Renting out a property for the first time can be both exciting and overwhelming. If all goes well, you can use of the rent to for your mortgage payments and gain equity as well as have positive cash flow.
However, becoming a landlord comes with an array of challenges and risks that can jeopardize your chances of success. You need to know of the pitfalls to avoid to protect your investment property while also maximizing your profits.
If you are thinking of renting out a house for the first time, here are 8 tips to help set yourself up as an expert landlord:
1. Understand the Housing Laws
Owning a rental property does not give you the right to just do anything you please with it. You need to understand the legal ramifications of being a landlord. For instance, landlords should not discriminate against tenants based on family status, race, disability, religious status or sex.
The rental property should also be kept habitable and safe. The landlord may face liability from accidents as a result of safety hazards. There are also laws surrounding other rental issues like setting rental rates, tenant eviction, and assistance animals that you should abide by.
Not researching the local, federal, and state Fair Housing Laws can be a costly mistake when renting out a house for the first time. Take your time to learn the landlord-tenant laws. You may want to consult with an attorney who specializes in housing laws.
2. Present the Rental Property in the Best Light
When renting out a house for the first time, remember to present it properly to attract the tenant you want. Make your rental property stand out in the competitive rental market by cleaning it thoroughly and repainting it before showings.
Consider staging it with decor and furniture to help potential tenants envision themselves in their new home. You can also boost the curb appeal of your rental through landscaping, adding flowers and plants, weeding the garden, and keeping the compound mowed.
If you have been staying in the house you want to lease for rent, ensure you remove all personal belongings and clutter from the living room and other storage areas.
3. Screen Potential Tenants Properly
A good practice when renting out a house for the first time is to screen potential tenants. Choosing the right tenants will make your business enjoyable and less stressful.
Bad tenants can cause property damage or they may fail to pay monthly rent. This can quickly derail your profits. By finding tenants who are responsible, you will also prevent evictions, which are costly and time-consuming.
Ask potential tenants simple questions about who they are, their employment, and the reason they are moving. It is also advisable to always set your criteria before you begin tenant screening to avoid being accused of discrimination.
4. Price Your House Right
To get where you want to be renting out a house for the first time, you should price your house right. You should not price your rental property according to perceived value or your expenses.
If you overvalue your house, you may end up with long vacancy periods. To correctly price your house, you should find its market value by looking at rental comps.
5. Have a Lease Agreement
The most important item to keep in mind when renting out a house for the first time is a lease agreement. Once you find the right tenant, you need to put everything in writing.
A lease agreement is a written contract between the landlord and the tenant that sets out the terms of the tenancy and is signed by both parties. The document states the rights and responsibilities of both parties for the rental period. It includes details about who is responsible for property maintenance, rules about smoking and pets, how long they will rent, etc.
In case of disputes with the tenant, the lease agreement will offer legal protection. It is difficult to settle disputes with your tenant without a written lease agreement. If you are renting out a house for the first time, you may want to consider hiring a local attorney to help ensure that the document is valid.
6. Collect a Security Deposit
A security deposit helps to ensure that the monthly rent of the lease is paid and other tenant responsibilities are performed according to the lease agreement, such as avoiding or paying for damage to the rental property.
If the tenant damages the property or fails to pay rent, it will be deducted from the security deposit. This helps to reduce disputes about the initial condition of the house.
The laws pertaining to these security deposits usually vary from state to state. Therefore, make sure you understand the security deposit rules of your area.
7. Have a Good Real Estate Marketing Strategy
No matter how good your rental property is, you will not get tenants if nobody knows about it. Therefore, it is essential to have a good marketing plan to avoid long vacancy periods, which are costly.
With a good marketing plan, you will be able to attract lots of good tenants and lease your property quickly. Take quality professional photos and invest in good advertising packages on popular real estate websites.
8. Get Insurance
Although specific landlord insurance is not a legal requirement, it is prudent to consider it to protect yourself from the risks you may face as a first time landlord. This includes missed rental payments, accidental damage, legal expense, unoccupied periods, etc.
Most standard home insurance policies usually cover only the building and the possessions of the occupant. This does not provide the level of protection that a landlord needs. As a landlord, you need a policy that will protect the rental property, the renters, and the real estate investment as a whole.
You can also recommend that your tenants get renters insurance to protect themselves from any unforeseen losses.
The Bottom Line
A rental property business can be a good source of income that can put you on the road to financial independence. However, if you are renting out a house for the first time, you must constantly learn and adapt to be successful. You need to know how to rent out your house and avoid the traps that most first-time landlords fall into. With the 8 expert tips listed above, you are sure to get started on the right path.