Top 5 Tips for New Rental Property Owners
Whether you inherited a house or bought a second home to hold as a rental property, you are taking on an exciting new business venture. Owning an income property can help supplement your primary income. The house can literally pay for itself over time. In addition, you will be gaining appreciation and equity on the property as the years go by. It’s a great financial opportunity if you do things right.
Doing things right is the key. First-time landlords and inexperienced rental property owners often make the same basic mistakes that end up costing them time and money—while providing plenty of unnecessary headaches along the way. Here are PropertyLark’s top 5 tips for new income property owners:
1. Remember it is a Business
The first tip is to remember this is a financial investment and it must be treated as a business. Have a plan before you start renting out the unit. Create a detailed budget and stay up to date with your books. When you treat your rental property like the business it is, you have a much better chance of being successful and profitable.
2. Focus on Quality Tenants
Good tenants can sometimes be hard to find. Just don’t accept the first applicant. You want someone who you feel will stay in the unit for a long time and be able to pay rent on time each and every month. Look out for red flags like prior evictions or employment inconsistency. Ask a lot of questions and find someone who will be a good tenant—hopefully for many years to come. A quality long-term tenant paying a little lower rent is usually better than cycling through many tenants, even if the rent prices are higher.
3. Hire a Property Manager
Unless you are extremely confident in your abilities to act as landlord or your rental situation is fairly simple, you may want to consider hiring a property manager (or property management company). They can take a lot of stress off your plate when it comes to marketing the rental, finding good tenants, taking care of tenant needs and managing maintenance/repairs. This is a helpful tip for many first-time landlords who often try to take on too much. A great property management provider will essentially pay for itself.
4. Find the Right Rent Price
Pricing a rental property unit can be tricky. Understand the market and renter demand in the neighborhood. See what similar properties are renting for. You want to set a price that allows you to cover your expenses and ideally generate some profit each month. However, you don’t want to go so high that you have a hard time finding and keeping good tenants. There is usually a “sweet spot,” and it may take some extra research on your part.
5. Respect the Landlord-Tenant Relationship
Renting out your house to friends can be a bad idea, especially if they end up trying to take advantage of your generosity. Find quality tenants you can trust, and make sure there is a clear line in your relationship with them. It’s okay to be friendly, but you are always a landlord first. Make sure they take care of the property and follow the rules. Screen them carefully and be willing to take action if they are causing trouble for you or their neighbors.
These are just a few of the most important tips for first-time landlords and new rental property owners. For more property buying and management resources, consider joining the PropertyLark network. Learn more on our Buyers homepage.