Are you considering buying your first rental property? Being a landlord can be a challenging experience. There are many things to keep track of, and one mistake can cost you.
We have put together a few of our suggestions on how to get started and what to consider when looking for potential tenants.
Know where you stand financially.
Prepare your wallet and mind-set
•Have Your Finances In Order – You should know your credit score and tend to any negative marks before you apply for a loan. You don’t want to find out after finding your dream home that you aren’t able to afford it.
•Set Your Limits – What can you afford to spend? Don’t compromise here. Struggling to make your mortgage payments will take the joy out of your investment.
•Research – Talk to investors, read as much as much as you can, study market trends, and consider buying a course. The best investors never stop learning.
•Take Notes – Take detailed notes of each property you see. Many people will use a chart to easily compare bedrooms, bathrooms, price and other variable features of a home.
•Hire Professionals to Help – A first-time investor should never navigate the process alone. Enlist the help of professionals to help you along the way. Such as a property manager.
•Buy Below Market Value – To help guarantee a return on the property, you should try to only purchase properties that are listed under market value. If you aren’t able to get the lease payments you are after, at least you will be able to sell the home for more than what you bought it for.
•Calculate a Property’s ROI – To calculate ROI, the net profit of your investment is divided by the amount of money you have invested. The results are expressed as a percentage or ratio.
How to screen potential tenants
•Advertise – Utilize the most popular sites, and make sure you have excellent photography and accurate property descriptions.
•Provide an easy application – Hopefully, you will get tenants who want to apply on the spot. Make it easy on them. In the day of Smartphones and computers have an easy accessible online application or app.
•Background Check – Running a background check on prospective tenants is crucial. There are many services that can assist with this.
•Credit Check – In addition, running a credit check will help make sure your tenant will be able to pay you!
•References – Thoroughly check all references provided. Calling the previous landlord is always a great idea. Remember to ask how they left their previous residents and did they pay on time.
What to do once you have found the one!
•Sign an Agreement – The agreement, or lease, should be very detailed and leave no room for disagreements. Include your process for conflict resolution.
•Conduct an Inspection – Both you and the tenant should inspect the property (together if possible.) Have a document you can print that you can file away with the lease.
•Clean & Repair the Property – Any repairs noticed during the inspection should be made before the tenant moves into the home.
•Change Locks – To reduce your liability and keep everyone secure, you should change the locks with each new tenant.
•Final Steps – Collect deposits, rent, and provide keys.
After Your Tenants Have Moved In:
•Tenant File – Create a tenant file with all the pertinent information. Make sure to keep a copy of the lease. Keep track of all tenant issues and repairs.
•Calendar – Keep track of important dates, lease terms, maintenance schedule. If you own many properties, property management software will help to keep you organized.
•Stay on Top of Things – Keep the house in good shape and exercise a proper maintenance schedule. It will help to have a good line of communication. This will help with keeping the home in good shape.
•Master Vendor List – You will inevitably have to pay repair costs and maintenance fees. Work with vendors you trust for maintenance, plumbing, AC repair, etc. Keep their contact info readily available.
With each new thing we try in life comes obstacles. Learning to manage and buy rentals can be challenging and yet financially rewarding. With that being said enjoy the ride and excitement of owning your first rental!