Entering the world of property ownership comes with a great deal of responsibility. On one hand, offering others a chance to find and create a home can be incredibly fulfilling along with being a lucrative long-term investment for landlords — whether employing a property manager or taking on the duties yourself. On the other hand, you won’t know what that experience is like until you do it. When you get down to brass tacks, it’s also a business; one every landlord hopes turns into a lucrative and secure investment.
From overseeing efficient and effective repairs to managing utilities costs and of course, selecting quality tenants, there’s a lot to learn for every first-time landlord. Here are a handful of points that can get first-time landlords off the ground:
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Key Rental Facts
- 41% of adults ages 35-44 rent instead of own1
- The median home rent in the United States is $1,5882
- 91 of the 100 largest cities in the U.S. have seen rent increases over the last year3
Must-Know Landlord Advice
1. Know State and Federal Ordinances
It’s not only necessary to protect yourself legally but protecting your tenants should be a priority if you hope to build trust and create an environment people are happy to call home.
With 50 states in the union and countless counties within each state, it’s important to do your diligence and be up to date on any county, state, and federal housing laws. From whether your state requires a move in/move out checklist to understanding the full scope of protections under the COVID-19 CARES ACT federal eviction moratorium, there are different guidelines to know and follow, along with knowing the state or federal departments governing your area.
Find landlord handbooks for nearly every state here.
2. Collect Rent Online
Rent is your main stream of income on a property and therefore collecting it will be high on the list of important tasks. It’s likely the main reason you decided to make this investment.
If we’re being honest, there’s no real reason beyond personal preference why you should be collecting rent in person come the first of each month; doing so will be inefficient when you add up the number of tenants you’ll have to collect from, implement an in-person drop-off or collection system for each of them, make your deposits at the bank, and ensure that you’re receiving all funds in a secure way without anything getting lost.
Automating this task and allowing tenants to pay online is not only a timesaver for both of you but it can offer protection against bounced checks and even late payments, as digital payments will always be tracked with an exact date and eliminate possible disputes on meeting deadlines. Some of the best online property management and rent collection software can be found here.
3. Budget Your Monthly Overhead
If you own an apartment, you’re probably footing the bill for water and garbage collection, which is expensive. Utility costs are just one factor that plays into the “nobody knows until they do it” philosophy, where many landlords can easily overlook how quickly such costs add up when weighed against their monthly income. And those costs pop up in places you don’t expect.
For example, laundry on-site is a feature many want in their apartment or residence, but it can be incredibly expensive. The costs for electricity and water in a single room of an apartment building can be quite high.
So it’s definitely smart to do your homework on the monthly expenses landlords are expected to cover. This is, after all, a business for you. And the same outlook should be applied to irregular expenses as well. Like…
4. Have a Repairman You Trust
You can’t cut corners when it comes to in-home repairs like plumbing, leaks, or electrical repairs. Tenants are protected from living in homes with substandard conditions, meaning you not only will be expected to oversee repairs in a timely manner (late-night emergencies included), but they also need to be executed in a professional manner to ensure safety.
Furthermore, the last thing you want to do is pay for the same repairs over and over. So why not put in some time to find a repairman or business you fully trust? On one hand, it can create peace of mind for you and your tenants to have quality repairs, on the other, establishing ongoing relationships with a business can present opportunities for discounted partnerships for common services like plumbing.
5. Screen Prospective Tenants
Ultimately, some decisions will come down to your gut feeling but it’s important to implement a screening process that’s likely to produce the best possible tenants. So, what are your criteria for a quality tenant?
No landlord wants a revolving door of tenants, so perhaps researching and knowing an applicant’s rental history will give you an idea of how long you can expect them to stay. The same logic applies to requesting employment history as well as income to verify their ability to pay rent consistently and on time. You may even request professional or personal references. No matter the criteria — assuming it fits within fair housing laws — being thorough in your selection of tenants will be a valuable use of your time, ensuring (as best you can) you have quality over quantity.
A basic Rental Application Form can be used to inform you of employment, background, credit, and prior leasing history, while a Tenant Background Check Form authorizes a landlord to perform credit and/or criminal background checks, typically with a fee for the service. Each of these steps will be valuable information in choosing future tenants.
6. Have All Terms In Writing
Articulating these boundaries and expectations early will set everybody for success. Over time you will come across some new policies for new tenants that fit your specific preferences, and having them documented is a good way to make expectations clear and transparent for your tenants.