Becoming a property owner who intends to rent and make an income by supplying housing can be a lucrative venture for most landlords. However, to keep the venture afloat, there are multiple things that you should be doing at all times.
Becoming a landlord can be a lucrative investment. Rental properties generate income that can increase over time. While property values can fluctuate, it is still a stable investment. Most properties appreciate eventually, but owners know there will always be a market for rentals.
Reasons Landlords Invest in Properties
Not everyone wants, or can afford to own a home. Renters may not want to pay property taxes or might want to save money on insurance, maintenance and utility costs. A stable market is always a safer market to invest in.
5 Things All Landlords Should Do
While an investment property is lucrative, it also takes an active landlord to keep a property safe, habitable and worth the cost. The following tips are tips that every property owner should follow if he or she plans to rent it out.
1. Work With a Realtor
Working with a Realtor will help you better understand the housing market. Make sure that when working with a Realtor, he or she understands the market’s fluctuations and can tell you whether you are in a buyer or seller’s market. When your Realtor has the market knowledge, you have a higher potential of saving money on your investment properties.
A Realtor can also keep you updated about potential investment properties. If you are in the process of buying, he or she can make sure you know what’s happening at any given moment. You will never miss out on opportunities.
2. Screen Every Potential Tenant
Most landlords do not want their tenants to feel interrogated during the screening process. If an applicant becomes a tenant, it is better to have established trust. The tenant shouldn’t feel you suspect them of wrongdoings and should have confidence in the landlord.
However, you cannot trust a tenant if you cannot verify their income, credit history and tenant history. Be polite with the applicant throughout the process. Express confidence in the process, but be firm about what you need to complete the application. Offer the potential tenant kindness and respect, but be firm about what you need him or her to do before you can offer the lease.
3. Schedule Regular Maintenance on Properties
To protect your investment, schedule regular maintenance. Not only will maintenance keep your tenants happy, but it protects you from excessive costs if something breaks down. For instance, if you ignore regular maintenance on your HVAC system, it could require expensive repairs in the future. Professional inspections and maintenance protect the value of your property because you always know the full state of the property.
4. Be Clear in Your Lease
There should never be any confusion in your lease. Do not print out a pre-made lease or quickly write up a lease on your own. Work with a Realtor and use a Residential Tenancy Agreement (Standard Form of Lease) to ensure that you do not leave any loopholes to be exploited.
Be clear about when and how you want the rent to be paid. If a tenant misses a rent payment, there should be details on what happens next. The tenant should not be confused about what happens after a late payment. Likewise, there should be no question about what you cover compared to what the tenant covers.
For instance, if you plan to handle landscaping, you must put that into the agreement, so the tenant knows not to worry about it. Likewise, if you have responsibilities that you would like to give to the tenant, like paying for hydro, be clear about them, so they do not expect you to do them.
5. Conduct Inspections With Evidence
Move-in inspections are critical to both tenants and landlords. When you perform a move-in inspection, take pictures and video evidence to protect you if the new tenant damages the property. Sometimes there are disputes after someone moves out regarding damages to the property. When conducting a video inspection, you and the tenant have peace of mind. You know that the tenant cannot blame damages on someone else and the tenant knows that you cannot blame him or her for damages caused by the previous tenant.
3 Common Mistakes Landlords Make
In addition to things you should do, there are also things you should avoid. Understanding what makes a good landlord vs. a bad landlord keeps you from losing money on your investment.
1. Turning Real Estate Into a Hobby
Do not look at property investment as a hobby. While you can use rental properties to make a passive income, it is a business that requires you to put in the same effort that you would a typical job. You should have separate bank accounts and a bookkeeping system to track taxes, expenses and deposits. In addition to taking real estate seriously, make sure you have professionals, like Realtors and financial advisors, in your corner to make educated decisions and advise on topics such as rent increases.
2. Not Documenting Interactions
Document as many interactions as you can with your tenants. Keep all of your conversations, voicemails, text messages and e-mail copies. If the tenant takes you to court or if you have to take the tenant to court, you need to have evidence to support your side of the story.
3. Not Preparing for Gaps in Renters
Sometimes properties will be empty. While some properties may have tenants all the time, others could have gaps in renters. You should always have enough saved to pay the mortgage in case you do not have a tenant. If you do not prepare for months where you may not have a tenant, you could lose your property due to foreclosure.
Landlords Find More Success With Professional Partnerships
When entering the real estate market, whether it is the first time or a time out of many, landlords should consider working with Realtors to avoid making mistakes. At Tsuji Real Estate, we understand how important your time, money and investment are to you. We will work with you to ensure that you reach your current goals. Contact us today to find out more about our services to landlords.
