You’re all smiles as you plan to dip your toes into the lucrative real estate industry. Or maybe you’ve already built a property ready to usher in your first tenants.
Either way, as a first-time landlord, the things to do can quickly overwhelm you.
Don’t worry- we are here to hold your hands as you take those baby steps. Here are some of the things to tick off your checklist:
Before opening your property’s doors to tenants, ensure you’ve purchased landlord insurance. You don’t want to suffer from common issues when renters occupy your property.
You can choose from three types of landlord insurance policies:
It’s the least expensive and covers only stated risks. These perils can include:
But you’re not guaranteed compensation for damages from any of those issues.
A DP-2 protects you from more types of risks. The policy explicitly names covered risks, just like DP-1 policies.
Apart from covering what a typical DP-1 does, DP-2 policy may also include:
This policy is an open peril cover that lists any specific risk not included in the above coverages.
The lease agreement is a binding contract that stipulates what you and the renters can and cannot do. The document also explains the steps to take if any party breaks the agreement.
Remember to cover all bases when writing a lease. Sure, a two-page document may cut it for some time. But what if something that wasn’t covered adequately in the document crops up?
Ensure you’ve included and described these items to safeguard your interest while adhering to legal obligations:
The exact clauses, terms, and language may vary with states, so do your homework perfectly.
You want to remain on the safe side of the law. After all, who wants to contend with lawsuits that can tarnish their images and waste resources?
The trick is to know and adhere to all fair-housing acts. This law protects tenants against discriminatory practices in housing based on seven factors:
The Department of Housing and Urban Development (HUD) is responsible for enforcing this act.
Here’s a well-kept secret: A person from HUD can pose as a renter on your property to see if you follow their act. Don’t let them trap you.
Also, if a renter feels like you’ve discriminated against them, they can file a claim with HUD. The department will then conduct investigations to get to the bottom of the matter.
To avoid such accusations and comply with the fair housing act, assume every potential tenant works for HUD or is attempting to accuse you of breaking the laws.
Although we mentioned this point above, it needs its own section. Yes, it’s that important.
Your renter might be a nice person who lets family and friends couch-surf while they look for their places. Or, due to a whirlwind of romance, their significant other might overstay at your property. Whatever the situation, complications may arise in the long run.
On the surface, unscreened guests staying beyond the reasonable time frame might not be the biggest deal. But here are some of the dangers they pose:
Let’s face it- it’s difficult to stop tenants from hosting unscreened occupants. Your best bet is to limit how long these guests can stay. Remember to include this policy in your lease to make enforcement a breeze.
Choosing between hiring a property manager and self-managing isn’t as easy as it sounds. A novice in the industry may view their property as a simple equation of rental revenue – (costs + mortgages) = profit.
But that’s just a basic mantra. It’s also recommendable to account for landlord duties, time, and energy. The duties include:
Managing all these duties can be a stressful 24/7 job. But with a platform like LandlordStation, your task becomes painless. Our one-stop solution will cover everything from tenant screening to document management and online rent payments to renters insurance.
Hiring property managers come with perks of benefits. These professionals make it their duty to understand the rental industry’s fair housing laws and best practices.
Property managers also enjoy powerful links in the industry, thanks to professional groups and associations. So staying abreast with changes in rental laws is painless.
However, these professionals typically charge 7-10% of monthly rental income to handle all the above duties and issues. For instance, the monthly fee may be $100 for a property whose rental income is $10,000. Plus, getting a trustworthy manager can be challenging.
We see you asking, “But I have my property insurance.” That’s great.
However, a smart landlord requires all tenants to have their own insurance policy. These policies protect you against extra liabilities.
While your homeowner insurance covers the actual structure and dwelling, the renters’ insurance protects the tenants and their property from losses.
For instance, your landlord insurance policy will cover building damages caused by a burst pipe, fire, or electrical issue. But what if the fire, water leak, or power surge destroy your tenant’s personal belongings? That’s where the renters’ insurance policy comes in.
Most renters’ insurance policies also include additional living costs incurred from insured misfortunes. Consider a situation where you need more time fixing that pipe, repairing drywall, and replacing the flooring. Such a situation can force the tenant to look for a temporal place, for example, in a hotel. Fortunately, their renters’ insurance policy may pay for extra expenses above their normal living costs.
Looking to finance your dream but don’t have ready cash? A loan may come through for you.
But while loans for rental property share some similarities with mortgages for residences, there exist significant differences. Be sure to do your homework and research the rental loan requirements, including:
You’ll choose between two types of loans depending on the number of units in your property:
Being a landlord can be a rewarding investment. And with the right strategies plus tools of work, your property management duties will be painless and you’ll be on your way!