Grab RSS FeedIn today’s hot housing market, rents are on the rise, which may have some homeowners wondering whether it’s time to consider becoming a landlord.
But being a landlord isn’t a cakewalk; it takes work, and sometimes it may seem like you’re shelling out more than you’re bringing in.
Here are the steps on learning how to get into the landlord game:
Figure out what you can afford. Renting out home with a mortgage is a balancing act: Avoid operating at a loss.
Prepare for the worst. Since a place may sit vacant occasionally or require repairs, having a decent financial cushion is key. Most experts say that properties should be able to rake in enough rent in 10 months to cover yearly costs.
Another rule of thumb is the 2 percent rule, where monthly rent should be least 2 percent of the price of the property.
Pick the right kind of property. Many components go into property selection, so make sure you identify your primary goal.
Is it good cash flow that you’re looking for, or do you just want something that’s low maintenance. Choose a property close to home, which allows a chance to check on tenants and house maintenance easily.
Make sure the property meets all applicable codes. Assess a property with a critical eye to make sure it’s “rent-worthy” and that helps to double-check the property once the renter leaves to make sure it was left in the condition in which it was found.
How to screen tenants. Having good tenants can make or break your experience, Laine noted. Make sure to interview and screen them thoroughly. Tenant screening companies make that easy, but ask prospects to agree to edit check.
Also, have tenants sign a lease delineating the rent, when it’s due, and actions that could lead to late fees and eviction.
Understand landlord liabilities. Know the local laws that pertain to the property.
Also, be sure to have adequate coverage, such as landlord liability insurance and landlord property insurance. These are different from a regular homeowner policy and should be obtained if you are renting out a home regularly.
Know a landlord’s responsibilities. Landlords are legally required to make repairs to their property—but that doesn’t mean jumping every time a lightbulb needs replacing, either. The key is whether the issue affects habitability. If a property is without electricity, water, or heat for more than 24 hours, it will generally be considered uninhabitable, and landlords are responsible for finding alternative temporary housing for the tenants until this issue is fixed.
Weigh the pros and cons of a property manager. If this all sounds like too much hassle, consider hiring a property manager, who can handle those details. It might be well worth the investment—typically 8-12 percent of the monthly rental fees—for the headaches saved down the road.
For more information, contact Black and Buono.
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