Investing in real estate is one of the most financially prudent things an entrepreneur can do. For some people, this means buying run-down homes, making repairs, then flipping them for profit.
However, if you’re looking for a way to make recurring revenue, investing in a rental unit and becoming a landlord is an amazing way to earn a passive income. The only problem is, most people don’t know the first thing about being a landlord.
That’s what we’re here for. Keep reading for our top nine landlord tips.
1. Research the Local Housing Market
First, you need to understand the local housing market. If you don’t already have a property, identify the best neighborhood in which to invest in a rental unit. Depending on your budget, this could be a single-family home, a duplex, a single apartment, or an apartment complex.
Furthermore, you need to figure out the appropriate rent price based on the size, quality, features, and location of your rental. You can also take other things into account, like whether or not you’re paying for utilities.
2. Understand the Local Landlord and Tenant Laws
One of the most important landlord tips for first-time landlords is educating yourself on the local rental laws. What are your rights as a landlord? What are your tenants’ rights?
This is important for keeping your side of the street clean. The last thing you want is a lawsuit on your hands or legal charges. We recommend working with an attorney to better understand the local laws.
3. Determine What Responsibilities You Need to Take On
Naturally, being a landlord means taking on certain responsibilities and obligations. For one, you need to provide a safe and healthy environment for your tenants.
Additionally, you are responsible for making certain repairs pertaining to the functionality of the home. These include things like plumbing, heating, cooling, electrical, and other major functions.
We recommend learning as much as you can about home maintenance and repair to save yourself on the costs of hiring professionals. For example, there are basic plumbing tips every homeowner should know that could save you hundreds of dollars in the long run.
You may also decide to take care of landscaping, yard work, snow plowing, and other regular maintenance issues. Finally, decide if you want the utilities to remain in your name or if you want your tenants to be responsible for them.
4. Treat Your Rental Like a Business
One of the most important landlord tips is learning how to treat your rental like a business. This means making an effort to please your customers (tenants). Focus on renter safety, comfort, and satisfaction.
However, you also need to ensure you’re getting paid. Empathy is important, as everyone falls on hard times. That being said, if a renter is constantly making late or short payments, you may need to reassess the situation.
In this scenario, you can call the renter and have a heart-to-heart with them. Tell them that if they continue to make late payments or fall behind, then you’ll be forced to evict them.
5. Figure Out How You Want to Charge and Collect Rent
Once you’ve established a fair rental price, you need to figure out how you want to collect money from your tenants. Do you want to receive a money order or check or make it digital. Digital options include:
- ACH direct deposits
- Google Pay
- And more
Additionally, determine what you want to charge renters outside of the monthly rent. This includes a security deposit that you will keep or give back depending on the condition of the unit when they leave. You may also decide to request the first and/or last month’s rent upfront.
6. Explore Alternative Methods of Increasing Your Revenue
One of the most financially prudent landlord tips is to learn how to make the most from your investment. You need to be fair and charge competitive prices for your unit. However, there are other ways to make money off your tenants, such as:
- Installing vending machines in common areas
- Having an on-site laundry room with coin-fed machines
- Renting out extra storage space
- Charging renters extra for pets
- Common area maintenance fees (lawn care, snow removal, etc.)
If you own an apartment complex, you can also look into adding bonus features such as a fitness center, hot tubs, and a pool. These will cost you money upfront but will allow you to raise your rent prices.
7. Figure Out How to Screen Applicants
As a landlord, you’re entitled to a rental applicant’s personal information. You need this information to screen potentially unreliable tenants and prevent future issues. This information includes:
- Finances (income and credit history)
- Rental history and references
- Employment references (including paystubs)
- Criminal history (if applicable)
- Driver’s license and social security number
You can choose to request more information if you want, such as character references, vehicle information, emergency contact information, and whatever else you deem necessary.
8. Invest in Insurance
As a property owner, it’s vital that you invest in landlord insurance. You need to make sure you’re financially covered in the event of a major incident, such as flooding, fire, etc. This can also be useful if a disgruntled tenant decides to act vindictively and cause damage to the unit.
Just as importantly, we recommend making renter’s insurance a mandatory requirement for tenants. This will cover the costs of their personal possessions in the event of a catastrophic accident such as those listed above.
9. Create a Solid Contract and Have it Reviewed by an Attorney
Finally, one of the most important landlord tips is making sure your lease agreement is bulletproof. We suggest having an attorney look it over to find any flaws, inconsistencies, etc.
The contract should include things like:
- Late payment fees and consequences
- Eviction guidelines
- Rules and regulations
- Monthly rent, security deposit, and other fees
- Renewal guidelines
- Tenant responsibilities
- Landlord responsibilities
- And more
Take your time and make sure you cover all of your bases. For example, if you are still trying to sell a home that you’re currently renting, you need to outline how events will unfold if you have an interested buyer.
How long will the tenant have to move out? How will you show the home to potential buyers with tenants living there? Alternatively, can the tenants themselves put an offer on the home?
Looking for More Landlord Tips and Other Business Advice?
Being a landlord can be incredibly rewarding and provide a reliable source of passive income. Many people have gained significant wealth by investing in rental units and building up their properties over time.
However, if you want to be a successful property owner, you must follow the landlord tips listed above. And if you’re looking for more business advice and information, check out some of our other articles before you go. Our blog was created to help entrepreneurs like you to thrive in the competitive business world.