If you are ready to become a landlord, there are plenty of things that you should be aware of before going down that path. Becoming a landlord can be a rewarding experience when done correctly but there are some crucial steps that you should take to avoid common pitfalls.
To become a landlord, spend time investigating what is the optimal property to purchase like a future apartment in alexan noho west north hollywood ca. Next, do research on your state’s rental laws. Draft a lease, spend time meeting and connecting with potential tenants, and make sure to invest in the necessary maintenance of the property before renting to avoid getting sued by tenants or having to spend more later.
1. Understanding Your Personality and Responsibility
Whether you are cut out to become a landlord has a lot to do with your personality and natural talents. There are many aspects to becoming a landlord that many people would find difficult while others may have no problem with. The psychological toll, the financial risk, and the constant demand for your time are a few examples of some of the realities that come from being a landlord.
In the face of tough decisions, a successful landlord must be able to adhere to the contract (the lease agreement) without being swayed by emotional actors. Land lording can be tough and often requires that hard decisions be made (more on this later).
Being on Call
An aspect of being a landlord that many do not consider is that the house they rent out is their responsibility in many ways. Any problems that come up often land directly in the landlord’s lap and must be taken care of efficiently and at any time.
That said, having a network of skilled professionals on hand that have prices and cost structures that you are happy with can save you from a lot of anguish. If any problems do arise in your rental properties at odd hours, these issues can often be solved with a quick phone call.
Even with a plan in place when it comes to dealing with issues that come up on your property, there will be times when your presence is needed. Whether you need to show up in the middle of the night or in the middle of an important or personal meal, it is possible that you can get called away to attend to your property.
2.Treat it Like a Business
As with any business, being a landlord requires certain rules that you should follow in order to be successful.
One of the first things that new landlords should learn is that they should not be too lenient. Even if the intention is not there, it is only natural for a tenant to begin taking advantage of the situation.
Lenient landlords often leave their tenants with the idea that paying late is OK and that there will be no consequences. As a result, property-owners suffer from an endless cycle of late payments and excuses that could have easily been avoided.
Learn the Laws
Landlords should always be well versed in the laws governing their venture. Become familiar with the regulation relating to properties in the area where the property is located.
Some states are more lenient towards tenants and others towards landlords. It is important to know the situation where you intend to be a landlord.
In some cases, tenants can stay in a home for a long time without paying their rent because laws in their area provide a period of catchup. Adversely, some states allow landlords to issue vacate notices within a month of a late rent payment.
3.Create a Solid Lease
Local laws are built to protect both the tenant and the landlord. In most cases, however, they do not go as far as a good lease to protect the landlord and property from misuse.
Your lease is a legal document and should be prepared as such. Do not download a rental agreement online and assume that your interests will be covered. It is always best practice to have a lawyer, who is well-versed in rental law, draft your lease for you.
Build Your Desired Outcome Into the Lease
There are several things that you can stipulate in the contract to keep your desired outcomes clear.
Your expectations concerning home improvement projects, painting, yard work, maintenance, smoking, pets, and just about anything else that is important to you, should be clearly stated within the contract.
4.Follow Your Contract
Follow the rules that you establish from the beginning. If you do not want pets in the property, do not allow any pets. If you have a system for charging late fees for rent payments that come late, do not make exceptions.
There are several reasons that you should stick to the contract. Doing so protects you and the tenant.
Send Clear Messages
Every time the contract is broken by the landlord, a clear message is sent to the tenant. That message, of course, says that the contract is more of a guideline than a legally binding contract.
Protect Your Interests
Breaking the contract opens doors for tenants taking advantage of your relaxed nature.
Breaking the contract opens doors for tenants to use your contractual infringements against you. You don’t want to end up getting into trouble as a landlord simply because you failed to follow the rules that you established from the beginning.
Maintain Good Communication
Inform tenants promptly and clearly when they breach the contract. This sets a clear message that the contract will be followed under all circumstances. Proper notice also means that there will be no surprises if you are forced to take steps to resolve any issues that you are faced with.
Many newer landlords do not consider this but collecting all of the rent payments upfront can lead to some surprising problems.
Check Local Laws
Before accepting large, up-front payments for the rental contract, it is always a good idea to check with the local laws first.
In some states, there are interest rates charged for early rental payments, and in others, landlords are only allowed to collect a certain number of months in rent at one time. Failing to follow the laws that govern these types of payments can lead to problems in the future. Be sure to check in your area if your tenant offers to pay in full.
Consider Motivation for Large Rent Payments
Another thing to consider when tenants offer excessive amounts of rent upfront is where that money came from. Generally speaking, tenants who are tempted to pay upfront are not used to having large amounts of money and they are looking for security.
In these cases, paying upfront is a sign of financial insecurity and that should be a red flag for you as a landlord. What happens when new payments are due? Will there be another large payment or will all funds be exhausted by then.
It is also worth asking yourself in these situations why someone would want to secure a place for a set number of months with little to no contact with you. It would be fair of you to suspect illegal activity or other nefarious activities.
Apart from simply checking the credit report of prospective tenants, there are a few other things that you can do to screen them.
Coming up with a clever questionnaire is a good place to start. Asking questions like, “how many pets do you have”, and “how many people will live in the house with you”, are good places to start.
Any questions that you ask should leave room for interpretation because people will answer these types of questions in different ways. Asking yes or no questions limits the types of responses that you can receive, and that puts the account on the amount of information you can get from your questionnaire.
As part of the screening process, you can also try to notice aspects of the prospective tenant’s personality by looking at various aspects of the tenant’s behavior and attention to detail.
For example, walking your talents out to their car at the end of your meeting gives you the chance to see how much time and care they put into keeping their vehicle in good condition. This can give you insight as to how that tenant will take care of your property.
When putting your listing online, there are some things that you should always do to protect yourself from scammers.
To avoid scammers stealing your images and listing to use in their own con projects, it is always a good idea to watermark any images of the property that you post. This will deter scammers from choosing your listing as this will take your listing out of the ‘low hanging fruit’ category.
Another step that you can take to avoid potential exposure to scam artists is to make the address available only to prospective tenants who contact you directly about the property. While it is fine to give general information about where a property is located, providing the address is almost never necessary.
8.Maintain a Professional Relationship With Tenants
It may seem obvious but being a landlord for a person that you care about can be quite difficult. As a landlord, you are forced to make decisions that can be difficult for the tenants.
If those decisions end up having a negative impact on those you care about, there is always a risk that those relationships can become strained.
On the other hand, if you fail to make those difficult decisions because of the relationship that you have with the person living in the property, you may end up losing far more money than you otherwise would.
9.Becoming a People Person
It is also important to learn how to respond to the various needs, issues, and demands of the tenants living in your property. As a landlord, you provide a home to your tenants and when it comes to homes there is a large number of very personal problems that you will be exposed to.
As a landlord, you should stick to the contract and maintain some distance between yourself and the tenant. However, you should not be inhuman. Listening to the tenant and to the issues they are facing can be helpful for you and them in many ways.
Listening and understanding does not mean that you should change your mind about following your own rules. But it does let the tenant know that you can both care about them and enforce the contract.
10.Prepare Rental Property for Heavy Use
An unfortunate fact of life for a landlord is that there is a constant stream of repairs and maintenance tasks that are required. These occur when tenants are still living in a home, as well as between renters.
As a result, landlords can save a lot of money in the longer term by opting for fittings, fixtures, and materials that are conducive to long-term, heavy use. Among other things, you should consider using door stoppers, durable surfaces, and laminate flooring that requires little maintenance and lasts for years.
Is being a landlord profitable?
Being a landlord can be profitable. There is no guarantee of profit, however. Many factors work together to make a landlord profitable. Good tenants and low maintenance costs are just a couple of the things that can help you become a profitable landlord.
How much money do you need to become a landlord?
To become a landlord, you do not need to shell out the entire cost of a home upfront. All that is required is that you can cover approximately 20-30% of the cost of the property.
So, if a house costs $200,000, the down payment could be around $50,000. Once the house is yours, you are free to rent it out for a profit.