Whether you’re looking to develop a second revenue stream or are being forced to move away from home for a job assignment or family duty, renting out your home can be a great way to keep your property and earn money on it.
Very few homeowners understand the intricacies of being a landlord, however. Here’s what you need to know.
Take everything into consideration
Leasing a property you own to people you may or may not know is a serious proposition. If you’re like most people, your home is probably your most valuable asset, and you aren’t eager to make careless decisions about it.
As such, you have to take incredible care to ensure you find good tenants, protect yourself legally, and thereby position yourself for long-term financial success. Here are four specific things you mustn’t forget during the process:
1. Run background checks
Ask any successful landlord what the secret of his or her success is and nine out of ten the person will point to the ability to find good tenants. The quality of your tenants — which means people who pay on time, respect your property, and don’t make a big deal out of every little thing — is everything, and you can’t afford to slip up and accept people who are troublesome or irresponsible.
Contrary to what people may lead you to believe, the process of legal eviction is very time-consuming and can be costly — so it shouldn’t be an automatic “fallback.” Granted, there’s no foolproof method to select tenants, it’s always a good idea to run a credit and background check.
You should also establish the rule of always meeting prospective tenants in person before agreeing to sign a lease.
2. Determine an accurate rent
Setting a rent at the perfect level can be a touchy task. Fortunately, there are plenty of tools to help you along the way.
Websites like Rentometer.com let you find out comparable figures in your area and will tell you if you’re under or over-valuing your property. Just remember that you can always lower your asking rate, but it’s difficult to back your way out of a low rate after a prospective tenant is already interested.
3. Draft a rental agreement
It’s always a good idea to get your legal documents and forms drafted before you actively pursue tenants. You can fill in the details and variables once you’ve agreed on specifics.
Instead of attempting to handle it on your own, you should get assistance with the rental agreement format. Contracts are nothing to take lightly; they serve as your best form of protection should anything go wrong.
4. Hire a property manager
Unless you plan on making this your full-time job, it’s smart to hire a good property manager to handle the specifics of being a landlord. A property manager can schedule service calls, collect the rent, and communicating directly with the tenant if any issues arise.
A good one will also help you market your property in the future and find new tenants should your existing ones move on.
Take the stress out of renting
Being a first-time landlord is stressful, but — as with anything — it gets easier over time. By keeping the above tips in mind each time you rent a new property, you can avoid making critical mistakes.