Congratulations! You have just become a landlord or are considering purchasing your first property. This is a great step to becoming financially independent and controlling your own financial destiny. However, starting out as a new landlord can be full of pitfalls and tough lessons. Here are 7 tips to help you get started on the right path.
1. Consider your property’s location
If you are still searching for rental property, you want to aim for the nicest location your budget will allow. In general, nicer neighborhoods will attract better renters, which means fewer headaches for you. You should consider the proximity to schools, parks, public transportation, and neighborhood amenities. It’s also good if the property is close to your own home or office if you will be self-managing it.
2. Get your paperwork in order
You could start out with a generic lease, but it would be wise to spend some money upfront to have your lease reviewed by a legal professional. This will help you uncover any weak spots and could save you thousands in the long run if your lease is ever contested in court or you need to evict a tenant.
3. Find your ideal renters
All things being equal, the tenants you rent to will make or break your landlord experience. That’s why it’s critical that you take your time to find qualified renters. Use tenant-screening software to check your prospective renters’ credit and make sure they do not have any evictions on record. You should also set out qualifying standards in writing so that if you do have to reject an application you can be protected against discrimination claims.
4. Protect your assets
Liability insurance is another instrument you will want to invest in. This will protect you in case someone is hurt while living in or visiting your properties. You will also want to make sure it covers dog bites on your property if you allow pets.
5. Automate your income
The dream with rental properties is to earn passive income where you can “set it and forget it”. If you have great tenants, this is a possibility when you use online rent collection software. These services let tenants pay rent online and the money gets deposited directly into your bank account. You can also automate late fees so you’re not leaving money on the table if a tenant pays the rent late. Rent specific software will also send rent invoices and give you the option of adding line items for things like utilities.
6. Join a community
Having a community to share ideas with and learn from is priceless. See if there is a local association in your area to join. This is a great way to learn from other people without having to experience all of the difficulties yourself. Plus, there may be opportunities for more business or partnerships.
7. Be prepared to put in more work and money than anticipated in the beginning.
Becoming a property owner is exciting and first time landlords often underestimate the amount of time and money needed when they first start out. However, taking your time to choose the right property and tenants will greatly impact the amount of work you have to put in down the road. One way to help keep your out of pocket expenses down is to stockpile any income you receive from rents for the first few years. This money can be used for necessary repairs or unexpected vacancies between tenants.
Generating side income with rental properties does not have to be difficult and with these tips you will be well on your way to a successful career as a part-time landlord. Plus, when you’re ready, you can use the money and equity generated from your first property to invest in more rentals.