Are you looking to buy your first investment property?
Becoming a landlord can make a significant difference in terms of financial security and growing your wealth. Rental property ownership, however, does come with its distinct challenges.
As a landlord, you need to deal with responsibilities like upkeep and repairs, tenant screening, rent collection and legal compliance. When you are starting your property investment journey, these things can get a little overwhelming with inadequate preparation.
In the following paragraphs, we will list the essential tips for your first rental property investment. You’ll learn about the basics of self-managing a rental. Use these practical suggestions to gain confidence and make wiser decisions.
Cut Your Tenant Turnover Rate
A high tenant turnover rate creates issues for landlords. When you have rental units sitting empty, you still have to take care of the regular expenses without getting any rent payments in return.
There are no quick fixes when it comes to lowering the tenant turnover. You need to strive towards becoming a great landlord. In other words, someone who is dependable and fair, as well as always open and communicative.
In practice, this means responding to your tenants’ requests at the earliest opportunity. When they have any issues, try to see things from their point of view. Aim to provide the best quality of life for your renters.
Building long-term relationships with your tenants is an investment that doesn’t directly involve money. Showing respect and courtesy can decrease the risk of a high turnover rate.
Always keep in mind that admirable communication and quick responses won’t eliminate the chance that your tenants have to move due to sudden changes in their personal lives.
Demand a Security Deposit
Security deposits play an important role in rental property ownership. As a landlord, you need to find ways to protect your financial interests. Asking for a security deposit is one of the essential methods of ensuring that your finances receive adequate protection.
However, there’s more to security deposits. When your renters pay the deposit, it’s less likely that they will behave negligently.
They are aware that part of their money is on the line. Real-life situations have shown that bigger-than-average deposits make people behave more respectfully while living in their rental homes.
You need to find the right balance when determining the security deposit amount. In some jurisdictions, you may have a legal cap on the deposit. Another point to consider is that you might get lukewarm interest from prospective tenants when they see a significantly higher security deposit requirement.
Find Ways for Extra Income
When you are buying an investment property, you should think bigger. It’s possible to take practical steps when making some extra income through minor tweaks and adjustments. Or you could use some rooms or additional buildings that come with the property in a way that makes you more money.
Here are some practical ideas for extra income:
- Maybe there is an unused auxiliary building on the property. For instance, you could use an abandoned shed to offer self-storage services.
- Does the property have any potential to have billboards or other types of paid advertising space designated on it? This idea could serve as an additional income stream.
- Installing solar panels on residential properties can be a lucrative plan. After the installation procedures are complete, you can start selling back the generated electricity to the grid.
Draft Strong Lease Agreements
Lease agreements amount to much more than pieces of paper. This document will regulate the legal rights and responsibilities between you and your renters. You can use the lease agreement to regulate anything that isn’t already part of the Landlord-Tenant Laws.
Make your lease agreement as comprehensive as possible. When you’re dealing with ongoing problems, which lead to disputes, you can readily refer back to the relevant clauses in the agreement.
Sometimes landlords discover that they haven’t used their lease agreements to regulate certain areas of their rental property usage. In these cases, it’s much harder to prove your rights, and the entire thing likely escalates into a court battle.
Here are some friendly reminders of things that you should get covered in your agreement:
- What are your responsibilities? What are your tenants’ responsibilities?
- Is smoking inside the rental unit forbidden? If it’s allowed, then where exactly?
- Are there any late payment fees? What is the exact policy?
- What is the monthly rent amount?
- When and how should your tenants pay rent?
- Are pets allowed in your rental unit? Are there banned breeds, size limitations or other restrictions in place?
Don’t be afraid to go as much into details as you want. Having the rules clearly in place will make life easier for both sides represented in the lease agreement.
Educate Yourself on Fair Housing Laws
The Federal Fair Housing Act (the FHA) was put into place to avoid discrimination in the housing market. For instance, you can’t disqualify your tenants based on their national origin, race, religion and other qualifying characteristics.
Learn about these rules to cut the risk of facing costly legal consequences.
The Bottom Line: Essential Tips for First-Time Landlords
Investing in rental properties comes with a range of potential benefits. These include passive income, self-actualization and long-term growth in personal wealth. Nevertheless, purchasing the property is just the start.
As a self-managing landlord, you have to deal with many responsibilities daily. Many first time rental owners opt for the services of a professional property management company. Consider the same to bring your daily landlord duties and worries down to a zero.