Once you’ve invested in property, it can leave you feeling like you’re ready to take on the world. There’s just one problem—an investment implies you’re going to be making a return. For many people who are property investors, they become landlords and rent out the properties they own. Being a landlord can be financially rewarding, but it also comes with a set of challenges. The following are some tips to help you navigate the complex world of being a first-time landlord.
1. Choose the Right Tenants
It’s easy when you’re a first-time landlord to be excited and happy to rent to anyone. That’s a bad plan for the future, however. Choosing the right tenants is one of the most important things you can do to protect yourself, your property, and your revenue.
Along with doing a background check of things like criminal history and credit score, you should arrange a face-to-face meeting with potential tenants.
There are legal requirements and regulations you have to adhere to when you’re renting a property, and if you aren’t sure about those, you might want to consult with a lawyer or someone familiar with housing laws before you start screening tenants.
Along with looking for tenants who are going to pay their rent and maintain the property, you also want to try to find people who are more likely to be long-term renters because turnover is expensive.
2. Look At Your Property As a Business
For many first-time landlords, owning and managing a property isn’t their primary source of income. That might come later, but you might also have a day job and use your rental property or properties as extra income. Even so, you always have to view your role as a landlord as a business.
This means you comply with all laws and regulations, and you protect yourself with things like landlord insurance.
You’re also responsible for maintaining your building and keeping everything in good working order, including smoke detectors, pipes and other features of a property that determine whether or not it’s safe.
As part of managing your business, you’ll also need to manage your finances and keep them organized. You’ll need to track things like mortgage payments and property taxes, rental revenue and expenses, and other costs. You should be able to quickly see how much you’re spending versus how much you’re bringing in so that you can make smart, numbers-driven business decisions.
3. Understand that Revenue Is Your Priority
You might be surprised at how many landlords aren’t aggressive when it comes to pursuing rent. You need to be aggressive in not only making sure that you’re collecting rent, but also that it’s on time. Yes, you can work with tenants if they need help and are communicating with you, but still being a landlord is ultimately a business and businesses are driven by revenue.
If you let things spiral out of control, you could miss out on months of rent and you may have to begin eviction proceedings.
Make it easier on tenants and yourself by setting up a portal so you can accept rent online.
4. Think About Hiring a Property Manager
Hiring a property manager is an investment, but it can be a smart move for many landlords. A property manager will take care of marketing, collecting rent and dealing with tenants. If you start expanding your business, a property manager can help you with all of your properties.
5. Be Careful with Renovations
Finally, if you’re a first-time landlord, you may be excited about your new business and you might do some renovations before you rent out a property. While it’s fine to make improvements, one of the biggest mistakes new landlords make is investing in renovations that aren’t going to show a return in terms of rent prices.
Any updates or changes you make, you want to ensure are in-line with the neighborhood, the property itself, and the potential rent you can charge.