Putting your property to work? Hone landlord skills
Being a good landlord is one of the key ingredients to generating a positive cash flow from an investment property. But becoming a landlord involves navigating unfamiliar tasks, such as vetting tenants, creating lease agreements and making home repairs — and a poorly managed property can make a rental a poor investment.
Here are tips for first-time landlords.
Check your community’s rules for rentals:
If your property is part of a homeowners or condo association, the association likely has rules governing rentals. Some ban homeowners from renting properties altogether, while others limit the percentage of units that can be rented out. There could also be restrictions for lease terms as well as tenant registration requirements, deposits and move-in fees.
Review your local landlord-tenant laws:
State law often governs certain aspects of the landlord-tenant relationship, from how much a landlord can charge for rent and security deposits to a landlord’s access to the property and the eviction process. Your city or county may have additional landlord-tenant laws, says Corina Eufinger, a real estate investor in Wisconsin.
It’s also important to get familiar with Fair Housing laws regarding federally protected classes and additional protected classes in your state, says Alexandra Alvarado with the American Apartment
Owners Association.
Vet tenants thoroughly: “Screening tenants is your best line of defense against any number of financial catastrophes, whether it be rent that doesn’t get paid or a renter damaging your property,” Eufinger says. Pull an applicant’s credit score, criminal history and eviction history. You can do this using a tenant screening service, such as MyRental, RentPrep, RentSpree or SmartMove. Fees for these services typically run $25 to $40 per applicant; many landlords charge prospective tenants an application fee to cover the cost.
Craft an ironclad lease agreement: There are free state-specific residential lease templates available on such websites as Avail, eForms and Legal Templates, but a real estate lawyer can help you create a lease agreement that protects your interests and limits your liability.
Most home insurance policies won’t cover damage or theft for rental properties, says
Get landlord property insurance:
Pat Howard with Policygenius, an insurance marketplace. Switching to a landlord property insurance policy can help you cover losses in certain events.
Have good help on speed dial: Unless you plan on being your own repairman, you’ll want to have a roster of reliable tradespeople you can call on to address surprise home issues.
Set the right rent price: To determine how much a typical renter in your area is able and willing to pay for your type of property, look at local market data using a website like Rentometer, RentCafe, RentRange or Zumper. If there’s a lot of competition in your area, pricing your rent slightly below market value can make your listing stand out.
Maximize the tax breaks: Rental property owners are typically eligible for a variety of tax write-offs. The IRS website’s Real Estate Tax Center provides answers to frequently asked questions about tax deductions for rental units.