If you’re planning on becoming a rental property owner for the first time, you might have a hard time imagining the scope and depth of what it entails. There are numerous tasks you’ll have to engage in.
You can make rental property ownership considerably easier for yourself by learning about the ins and outs of what you’ll have to do beforehand. Understanding the basics of being a landlord and then developing a more extensive knowledge of the landlord-tenant laws is one of the keys to success in this industry.
The following of some of our top 6 tips for managing your first rental property. Following these, you’ll be more likely to maximize your ROI.
1. Learn About Your Local Laws
Before purchasing your first investment property, you should make sure you understand your local landlord-tenant laws first. You do not want to make any legal mistakes that could cost you. Avoid unwanted penalties and fines by doing your research beforehand. For example, it'll be important to be fully up to date with New York's eviction laws.
Your main focus should be on building codes and zoning laws. It's easy to slip up with these topics as a first-time landlord. Before renting out to tenants, ensure that your property complies with all of the grassroots regulations. This will keep you from running into legal issues later on.
2. Screen Your Applicants
Tenant screening is an essential part of managing a rental property. You want to find tenants who follow the rules of your lease agreement, pay rent on time, and treat your property well. Finding the right tenants requires proper screening procedures.
When you screen your tenants in the right way, you filter out the unfit applicants from your list of prospects. By following strict screening measures, you cut the risk of later expenses, damages, and even legal issues if you end up having to evict them.
Here are some of the questions you should be trying to answer during your screening process:
Does the person have a criminal record?
Does your applicant have steady employment?
What information about them emerges from a credit check?
Does the applicant have references from past landlords or employers?
Has the prospective tenant faced eviction in the past?
When your are screening tenants, you must ensure you are complying with the Federal Fair Housing Act (the FHA) and other tenant screening laws. According to the Fair Housing Act, you can't discriminate against someone based on their race, color, sex, national origin, disability, religion, nor familial status. Make sure you adhere to this strictly when you’re screening tenants.
3. Minimize Your Tenant Turnover
Most property owners will have to deal with reducing their tenant turnover rate. This is an important task because empty units result in regular expenses while failing to compensate in any way for these costs.
Minimizing your tenant turnover starts with becoming a great landlord. Be communicative, friendly, and empathetic with your tenants. Try to respond to their maintenance' requests as soon as possible.
By creating healthy relationships with your renters you reduce the risk of frequent turnovers. Respect and open communication can go a long way in encouraging a tenant to resign their lease.
You may even want to offer incentives to boost long-term tenancy. For example, you could offer cheaper monthly rent rates in return for fixed long-term agreements or renewals.
4. Decide on Advertising Techniques
Marketing and advertising your property are crucial to your success in finding tenants for your rental property. It's important to consider various options such as online listing sites, bulletin boards on campuses and community centers, and posting for rent signs on the property.
No marketing effort is complete if you don’t include high-quality visuals. You should take professional photos of your rental property's interior and exterior areas. Ensure that you get good lighting in the photos and include them in all of your advertisements.
5. Ask for a Security Deposit
Collecting a security deposit is critical to protecting your financial interests as a landlord. Whenever a tenant seriously damages your rental property, you can soften the financial blow by using their security deposit to cover the costs.
Security deposit also helps increase a tenant’s awareness of the financial consequences of their actions. In return, this will likely lower tenant damages and general negligence.
You want to make sure you’re not asking for a deposit that’s too small. You need to ask for an amount that will actually be able to cover the costs of substantial damage if it happens.
6. Create Solid Lease Agreements
The most important document regulating the legal relationship between you and your tenants is the lease agreement. You should make sure that your lease agreement is as comprehensive as possible.
If you have a dispute with your tenant, you can refer back to the lease agreement. When you haven't adequately covered some aspect of your rental property in the lease agreement, you increase the chance of exacerbating the conflict.
You should address the following questions in your lease agreement:
Do you allow smoking inside the rental unit?
What is the monthly rent? When and how should it be paid?
What are your tenant’s responsibilities?
Do you accept pets in your rental property? If you do, are there any restrictions?
What is your late payment fee policy?
What are your responsibilities as the landlord?
Sometimes first-time landlords don't feel comfortable going in-depth with their lease agreements. In reality, you should put down as many details as you can. This will make your life easier later on.
Overview of some Essential Tips for First-Time Rental Property Owners
Owning a rental property is not an easy task. You need to find a great property and make sure it’s up to date with all the habitability laws. Afterward, you need to manage all the related aspects of owning a rental property including marketing, tenant screening, rent payments, and regular maintenance. The process may be difficult but it’s extremely rewarding and can help increase your personal wealth.
If you feel that taking on all of these responsibilities and duties may be a bit too much, consider hiring a professional property management company, such as Essential Property Management. We will handle all the associated stress and worries while caring for your property and focusing on maximizing your ROI. Contact us today for more information!