Tips All Landlords Need to Know
|Tips are guaranteed to help any landlord get the most out of their investment|
Everyone who has ever forked over a fat rent check every month has likely fantasized about being on the receiving end of the transaction. And being a landlord certainly can sound like an appealing way to earn some ancillary income.
Owning a rental property can be more than just a chance to earn money: It also allows an individual to invest in a community in a very authentic and tangible way. Sounds pretty good, right? Well, there are a few considerations that anyone wanting to become a landlord should know.
The following five tips are guaranteed to help any landlord get the most out of their investment.
Have a Good Business Plan
If you are going to be a landlord in a neighborhood, you need to be an expert on it. What sort of rent can you expect? (Relatedly, what is the Area Median Income, or AMI?) How old is the average age of units in the area? How do the units you want to rent out compare? These are all questions that should be answered in a business plan. There should also be a good accounting of fixed expenses such as office space, insurance, maintenance of common areas, and utilities as required.
When accounting for expenses, don’t forget about property management insurance costs. This insurance is key to knowing whether your company will be at risk for issues such as worker’s compensation, general liability, error and omissions (E&O), and whatever else a qualified insurance professional may deem necessary.
The best part of having property management insurance is the peace of mind that coverage can offer (often for around $25 a month). Compare that to the cost of covering property damage or bodily harm incidents. It won’t even be close. Still, insurance fees will be highly dependent on various factors such as location, size of the management company, type of property, and more. When creating a business plan, the thing to do is reach out for an insurance quote first, which is typically free and easy to do online.
Things Will Go Wrong
Even if you only have units in brand new buildings, things are destined to go wrong. Add age to the equation, and the potential for problems only increases. In reality, there is little a landlord can do about this. Things will go wrong. Pipes will freeze or burst. The paint will peel and crack. Maintenance will be required.
In short, if you are getting into being a landlord because you think the property will take care of itself, think again. Every property will require careful monitoring and routine maintenance to ensure that the landlord’s investment is safeguarded. And if you are going to manage your properties personally, it is good to be prepared for those 3 am wake-up calls.
Good Tenants Are Worth Their Weight in Gold
Any landlord will quickly find that a quality tenant screening process is almost a necessity more than anything else. Of course, this will require more time to chase down things like personal references and credit reports. However, the extra effort is well worth it. A good tenant won’t cause issues with other occupants and will take good care of their home.
Landlords should want a tenant that cares about their home, as this means they will be sure to report when maintenance is needed. In addition, having long-standing tenants will help foster a sense of community and reduce turnover among your units. Reducing turnover is always a good thing as filling spaces is always the most expensive time for any landlord. Having good tenants will also help cut down on evictions. The eviction process can be prolonged and costly. This is why an eviction should be avoided whenever possible and why screening is vital.
Treat Security Deposits as Necessary
There are strict laws governing how a landlord should handle any security deposits and their appropriate return. Knowing how they function where you operate can make a big difference in what a landlord can and should do with that money.
For example, in New York City, security deposits should be placed in an interest-bearing account and returned to the tenant within fourteen business days (less any money used for necessary repairs). In Chicago, on the other hand, landlords must give a receipt specifically for security deposits and place the money in a federally insured bank account with a minimum interest rate. As hopefully is now more precise, depending on the location you are doing business, the regulations regarding security deposits can vary widely.
Never Stop Learning!
Finally, there is this last piece of advice to all landlords: never stop striving to learn more about the business. More knowledge almost always helps you better understand the nuances of a situation.
For example, better understanding the market or neighborhood you are functioning in will always benefit a landlord. However, conditions change. If you haven’t done your homework on an area in a decade, your perception is likely outdated. So always take the time to learn more about the business. You surely won’t regret it!
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