Essential Tips for First-Time Landlords: 13 Key Insights
Becoming a landlord comes with its own set of challenges, especially for those new to the role. From attracting and vetting tenants to drafting effective rental agreements and managing rent payments online, navigating these responsibilities can seem overwhelming.
To help you get off on the right foot, here are 13 crucial tips every new landlord should know:
1. Approach Your Rental Property as a Business
Even if managing rental properties isn’t your main job, it’s crucial to treat it as a business. This means maintaining professionalism in all interactions with tenants, keeping your finances well-organized, and ensuring thorough tenant screening before they move in.
Running a successful rental business requires adherence to various regulations. It’s essential to familiarize yourself with federal, state, and local laws to avoid legal issues and build a positive reputation. Real estate and rental properties come with numerous rules, so take the time to research and understand these requirements before diving in.
Protecting yourself from potential liabilities is also important. Consider purchasing landlord insurance to shield yourself from financial losses in case of incidents like property damage or theft. This insurance can help cover costs if you face legal claims or unexpected repairs.
Preventing issues before they arise is key to successful property management. Ensure your property is in top condition and meets safety standards. Invest in necessary upgrades and regular maintenance checks. For instance:
• Test smoke and carbon monoxide detectors
• Clean and inspect vents
• Check for any issues with internal and external pipes
Once tenants are settled, have a plan for addressing emergencies. For example, know how to handle a broken furnace or assist tenants who accidentally lock themselves out. Keeping contact information for a plumber, locksmith, and contractor on hand will help you respond quickly to any issues.
By maintaining professionalism, managing finances carefully, adhering to laws, protecting yourself from liability, and proactively addressing potential problems, you’ll set yourself up for success in managing your rental property.
2. Locate Tenants Through Online Platforms
In today's digital age, most prospective tenants search for apartments online, making it essential to create a compelling online rental listing. Utilize popular rental websites like Trulia to maximize your reach.
To attract tenants, your listing should include all relevant details about your property. This includes the rent amount, property address, number of bedrooms and bathrooms, available amenities, and nearby attractions. Providing thorough information makes your listing more attractive to potential tenants. Additionally, upload clear, high-quality photos of every room and common area to help prospective tenants visualize the space.
Crafting an engaging rental listing that showcases your property's best features and clearly states your requirements will help you find reliable tenants who are likely to pay rent on time and take good care of your property.
3. Think About Hiring a Property Manager
Engaging a property manager can be a valuable investment if you want to reduce the time and effort involved in managing a rental property. Property managers handle tasks such as marketing the property, collecting rent, and resolving tenant issues. They can also be particularly beneficial if you own multiple properties and feel overwhelmed by the responsibilities.
Considering a property manager is especially wise if you don't live near your rental property or prefer not to manage it directly. Entrusting your property to a professional ensures it is maintained properly and any issues are addressed promptly, providing you with peace of mind.
Remember, as a landlord, you are legally obligated to provide a habitable living space for your tenants. If you lack the time or resources to fulfill this duty, hiring a property manager may be necessary. Whether it's repairing a roof or repainting walls, a property manager can handle or delegate these tasks effectively.
If your budget allows, a property manager can streamline your landlord responsibilities and make the rental process smoother. Similar to finding the right tenant, it's crucial to thoroughly vet potential property managers. Ask for local references and interview several candidates to find the best fit.
4. Determine the Optimal Rent Price
To establish the ideal rent price for your property, start by researching the local market to understand what the fair market rate is in your area. Setting your rent in line with local standards can be crucial for minimizing vacancies and attracting reliable tenants quickly. Online tools like Rentometer can assist in guiding you to an appropriate rental rate.
While setting your rent price, consider its impact on your finances. Rent payments are your primary income source from the property, so it’s important to balance them against your expenses. Create a list of your fixed expenses, such as mortgage payments, property taxes, insurance premiums, and HOA fees. Then, account for variable costs like utilities, repairs, and property improvements. Comparing your total income to these expenses will help you determine how your rent price influences your monthly revenue.
However, setting the right rent price is only beneficial if tenants pay on time, which is why the next tip is crucial.
5. Implement a Thorough Tenant Screening Process
The primary aim of tenant screening is to identify reliable tenants who will pay rent punctually and maintain your property with care. To find such tenants, it’s essential to sift through the numerous applications and select the best candidates.
When screening tenants, prioritize those who can consistently pay the rent in full each month, have no criminal record, and possess a positive rental history. This process helps ensure you find responsible tenants who will respect your property and fulfill their rental obligations.
6. Implement a Rental Application Process
A comprehensive rental application provides essential information about potential tenants, including their name, current address, reason for moving, employment details, income, and landlord references. Asking the right questions in the application helps you gather the necessary information to make an informed decision about who will reside in your property.
7. Make Renters Insurance Mandatory
Given the prevalence of lawsuits, it's wise to require renters insurance for your tenants. This insurance protects against potential litigation if a tenant's belongings are damaged. Renters insurance is usually affordable, making it a manageable expense for most tenants.
However, before adding a mandatory renters insurance clause to your rental agreement, consult a legal professional. State laws regarding renters insurance requirements can vary, so it's important to ensure compliance.
8. Conduct Credit and Background Checks
Performing credit checks is an effective method to assess if a tenant applicant is financially responsible. When reviewing credit and background reports, watch for red flags like significant debt, missed payments, bankruptcy, or previous evictions. A strong financial and background history often indicates that a tenant will pay rent on time, has no relevant criminal record, and will respect the property.
Keep in mind that renting to someone with good credit is crucial. Even if a candidate seems ideal in other aspects, poor credit may signal financial irresponsibility, which could lead to issues down the road. No amount of charm can make up for financial unreliability.
9. Establish a Written Rental Agreement
Creating a written rental agreement is essential for outlining your expectations and protecting yourself legally. While verbal agreements might be legally binding in some cases, especially for leases under 12 months, they lack the clarity and enforceability of a signed document. Without a written agreement, proving the terms agreed upon before move-in can be challenging.
Your rental agreement must comply with state-specific laws. Using a lawyer-reviewed, state-specific rental agreement ensures your document adheres to legal requirements.
Make sure your rental agreement is detailed and customized. Consider the rules you want to enforce: Are pets permitted? Is there a late rent fee? What is the exact security deposit amount, and how is it returned? Do you need a noise restriction? Tailor your rental agreement to your specific needs. Additionally, if your property falls under HOA regulations, include those in the agreement, such as quiet hours, snow removal, and guest parking rules.
A clear rental agreement fosters a positive landlord-tenant relationship. Define responsibilities for repairs and maintenance: Who covers the costs? Set response times for tenant issues, and specify your availability—24/7 or only during business hours. Ensure your timelines comply with local, state, and federal laws.
Having a comprehensive and specific rental agreement reduces potential misunderstandings and simplifies communication with your tenant. When everything is clearly stated in the agreement, there is less chance for confusion in the future.
10. Enforce and Adhere to the Rules
To maintain the integrity of your rental agreement, it's crucial to enforce its rules consistently. If tenants notice that rules aren't being enforced, they might take advantage of the situation. The most critical rule to enforce is the late rent fee. While allowing a grace period is reasonable, ensure tenants pay the fee if the rent is overdue.
Equally important is that you follow the rules as well. For instance, adhere to the Notice of Entry rule, which usually requires giving tenants 24-hour notice before entering the unit. Respecting these rules not only upholds the agreement but also builds trust and respect with your tenants.
11. Facilitate Online Rent Payments
Collecting rent online is both convenient and secure. According to Money magazine, 61% of millennials and 42% of older generations prefer to pay their bills online. Making rent payments easy increases the likelihood of timely payments. Tenants can even schedule automatic withdrawals, ensuring the rent is paid on time every month. The convenience of online payments is appreciated by tenants, and landlords benefit from reliable payment schedules.
Online payments also offer transparency. You can see when a tenant schedules a payment, the exact date it leaves their account, and when it will arrive in your account. This eliminates the common excuse of "the check must have gotten lost in the mail."
Additionally, mailing checks carries risks such as loss or theft of bank account details. Online transactions encrypt personal information, making them more secure. With the added convenience and security, online rent payments are the best way to ensure timely payments each month.
12. Maintain Digital Records
As a landlord, it’s essential to keep comprehensive records of everything: deposit receipts, rent payments, maintenance receipts, and all communication with tenants. Digitally storing these records helps you stay organized and eliminates paper clutter.
Maintaining detailed records is crucial in case of legal disputes. With documented transactions and communications, you can provide evidence to support your claims in court. This proactive approach ensures you’re always prepared.
Digital record-keeping is the most efficient and organized method for managing your rental business professionally.
13. Retain Quality Tenants
After investing time in finding and screening tenants, you want to retain those who pay rent on time and care for your property. Continuously repeating the tenant search process can be draining, so it’s beneficial to keep good tenants.
If you have a reliable tenant, approach them about renewing their lease around 90 days before it expires. Renewing leases helps avoid vacancies and saves you the effort of finding new tenants.
Conclusion
From managing your rental property business, finding and screening tenants, to collecting rent, every step is vital. Our goal is to help you run a top-notch rental business efficiently, without unnecessary time, money, and stress. TransUnion SmartMove offers an online tenant screening service designed for busy, independent landlords. With quick access to credit, background, income insights, and eviction reports, you can fill vacancies promptly. With the right tips and tools, being a landlord can be a smoother and more manageable experience.