Owning a rental property and becoming a landlord can be a very profitable experience.
Before you can start making gains, however, you must take the necessary steps to ensure your business and rental property are properly set up.
In this article, we’ll be covering how to get started as a new landlord.
Purchasing a Rental Property
Your first order of business as a new landlord is to decide what kind of property you want to own. You have several different kinds of properties to choose from:
- Apartment complexes
- Single-family homes
- Multi-family homes
- Townhouses
- Condominiums
- Vacation homes/short term rentals
Different property types have different lease structures and management responsibilities, so make sure you’re aware of what your management needs are ahead of time.
Location is another important factor to consider when choosing a rental property to buy. Different neighborhoods and cities have different housing demands.
Lastly, you may be looking at buying rental property with existing tenants. A property with reliable tenants whom you can start collecting rent from immediately add value to your purchase.
Preparing the Property
After you purchase your property, you must get it ready for tenants.
First, hire a professional home inspector to evaluate if your property complies with local safety and building codes, and make any necessary repairs. Next, hire somebody to clean the property. It’s also a good idea to add a fresh coat of paint.
Finally, consider taking on larger renovation projects, such as installing hardwood flooring, remodeling the kitchen or bathrooms, and adding smart technology. These improvements will increase the value of your property, so the initial costs of these projects pay off.
Determining a Rent Rate
Coming up with the right amount to charge for rent is one of the most crucial decisions new landlords must make. You should spend ample time and attention on this decision, as an inappropriate rent rate could end up costing you a lot of money.
If your rent rate is too low, you’ll be losing money on what your property is actually worth. If your rent rate is too high, on the other hand, you won’t be able to attract renters. Determining the proper rent rate is all about hitting the right balance.
The best way to come up with the right rent rate is to research local properties. Browse listing sites for properties in your area to gauge what landlords of comparable properties are charging for rent. Keep track of each property’s price, square footage, amenities, and other features on a spreadsheet. Once you’ve collected enough research, you can use this information to determine the value of each feature in your market.
Marketing Your Property
To stand out among all the other properties in your area, you have to know how to advertise a rental property. The first step is creating a great listing. This is the first impression renters will have of your property. A listing is comprised of three components:
- The Headline –This is a single line that contains the most important information about your property, such as price, type of building, number of beds/baths, and location.
- Photos – Make sure your photos utilize natural light, showcase important rooms like the kitchen first, and are uploaded as high-quality files.
- The Description– This includes more detailed information about your property, such as square footage, dimensions, amenities, and policies.
The best way to advertise your listing in today’s landscape is to post it to listing sites. Sites like Zillow, Apartments.com, Trulia, and Craigslist have become the most popular way that renters look for properties, so try to get your listing on as many sites as possible to maximize exposure.
Finding Tenants
When you start receiving interest in your property, make sure you conduct thorough tenant screening. Screening your prospective tenants is the only way you can protect yourself from signing leases with bad tenants. Thorough tenant screening includes requesting proof of income, calling employment and landlord references, and running credit reports, eviction history checks, and criminal background checks.
Make sure to practice fairness when evaluating tenants. The best way to be objective in your decisions is to adhere to a tenant scoring system. By numerically comparing applicants based on criteria like total income, credit score, eviction histories, etc., you can objectively determine who is the most qualified tenant.
Conclusion
There are several steps you must take when getting started as a new landlord.
Before you can start collecting rent, you must first buy a rental property, make repairs and improvements, determine a rent rate, market your property, and screen tenants.
Now that you know what each of these steps entails, you’re ready to get started on your rental business.
