Investing in rental property is a great way to earn passive income, but that doesn’t mean there isn’t work involved in being a landlord.
From maintaining your property to interacting with your tenants, there are numerous factors that will affect your investment. Putting more effort into managing your property will help you keep it profitable for longer.
Read on to get 6 important tips for making your new business endeavor a successful one.
Be Selective in Choosing New Tenants
A comprehensive rental screening process will help you reduce the risks of renting to a bad tenant. Use an application that requests detailed information about the applicant’s personal history, employment record, and finances.
If the application looks good, follow that up with a criminal background check and a verification of the individual’s employment. You should also check references from past landlords or property managers to ensure that the candidate has a good rental history.
Always Update Vacant Units
Even the best tenant will leave some wear and tear on a unit they’ve rented for a long time. When a tenant vacates a unit, make sure to check safety equipment, such as door locks, smoke detectors, and light fixtures. Any holes in the walls, missing outlet covers, or cracked windows should be repaired.
If you find more extensive damage like torn or ripped floor tiles, you can use the tenant’s security deposit to repair the damage. For this reason, you should never return a security deposit until you have inspected the unit.
Once you’re sure all repairs have been completed, you can add the finishing touches. This includes adding a fresh coat of paint to the walls and trim. Have the carpets and flooring professionally cleaned.
Keep an Eye Out for Health Hazards
A tenant can hold you liable for certain environmental dangers that could affect their health.
A common problem of this type is black mold growth, which can occur underneath carpets or in the walls near sinks, bathtubs, and washing machines. Any area where there’s a possibility of a plumbing leak or water damage runs the risk of mold growth.
Reduce these risks by taking good care of your roof and by repairing plumbing leaks promptly. If you do find mold growth, advise your tenant immediately. Then, contact a mold remediation company to remove the mold. Once the mold has been eliminated, you’ll need a contractor to replace any flooring, drywall, or wood that was removed.
Require Renter’s Insurance
Even though you must maintain insurance for your real estate property, you should also require your tenants to have renter’s insurance. A good renter’s policy will help them recover compensation for any personal property that is damaged or stolen.
Many renter’s insurance policies also cover the costs associated with the need for temporary lodging. If your property is destroyed by a fire or storm, your tenant’s insurance coverage will pay for them to stay off-site until your property can be repaired or rebuilt.
Maintain Good Relationships
You’ll have a more positive experience as a landlord if you can develop good relationships with your tenants. Providing advance notice of inspections, rental rate increases, and other inconveniences will help. If you have multiple tenants, you can organize social events to help form a stronger community.
Another way to develop stronger landlord/tenant relationships is by offering incentives. When a tenant makes all rental payments on time for a six-month period, offer them a $50 rebate on their next payment.
Refer-a-Friend programs are also successful when there are multiple rental units on your property. Look for other incentives you can offer to your tenants that won’t put you in a financial bind.
Charge Adequate Rent
While you don’t want to charge rent that’s so high it will chase away good prospective tenants, you also don’t want to charge too little. Look at the rates that other property owners in the area are charging. This will give you a good starting point for calculating how much you should charge.
Look at your mortgage payments, average monthly upkeep costs, and other property management expenses in calculating your rental rate. You should still have a 20% to 30% net profit after your expenses have been met each month.
While this may seem like a great deal of responsibility, you shouldn’t feel as though you have to do everything yourself. Hire contractors for the physical upkeep of the property. A property management firm can help you with tenant interactions and other aspects of managing your property. The right help can ensure that your real estate investment will be successful for years to come.