How to turn home ownership into income
Becoming a landlord is quite a responsibility, so before you step into home owning for renting, take some time to find out exactly what those responsibilities are. Learning about what your legal duties are and the rights of your tenants means that you should be able to have a good experience rather than trying to work things out by trial and error.
If possible, live close to the rental property
This gives you the opportunity to inspect it from time to time, as long as you give tenants proper notice, and you can keep an eye if there is any maintenance required. Doing it yourself will save you money, as long as you’re confident and knowledgeable about doing DIY jobs. If you don’t live very near, then hire a property manager to take care of things, but remember to factor that into your monthly budget.
Understand the law
Whichever state you live in, you need to understand the law as it pertains to landlords and tenants. These will cover issues such as how much access you can get to your property, security deposits, and notice periods for when your tenant wants to leave or if you want them to leave. You should also check out federal laws that relate to habitability and anti-discrimination so that you don’t fall foul of something that could easily have been avoided.
Develop a good landlord/tenant relationship
Remember that this is a business transaction in that you will be receiving income for providing a service. This doesn’t mean that you can’t cultivate a good relationship with your tenant, and the chances are that the rent is more likely to be paid on time. Be careful about getting too friendly and allowing the rent to slip for a couple of weeks – the last thing that you want is to end up with several months’ rent owing.
Vet your tenants
It’s a good idea to screen your tenants, get some background detail, and run credit checks so that you have an idea of who is coming to live in your property. Interviewing candidates also makes sense so that you know early on if you’re likely to develop a good relationship down the line. It doesn’t always work out, but you can certainly narrow the odds of there being a problem. You can always get an agent to do this for you and make recommendations before you meet anyone, but put the costs into your budget.
Put insurances into place
It’s essential that your property is insured properly so that if something happens to the main building, any losses will be covered. You should also look into getting a home warranty so that when you’re investigating cover for your building and wanting home warranty quotes, you can easily find a broker to get a quote. Tenants will usually cover the costs of insuring their own contents, but a home warranty can cover aspects such as your heating and electrical systems, air con, and plumbing.
Get a valuation
When you buy a property for rental, you’ll know how much you paid for it, but you should keep an eye over the months and years as to how much, or even if, your purchase is increasing in price. The more equity that you build up (though you’ll have to spend money when replacing tenants), the more that it can turn out to be good investment. Rental properties aren’t a “get rich quick” type of business, but if you do it well, you could get a very acceptable return on investment; and if you are able to buy more properties, you could build up a very impressive portfolio.
Prepare a custom lease
It’s perfectly possible to prepare your own lease using an online template, but it may be worth taking some advice from a realtor or attorney who specializes in rentals. Small print can be a devil, so you really need to get things set up as watertight as possible. It’s a good plan to customize your lease so that it fits with your situation. If you don’t allow pets, you need to make that clear, and if you do, then you can state what type and how many. Remember that pets cause additional wear and tear to a property, so be certain as to what you will permit.
Be well organized
Being a landlord has its ups and downs, but you should be able to bring in a regular income without too much expenditure. If you are well organized and prepare everything properly, you should reap the rewards of being a rental property owner.