Whether you're an intentional landlord with real estate investing dreams or an "accidental landlord" due to military orders, there are some things you should know before you ask your first tenants to sign on the dotted line. The most successful rental businesses benefit from plenty of prep work and property management education.
We've put together eight essential first-time landlord lessons to teach you how to become a landlord who's not only financially successful but also enjoys renting their property and empathizes with fellow military members as they relocate.
Congrats, you're a business owner! There's a lot to learn, but organization is the one skill you must sharpen before renting to tenants.
Not only should you have impeccable financial records (you'll thank yourself come tax season), but you also need a system for miscellaneous records like maintenance and repairs. Even if you have a property manager, don't expect them to manage your rental business finances. Keep duplicate records of your income and expenses.
Organize your finances so you can easily turn them over to someone else, such as a property management company or your spouse, in an emergency. Will your property upkeep for rentals operate seamlessly if you're unexpectedly hospitalized for a month?
Learning the landlord/tenant laws for your city and state can be time-consuming and sometimes confusing for first-time landlords. There's more to being a landlord than simply emailing a lease and asking tenants to sign, especially when working with military members and their unique circumstances.
Start by checking your state's tenant and landlord resources to understand your rights and your tenants' rights. Keep in mind that part of a property manager's job is to know and stay up to date with rental property laws. If you need help, a local property manager will provide the expertise you need to confidently manage the legal responsibilities that come with owning a rental property.
First, know that your standard homeowners insurance doesn't cover the conversion into a rental property. Part of your due diligence as a property owner is finding adequate rental property insurance. (And don't forget to add these likely increased insurance fees to your operating budget.)
Consider stipulating in the lease that your tenants must purchase renters insurance to ensure everyone understands their coverage responsibilities. They may be unaware that their belongings are not covered under your rental property insurance. In case of a problem, you and your tenant should know what to expect.
Learn more: Renters Insurance vs. Landlord Insurance: What's Covered?
If, based on your market research and a reputable property manager's suggested rental amount, you believe the monthly rent is priced appropriately, stick to your price point until the situation dictates otherwise. Be aware that the economic climate and military lifestyle scenarios can affect your asking price, especially if you're considering a unique situation like renting out a room in your home.
Consider this common example of a situation you might encounter. Your property is located in a heavily military-dominated market, and you happen to have the misfortune of facing a turnover outside of traditional PCS move season.
Not every prospective renter who asks for a lower monthly rate is carrying financial baggage you need to worry about. They might legitimately think the rent is too high and figure it doesn't hurt to ask, or maybe they have a cultural background that dictates it's rude not to haggle.
However, if a prospective tenant is adamant about a price reduction, it could be a red flag that they'll be problematic over the lease's term. They may cause you undue hassle as they try to bargain and bicker over every item and issue with the home. Or, their negotiations could suggest they're unsure if they'll have enough money for rent each month.
This is one of those situations when you'll have to listen to your landlord's intuition and use screening tools to help you decide to offer a lease.
When finding renters, consider tenant screening fees as part of rental property operational costs and an inexpensive way to secure your property and find trustworthy renters.
For a reasonable fee, especially compared to hefty damage and eviction costs, you can get a credit report, rental history, eviction history, and criminal background check from RentRisk as part of your strategy for property upkeep for rentals. That's money well spent to help protect a much more significant investment—your property!
No one wants their living space invaded, but your tenants should expect reasonable property inspections on a predetermined basis. Reasonable doesn't necessarily equate to a monthly walk-through, but in most cases, you should conduct a property inspection once per year.
Sometimes, more frequent and quick inspections can occur throughout the year, as maintenance calls require. If you or a trusted professional performs the maintenance, a visual inspection keeps a watchful eye on the landscaping, kitchen, and bathrooms. These are areas that often incur the highest repair costs.
Many military landlords often don't live near their rental properties, so it's advisable to have a professional who will administer the inspections for you. Don't rely on the adage that "no news is good news," and hope the tenant keeps the house pristine. They may simply prefer to put up with mold or water leaks rather than inform you before moving out.
Everyone wants the best for their family members, so deciding whether or not to become their landlord is complicated, especially if you let them move in without a lease. This is a major mistake new landlords can make.
Even if you verbally agree with a family member to pay rent, you may encounter common problems. If your family member tenant refuses to pay, you have nothing in writing holding them to the payment. In the case of an eviction, a judge may side with your family member, particularly if they paid rent in cash without a paper trail to corroborate your side of the story. If you pursue eviction, depending on your state, it could take months before they eventually have to leave.
These are worst-case scenarios, but other problems you may run into as a landlord include improper upkeep and maintenance, pet damage, sub-letters, and many other difficult situations. Download a comprehensive but straightforward lease from US Legal Forms to avoid unnecessary confrontation. They're state-specific and accepted as a binding contract.
Learning how to become a landlord isn't a quick process. There's much more to know than just how to charge enough rent to cover your monthly mortgage payment. Increase your chances of a successful landlord career by educating yourself with guidance from other military landlords and real estate professionals, such as a property manager.
Find even more landlord help with our free guide below.