Tips for First-Time Rental Property Owners
by Kayla Keena
If you're thinking of becoming a landlord, you have an entrepreneurial spirit to be envied. It's a pretty picture: the rent rolling in every month, your property steadily rising in real estate value, you set your plush recliner to massage you as you watch your bank account rise. But don't let your enthusiasm blind you to reality. Do your investment research and pay attention to these tips for first-time rental property owners.
Ask Yourself These Questions
- Can I keep up with the demands of my own home?
- Do I have the financial expertise to budget appropriately?
- Can I spare the money?
- Do I understand the real estate market?
- Do I have the patience to deal with tenants?
- Do I have the customer service experience to be respectful, professional, and firm when enforcing a lease?
- Can I communicate well and respond quickly to tenants?
- Do I have the time to take on this endeavor?
- Am I prepared to deal with potential property damage?
If you whispered a defeated No to any of these questions, take a time-out and reevaluate your options.
Crunch the Numbers
When you purchase a prospective rental property, you will be required to place a 20 percent down payment on a mortgage, which may be considerably more than you had to pay for your home's loan. You may also require landowner insurance and flooding or earthquake insurance for the property. Factor in any association fees, property taxes, pest control, and lawn care as well.
You're not done yet. Be sure to account for the months you may not have rent coming in. Calculate maintenance costs and put aside a good amount for emergencies. Take the cost of rent, subtract the costs above, and look at the result. Are you OK with that number as your monthly profit?
Rely on the Experts
As a first-time landlord, you don't want to learn things the hard way. Preempt problems by turning to the experts. Here's how accountants, lawyers, local officials, and property management companies can help:
- Accountants: An accountant can double-check all the math you did. Look for a specialist who understands income property regulations and can prepare you for hidden costs and tax surprises.
- Lawyers: A lawyer can translate state and local housing laws and will remind you that tenants have rights, too. You can avoid a lot of headaches by having your lawyer look over your leasing agreement.
- Local Government Housing Officials: When you apply for your Certificate of Occupancy, introduce yourself to the staff at your local government housing office. They can give you a heads-up about inspections and licenses so you can avoid fines.
- Property Management Companies: You want to be a good landlord, but you may not know what you're in for. Hire a property manager and delegate specific duties, such as bookkeeping, rent collection, maintenance and repair appointments, late-night phone calls, and even evictions.
This is your first step toward becoming a legendary land baron. So, before you sign anything, gather as many tips for first-time rental property owners as you can. Your recliner will have to wait.
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