Becoming a landlord isn’t an easy step. However, if your house has been on the market for longer than you’re comfortable with, it may be time to stop worrying about selling it and just get some income from it. Renting it out means someone lives there, so if something goes wrong, you’ll know.
Do Your Homework
Set a fair rental price. Review rents in your area with one of many online tools, such as Rent-O-Meter, to make sure that your home is fairly priced. Consider any special features that your home offers, such as a master suite instead of a master bedroom, and be sure to market any community amenities, such as easy access to grocery stores and parks, or a nearby pool for the kids.
Get Some Help
A rental manager can make your life as a landlord a lot simpler. They are the person who gets a call when the plumbing is clogged or the AC stops working. Many rental managers have a long list of handyman services and repair professionals who can make repairs and updates much simpler. Be aware that these professionals will charge a fee or a percentage of the rent. When hiring a rental manager, make sure that they don’t charge a minimum for an empty house. If you’re not getting paid, nobody is getting paid. This will increase urgency to get the place marketed and rented out. Also be aware that your first month’s payout may be small; most rental managers charge a hefty percentage from the first month’s rent for marketing.
Check Out Potential Tenants
You will want to check out your tenants. The process of background checking isn’t cheap, but you can save yourself a lot of worry and trouble by doing this work at the front end of the lease.
Background and credit checks will need to be reviewed carefully. If your potential tenant has a criminal record that’s 10 years old but 9 strong years of employment history, you can probably be confident that they’ve put the past behind them. If the arrest is only 2 years old, take care.
If a potential tenant applies and a bad credit history pops up, carefully review the documentation. Someone who is struggling with
- medical debt
- student loan debt, or
- credit card debt
may not necessarily be a bad risk to a landlord. If they’ve been paying their rent regularly, which you can find out from former landlords and property managers, they’re likely a good bet. Recent upheavals in the job market have put a lot of people who were able to pay their bills in a tight financial spot. If you’re able to confirm that they paid their previous rent and didn’t tear up the property, take a chance.
Call Your Insurance Professional
Laws vary from state to state. You will obviously need insurance on the property, but the tenants will need to cover their own possessions with California renters insurance or a similar product in their particular locale. If you’ve started a business to help you manage the rental income for tax purposes, see if you can get a reduced rate on your insurance through your business. Be aware that this may mean you need to put the property under your business name. You will likely need an attorney to make this happen. However, once you’ve taken all of these steps, the savings can be significant.
Be Prepared for Wear and Tear
If you absolutely loved your last house, letting someone else move in can be tough. Not everyone will keep the place as clean as you did. Not everyone will take as much care as you did. Expect worn carpet, scuffed walls and some grime. When you move out, remove all of your belongings. If you have shelving or a built-in workbench in the garage, pull it. Leave nothing in the space, not even touch-up paint. Rent a storage unit or take these items to your new house.
To get the lay of the land as a new landlord, join a local Real Estate Investment Club. Talk to rental managers and find one you’re comfortable with. Go into this with your eyes wide open.