Becoming a landlord is something that can creep up on you. There may come a time when you need to move for professional or personal reasons and find it more daunting to sell your property than to rent it out. It can also be something you’re looking into for additional income.
With more households renting now than at any point in the past 50 years, you may find yourself in a position where you have a living space that someone is interested in occupying.
As a host, you have to look out for yourself and your property while also stepping up to the task of offering livable spaces. The job comes with more responsibilities than you might initially consider. It’s easy to miss some over the course of your own daily activities. Here, we present to you the mistakes you may find yourself making on your way to becoming a landlord.
Image borrowed from Domain
1. Not Understanding the Local Market
Not every spot will merit the same return on investment. If you are looking to purchase property for the sole purpose of renting it out, you should consider the location carefully and choose among the best.
If you already have property, it’s best to consider your target market (i.e. who would want to stay in the area and for what reason). Whether it’s the employees of nearby establishments, students looking to score an internship, or traveling nurses, knowing your potential tenants will help you present your space better. It will also help you manage costs since you’ll have a better idea of which facilities and amenities to prioritize. Trying to please everyone isn’t a bad thing, but it does mean time and money that could have been put towards securing a steady niche.
2. Being Passive in Marketing
Before becoming a landlord worth the title, you have to first secure tenants. The need for housing guarantees renters but it also guarantees competition, so you shouldn’t be lax about this. You should know how to get your space out there and make an impact at first sight. People move at a quick pace, so it’s more of a requirement rather than a recommendation to have the right details about your space ready for any prospective renters to look over. People can and likely will overlook your property if you make it hard for them to reach the details they’d need in order to make a decision.
Explore all platforms that connect you to your potential guests, and waste no time—the sooner you get tenants, the sooner your property earns.
Image borrowed from Union Station
3. Failing to Screen Guests
You might be tempted to take in the first tenants that show interest. Having your space earning as soon as possible should definitely be your goal, but you have to be sure that your property and your income are secure. Unfortunately, there really are definitely reasons for you to reject an application. Looking over criminal histories, background checks, and credit scores are just some of the ways to make sure you are letting the right people occupy your home. Overlooking these requirements could lead to nightmare tenants and situations that may turn you off from ever renting your home out ever again!
4. Neglecting Your Paperwork
Before becoming a landlord you have to go through some paperwork. There are a number of obligations that you are required to fulfill and adhere to, such as first registering the tenancy as well as providing your tenant with a rent book or a statement of rent paid. These are things that you should not miss as it could lead to very serious legal issues. It pays to educate yourself on the tenants’ rights and yours as a host.
5. Neglecting Host Responsibilities
On the matter of legal issues, becoming a landlord entails fulfilling certain host duties. Some of these duties that are crucial to keep in mind are as follows:
- You must prepare the property so that it is ready for the tenant to move into at the beginning of the agreed upon lease. This means sorting out anything that could prove to be a complication down the road, such as informal settlers.
- Secondly, you must also attend to all matters that would allow the property to be habitable. Though you’re not obligated to make all the repairs prior to the tenants’ moving in, be aware that if any injuries occur from it that you could be held liable. Tenants will also have a number of options on how to proceed after such an incident, so those are best avoided with prevention and maintenance.
- Thirdly, you must cover for property taxes. Just because you no longer reside in the property yourself does not mean you are exempted from the responsibilities that come with its ownership.
Losing track of these duties, or outright ignoring them, is a quick way to earn the ire of your tenants, and possibly even your local government.
Image borrowed from Termedia
6. Ignoring Expert Advice (a.k.a. Not Hiring Professionals)
When you start renting out property, you may opt to be the hands-on sort. There’s nothing wrong with having the zeal to keep your hands busy, but as we’ve mentioned, becoming a landlord is more than fixing issues with the house and making sure the rent is paid on time.
If you’re looking to make this a source of passive income, there are property management companies that you can hire to attend to all matters regarding the place you are putting up for rent. Services like 2nd Address have you covered in the way of listings, and finally, having someone with actual training inspect your property for potential issues would save you money on repeat fixes.
7. Not Tracking Expenses
You may find yourself in a position where the rent you’re charging isn’t earning you any profit. Worse, you may find that you’re even suffering a loss when you tally everything at the end of the month. This is often the case for hosts who fail to plan the numbers behind their rental homes in advance.
Project your costs well ahead of time, and be aware of the other financial benefits of renting out a living space –for instance, there are a number of tax deductions you can benefit from. Sorting through these things early will help alleviate any cuts to what should be a steady stream of passive income.
Though it isn’t the easiest thing in the world, once you’ve sorted out the paperwork, found some good tenants, and crunched the numbers, becoming a landlord is a stable and honest business. It’s a way to ride out the real estate nosedive until it’s profitable to sell again, and a way to take advantage of the fact that demand for living spaces will always be consistent.
Keep this advice in mind, and learn from the mistakes you make along the way. Becoming a landlord isn’t easy business, but no venture worth taking is.