as this saves you from going through the screening process again.
Managing Tenants
Managing tenants doesn’t have to be a cumbersome experience and you can stay ahead of any issues by prioritizing the care for your property. Maintenance issues are the number one concern for renters so ensure that you stay ahead of any issues with proper care and regular maintenance. If an issue does arise, resolve it as soon as possible.
Having a good relationship with your tenant is beneficial in the long run because this will cut down on not only the time you spend looking for a new tenant but also reduces your chances of not earning income on a property that isn’t rented out.
Conclusion
Your rental property is a business and you should treat it as such as a landlord. When you follow these tips and take care of your property, the investment will be well worth it.
