Are you considering becoming a landlord? I’ve been a landlord for more than half my life. So many people have asked me over the years what it’s like to be a landlord or how to become one. Now’s my chance to share the answers.
In this article, we will provide tips on becoming a successful landlord based on my experience as someone who has been doing it for years.
Table of Contents
Understanding the Basics of Being a Landlord
Being a landlord is a big responsibility and can be incredibly rewarding. As a landlord, you’re responsible for taking care of your rental property and ensuring it’s safe and habitable for tenants.
This includes finding tenants, collecting rent, handling maintenance issues, responding to tenant complaints, and more.
Before you start renting out your property, it’s essential to familiarize yourself with local housing laws and regulations. You also need to create or find a residential lease agreement that specifies the rights of both parties and outlines all of the rules related to your rental property.
Once you have tenants in place, staying organized and keeping track of payments is essential. You should also inspect the property periodically to make sure everything is working properly and is up to code.
Remember that tenants are people. They don’t want broken things. Tenants do not want you invading their privacy. Tenants do not want to get late on rent. Tenants never want to be evicted.
Realize these things, and when there are issues, work together to figure them out. That is until you can’t, then escalate to an attorney.
Being a landlord comes with many challenges but also rewards if done right.
By taking the time to understand your responsibilities as a landlord and staying on top of duties such as maintenance, repairs, inspections, and more, you can ensure your rental property is running smoothly for years to come!
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Finding the Right Properties
Finding the right rental property is critical to becoming a successful landlord. It’s essential to identify your niche to
Consider the type of tenant you are looking for and what they might be looking for in a rental home. Are they families, students, seniors, or young professionals? Consider what amenities they may want and look for properties offering those features.
Location is also an important factor when selecting rental properties. The location of a property will determine its desirability and help set the rent rate.
It’s important to consider things such as the local job market, schools, crime rates, public transportation access, etc., as this will give you an idea of how attractive the property is and what rent rate you should set.
Before signing a lease with tenants, it’s also a good idea to carefully check out any house that could be rented. This includes checking for structural integrity and ensuring all systems (electrical, plumbing, heating/cooling, etc.) are in working order.
It’s also a good idea to check out neighborhoods during different times of day to get a better sense of the area around the property and gauge whether it would attract potential tenants.
By doing your research upfront, you can avoid costly mistakes later on down the line when managing your rental properties becomes more difficult or expensive than anticipated.
Finding “Good” Tenants
Finding the right tenants is essential for becoming a successful landlord. You want to ensure that your tenants are reliable and have good track records.
You want to increase the likelihood of renting to a tenant that pays on time, takes good care of your property, and follows all the regulations in your lease agreement. The easiest way I found to do that is to look at their track record.
In my experience, predictability is one of the most important factors when choosing tenants. This means looking for someone with a history of paying their bills on time and caring for rental properties they’ve lived in before.
Research to determine if the prospect has any outstanding debts or criminal records that could keep them from being responsible tenants.
It’s also important to check references from previous landlords, employers, and others dealing with potential tenants. This will give you an idea of how well-liked the tenant is by other parties and whether or not there are any major red flags associated with them.
Lastly, but most importantly, you must ensure you can easily communicate with potential tenants. This includes ensuring a clear line of communication between you and them if any issues arise during the tenancy requiring immediate attention.
If you do not get along with a prospect before you sign a lease, it will only get worse.
My Take On The Landlord-Tenant Partnership
When landlords build good relationships with their tenants, it becomes so much easier to deal with the unexpected issues that arise.
This helps ensure the rental property is always in great shape and shows that the landlord is committed to giving their tenants a great place to live.
Moreover, having strong relationships with tenants allows landlords to be more flexible regarding rental prices. Suppose a tenant has been reliable with a history of paying rent on time.
Then that tenant knows they are going to be late on rent and let’s you know in advance. Show them you appreciate them and waive the late fee.
Incentivizing quality tenants to stay longer and rewarding them for their loyalty.
The same holds when it comes to providing services like repairs or maintenance.
By doing these things quickly and well, landlords can keep their current tenants happy and attract new ones looking for good rental properties with good customer service.
Focus on having a solid relationship with your tenants and providing excellent customer service can help you become a successful landlord while allowing you to charge competitive rents slightly higher than comparable units in your area.
Setting Up Leases and Establishing Rules and Regulations for Tenants
Setting up leases and establishing rules and regulations for tenants is an important part of being a successful landlord. When creating a lease agreement, it’s essential to spell out the terms of the contract as clearly as possible.
This should include the duration of the lease, rent payments, late fees, security deposits, pet policies, smoking policies, property maintenance and repair responsibilities, subletting restrictions, etc.
Beyond the written lease document, it’s also crucial to establish clear expectations with tenants.
This includes ensuring they understand their obligations while living in your rental property, such as paying rent on time, respecting common areas and neighbors’ privacy, maintaining cleanliness and tidiness of their unit, and adhering to other rules outlined in the lease agreement.
Setting expectations from both sides will help keep communication channels open so issues can be discussed quickly before becoming more significant problems.
It’s also essential that your tenants know how to contact you if they have any questions or problems with the rental property.
Providing clear contact information and instructions on reporting maintenance requests or submitting complaints is essential for efficiently managing your rental properties.
By setting up a solid foundation from the start, you can ensure a successful relationship with your tenants while protecting yourself as a landlord.
Establishing clear expectations from both parties is key to having a pleasant experience as a landlord.
How To Determine What To Charge In Rent
When deciding how much to charge, I looked at other houses nearby and ensured my rent was competitive. I also considered the size, condition, amenities, and location before deciding on a price.
It’s important to remember that many factors can influence rent prices in your area, so it’s essential to research before setting a rate.
Once you decide on the rent amount, you must communicate this to potential tenants so they know what to expect. You should also check with local laws and regulations for renting out properties and any tenant protection laws in your state or municipality that might affect rent prices.
In addition to setting an appropriate base rent amount, I offered perks such as discounted rates for long-term leases.
The best way I found to charge more in rent was by being a better landlord. So many prospects I met with told me they moved because they didn’t like their landlords. I focused on being a good landlord. So I could charge more by marketing myself as a better landlord.
Financing Options Available to Landlords
Landlords can buy rental houses by taking out mortgages. They can also pay with cash if they have enough money. Or they can pay with cash and later get a loan to repay the money they spent, known as refinancing.
Most investors that make cash offers refinance right after they acquire the property. They generally are less well-funded than people think.
It’s important to remember that getting a loan for rental properties can be difficult, so you should research what different lenders offer. Other types of loans are available depending on the type of property and your financial situation.
Investment properties have higher interest rates than owner-occupied homes. Usually, the rate is 1-2% higher for an investment property. This means it costs more money to borrow for an investment property than for a home someone lives in.
How To Maintain A Rental House
I decided very early on that tenants hate it when landlords fix things themselves. Tenants usually deal with problems to avoid their landlords making bigger problems.
So I made the business decision to hire experts. It greatly ate into my returns, but tenants renewed leases more often with me. They also referred friends to me.
Since I had less turnover and received referrals, I more than made up for the cost of hiring professionals to work on the houses.
Plus, I wanted to have a life. I did not want to spend my life fixing faucets.
Risks Associated with Being a Landlord
Being a landlord can be rewarding, but there are also risks. Some of these risks include not finding the right tenants, needing more money to cover repairs, or getting sued by a tenant.
You could pay fines if you don’t follow the rules and regulations for renting out properties. Lastly, if something goes wrong with your property or tenant relationships turn sour, it could cost you financially.
To mitigate these risks, ensure you know all the laws and regulations of being a landlord in your area. You should also carry enough insurance to cover any potential losses or damages on your property.
Having a good relationship with tenants is key to success as well as staying organized and on top of things when it comes to managing your rental properties. When done correctly, being a landlord can be financially rewarding and satisfying!
The Benefits Of Being a Landlord
Being a landlord can be a great way to make money. I retired at 42, and it wasn’t bad! The main benefits, and these are big deals, are:
- Tenants provide you with a diversified income stream.
- Tenants pay off your mortgage.
- There are also many tax incentives for investing in real estate.
- Historically homes appreciate over a long enough time horizon (stop watching the news! Real estate is a long-term investment, but the news focuses on short-term noise like housing prices or interest rates)
- Leverage. For little or nothing down, you can buy an asset worth much more that returns 7-12% a year.
What Is Keeping You From Becoming A Landlord?
Over the years so many people have set up meetings with me to ask me a notebook’s worth of questions. But my answer is always the same. “Why don’t you just go buy a house”. If you’re interested in becoming a landlord, why haven’t you?
I shared many tips in this article, but you likely know most of the answers already. The one question you need to answer, and google can’t tell you this, is what’s keeping you from becoming a landlord?
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Greg is a Chartered Financial Analyst (CFA) with 22+ years experience in Financial Services. He has held numerous FINRA Securities licenses (series 7, 63, 65, and 66), and is an expert on Investment Products and Financial Planning. Greg has 22+ years experience as a real estate investor and degrees in Psychology and Philosophy.
Greg has been quoted/interviewed in Yahoo Money, Yahoo Finance, USA Today, Authority Magazine, Realtor.com, Business Insider, and others.
Greg is an avid runner, and the father to identical twin girls and their awesome brother. His love of budgeting and his kids led him to join The Great Resignation in 2021.
Disclaimer: Any Financial Tips on ChaChingQueen are general and informational. Speak with a professional about your specific situation.