Renting a property can be an incredible source of passive income. Additionally, it can be the way you pay off your mortgage (including property tax!). It might even be what pays for that three week vacation. With that being said, renting your home is not an automatic formula for success. In many ways, you need to treat your rental property as a business.
Do you want to successfully rent out your property? This guide will show you how.
Understand The Laws Intuitively
Tenants have rights. So do landlords. Should you ever find yourself in court (disputes, unfortunately, are common between landlords and tenants), you don’t want to be in violation of the law. In which case, you want to ensure that you’re up to speed on both statewide and federal property law.
Not only will this benefit your relationship with the tenant, but it’ll also inform the leasing contract you create.
- Be Sure to Understand the Fair Housing Act – The FHA is a law that was created to ensure there is no discrimination between landlords, tenants, and general housing. It was enacted to ensure that every American has an equal opportunity to find and obtain a place to live.
The Tenant Screening Process, Be Stringent
When renting a property, nothing quite spells disaster like a malicious or irresponsible tenant. In order to ensure that your property is cared for, your “no pet” rule is not broken, and that rent doesn’t roll in two weeks late every month, you need to find a good tenant.
Finding a good tenant comes down to the efficacy of the screening process. For instance, you should:
- Run their credit score and charge an application fee
- Run a criminal background check on a tenant
- Make them prove their income is enough to support rent
- Reach out to previous references
- Identify whether or not they have an eviction history
- Set specific requirements to ensure the quality of the candidate
- Ask if they will be traveling or frequently at the property
Any seasoned rental owner will tell you that, by all means, you want to allocate resources to find a great tenant. Your focus should not even be “great,” but perfect.
Are you going to require that your tenant takes out renter’s insurance? Did you know that your current homeowner policy probably won’t cover the property if you’re renting it out?
Taking out an effective insurance policy is one of the primary ways (outside of understanding the laws) that you safeguard your finances in the chance of a mishap. You’re going to want a rental home insurance policy that covers:
- Damages did to your property
- Medical expenses that arise from an injury involving the property
- Loss of rental income
By requiring a tenant to take out their own policy, you create another layer of defense that works in favor of both parties. Should something go wrong, they’ll be glad they had their own insurance.
Market Your Home, Keep It in Great Condition
At the end of the day, your rental home is a phenomenal asset! You don’t want it to depreciate due to tenant neglect. To that end, be sure to create a routine schedule to drop by and check on the state of the place. Be careful not to be invasive (or show up unannounced—this comes down to the laws again), but not to avoid seeing the state of the property for months on end.
Additionally, you’ll want to be sure to market your property carefully. The better the marketing, the better the candidates. Atop of photography, videography, and staging, be sure to:
- List all the benefactors of the home
- Include appetizing rental terms that are honest (brand-new X, state-of-the-art X, etc.)
- Consider hiring a property management company
- Post your listing on credible, reputable platforms
The better you care for your property, the higher its value. The more involved with you are in marketing it, the likelier you’re going to attract quality tenants.
Be Kind, Professional, and Diligent
The reality is that being a successful landlord involves both people and managerial skills. At the end of the day, you don’t want any surprises. And, should they occur, you need to be prepared for them. Treat your home like a business, establish a professional relationship with the tenant, follow these tips, and you’ll be well on your way to achieving the success you deserve.
Like with many things, becoming an effective rental owner takes time, practice, and experience. In time, things will fall perfectly into place.