Landlord Checklist: Tips for First-Timers
So you have just decided that you want to rent out your spare apartment. You are looking forward to receiving some extra income, but you are also nervous about what could happen. As a first-timer, you probably lack experience in dealing with tenants, and there’s nothing wrong with that. But there are things you can do to minimize the risks associated with renting out your new property.
To begin with, you should know and understand rental laws. Your contract will probably account for most of the important details, but it still pays to be on top of things. Make sure you also get landlord insurance, plan your taxes, establish your screening process and be clear with your expectations.
Below, you’ll find a checklist of things every first-time landlord should know and do. Who knows, maybe the real estate arena will be a perfect fit for you, and you’ll consider becoming a real estate investor, exploring the BRRRR strategy example, and maximizing your profits? But for now, read on to make sure you are prepared for the challenges that come with being a first-time property owner.
In each state, there are different laws and regulations that apply to renting a property. As a first-time landlord, you probably don’t know them all. From security deposits to evictions, there are numerous things you need to be aware of before you can start renting your property.
On the one hand, you need to know the rules to protect your interests – if something goes wrong, you need to know what your rights and obligations are. On the other hand, you should be aware of laws that help protect your tenants from unfair treatment.
Start by familiarizing yourself with the Fair Housing Act. This federal law prohibits discrimination in housing based on race, color, religion, national origin, sex, familial status, or disability. In other words, you cannot refuse to rent to someone based on any of these protected characteristics.
In addition to the Fair Housing Act, your state or city may have its own laws that further protect tenants. Get in touch with your local property owner’s association or a law firm to make sure you know all the important laws and regulations. For example, some states require landlords to give tenants a certain amount of notice before increasing the rent.
Of course, you don’t have to be able to cite them all by heart, but it’s crucial that you know where to find information to help you in case of any problems.
As a real estate owner, you need to protect your investment. That’s why it’s important to get landlord insurance. Unlike homeowner’s policies, this type of insurance covers damages caused by your tenants. It will also cover you if someone is injured on your property or in case your property is vandalized – all that, of course, depending on your chosen coverage.
It’s best to contact an insurance agent for advice on the best coverage for your needs. To do so, you will need to provide your agent with some information about your property, such as the address, square footage, type of construction, age of the building, and occupancy rate.
Some of the things you should be looking for are:
- Coverage for loss of rental income if your rental property is damaged in a way that prevents you from renting it out.
- Replacement cost coverage for the structure of your rental property, up to the amount listed on your policy.
- Coverage for personal property on your rental property (such as appliances that come with a leased or rented apartment).
- Coverage for your legal expenses if you need to evict a tenant or go to court over rent collection.
In most cases, you will be required to pay taxes on your rental income. You should be aware of the tax laws in your state to make sure you are paying the right amount of taxes. But paying taxes is just a small part of the story – you should also be aware of how to deduct expenses from your rental income.
Some of the things you can deduct are the cost of maintenance, repairs, and improvements, insurance premiums, and property taxes. But make sure you are keeping track of all your expenses – you will need to keep receipts and other documentation to prove your deductions.
Choosing the right tenants is crucial for a successful rental business. You should set up a screening process to make sure you are choosing the right tenants for your property. To start with, you should require every applicant to fill out a rental application.
This doesn’t have to be anything formal, but it should include questions about their employment, rental history, and credit score. You should also require potential tenants to provide a copy of their driver’s license or other government-issued ID.
Next, you should run a credit check on every applicant. This will give you a good idea of their financial history and whether they are likely to pay their rent on time – the last thing you want is to constantly chase after your tenants for rent payments.
Finally, you should conduct a background check on every applicant. This will help you find out if they have a criminal history or if they have been evicted from other rental properties.
All that should be obviously done within the law. You should make sure that the screening process is fair and does not discriminate against any applicants.
Before you sign a lease with a tenant, it’s vital that you are clear about your expectations from the very beginning – about the rules and regulations that apply to your property. This includes things like how much rent is due and when it is due, what type of behavior is expected from the tenant, and what the consequences are for violating the lease agreement.
For example, if you don’t allow smoking on your property, you should make that clear from the start. The same goes for pets, noise levels, and other things you may want to include in the contract. If you have any rules that are stricter than what is required by law, be sure to include them in the lease agreement as well.
Apart from that, you need to be honest with yourself. Think about how long you want to rent out your property and what type of tenants you are looking for. Do you want long-term tenants, or are you okay with shorter leases typical for holiday rentals?
You should also think about how much you are willing to invest in your rental property. Are you planning to make any improvements or renovations, or are you okay with renting out your property as it is and leaving the maintenance to your tenants?
Answering these questions will help you find the right tenants for your property and avoid any problems down the road. The more prepared you are, the easier it will be to find and keep good tenants and, at last, to become a great landlord.
Even if you do everything right, there is always a chance that something could go wrong. That’s why it’s essential to have a contingency plan in place. For example, what would you do if your tenant failed to pay rent? What if they caused damage to the property? What if they were evicted for violating the lease agreement?
Having a plan in place will help you deal with these problems as they arise. It will also help you avoid making decisions in the heat of the moment.
Furthermore, it’s important to be prepared for the unexpected. Things like fires, floods, and earthquakes can happen, and you need to be ready to face them.
There are a few things you can do to protect your property, such as installing smoke detectors and fire extinguishers and having an emergency fund to cover repairs. You should also consider getting earthquake and flood insurance.
Renting out your property can be a great way to earn some extra income. But as a first-time landlord, you need to be prepared for the challenges that come with being a property owner.
The first thing you need to do is get familiar with your state’s rental laws. You should also get landlord insurance and plan for taxes. Next, you need to establish your expectations so that you can ensure your landlord career is a success. Another crucial thing is to have a contingency plan and an emergency fund set aside in order to prepare yourself and, first of all, your tenants for the unexpected.
Being a landlord requires time and dedication, but with a well-thought-out approach to renting, you could minimize your efforts in keeping things going smoothly. As such, the more attention you dedicate to your first ever rent-out property now, the more issues you’ll be able to avoid down the road. Good luck!
Thank you for reading!