Leasing a property can be very profitable, but there are some steps a landlord should take to have the best experience. Many first time landlords make costly mistakes early in their careers. Most potential pitfalls can be easily avoided with a little research.
CORRECTLY ESTIMATE THE MARKET RENT
Market rent is the going rental rate for similar properties in the area. Landlords need to survey the rental market and realistically evaluate how much money a property is likely to generate in monthly rent. A great resource for estimating rent is HUD’s Fair Market Rent Documentation System. It’s free and easy to use. Property portals like Zillow also have research tools to help calculate rent. It’s not a bad idea to also check Craigslist and any local rental website, but rental scams are common in some areas, so verify this information. Scammers will list a property very low to entice people to send a deposit sight unseen.
KNOW LANDLORD-TENANT LAWS FOR YOUR AREA
Landlord-tenant laws vary greatly by area. NOLO is a reliable resource for general information. Some states regulate how much landlords can collect and hold for deposits, what can or cannot be included in a lease, and indicate timelines for notifications and return of deposits. Big cities often have tenant’s unions that will offer tenants assistance for free, and no landlord wants to get into a dispute with them. Federal Fair Housing laws may also apply to some landlords, usually larger ones, but being proactive with regard to Fair Housing is the safest bet.
HAVE A TENANT SCREENING PROCESS
Carefully screening prospective tenants will head off problems later. Services like SmartMove make this easy and the tenant pays the fee. It’s a good idea to check a potential renter’s credit score, criminal record history, eviction history, and verify their employment.
PROPERTY MANAGER OR SELF-MANAGE?
Landlords need to be able to respond to problems 24/7. Hiring a manager can make this less stressful, but of course, there is a cost associated with professional management. 10 to 15% of rent is a common charge. New software is making DIY management more efficient. TechRadar compared some of the most popular applications. They offer a variety of features that can help with tracking maintenance and repair requests as well as help track expenses. Some also offer online rental payment options which will make collecting rent easier.
These are the most critical steps to take to ensure a rental property is profitable for a landlord. With correct attention paid to these details at the beginning of a landlord career, it can be a positive and rewarding venture.