For a myriad of reasons, many homeowners are finding themselves in a position to become a first-time landlord. Perhaps the cause for you is a military move, a job change, or the need to rent the home of an elderly relative. It may be that you love your home and want to return to it in the future, that you see the investment potential in holding on to the house, or you view such a move as a money-making proposition in the long run.
Whatever your reason, taking on the responsibilities of a landlord is a serious decision, but it is a “do-able” task if you exercise due diligence before leaping into that role by educating yourself about state and municipal regulations, tenants’/landlords’ rights and responsibilities, required documents, and legal terms and industry jargon.
A few tips to help you get started...
- Have a financial plan in place. Analyze the cost of annual maintenance and repair, property taxes and insurance, travel, if applicable, and legal fees. It is important, also, to have a “rainy day fund” set aside for unexpected (and sometimes large) expenses.
- Consult with a real estate attorney before beginning as a landlord. Avoid invalid or incomplete lease agreements, understand timelines, and seek legal advice in general.
- Estimate the amount of time your landlord duties will require of you and be realistic about your ability to adequately cope with them. It may be in your best interests to consider hiring a property management team (we do that!!) to deal with finding new tenants, emergency repairs, and other time-consuming chores.
- Learn about your prospective tenants. If this task is left to property managers, be sure they have done a thorough job of vetting the clients Ask about their previous rental history, why they are moving, where they work, and their income. Call their previous landlords. Have them complete a rental application and take the time to verify their good credit and their employment, which will help you determine their ability to pay the rent. Online websites, such as Youcheckcredit.com will, for a fee, provide this service for you.
One caveat: if you are planning to buy another home and rent the existing one, understand that you are entering a far more complicated transaction. Consult with your Realtor, your banker, and numerous websites to understand the intricacies of such an endeavor.