For many, the idea of becoming a landlord seems more like a chore than a job, and more of a waste of time than an investment in your financial future. While this path isn’t right for everyone, some homeowners have chosen to become landlords to earn extra income or at least defray part of their mortgage costs. If you have been thinking about leasing your home(s), consider these tips (in no particular order) to make the most out of the experience. Who knows, you may even come to embrace your new job title.
Ask yourself these questions – Do I have good instincts about people? Do I handle conflict well? Can I balance my personal life, professional life, and the needs of my prospective tenant(s)?
Understand the law as it relates to landlords and tenants – No one may refuse to rent on the basis of race, color, national origin, religion, sex, familial status, or handicap. Research your state’s Fair Housing laws. If you plan to lease a home in Arizona, be sure to study and know the Arizona Residential Landlord and Tenant Act.
Set a fair price – Remember, real estate is local. Learn about your marketplace by studying local classified ads, scouring the Internet, and finding out what your neighbors have charged for rent recently. Even if you’re planning to manage the property yourself after finding a tenant, I highly recommend hiring a full-time REALTOR® to list your home on the MLS and help you negotiate a lease agreement/contract. A REALTOR can prepare an analysis of what monthly rent prices have been charged by landlords who own similar homes to yours.
Differentiate your property – In a community full of 2 Bedroom, 2 Bathroom condos listed at $999/month, perhaps yours should be the only one with wood floors, or overhead fans in each room, or stainless steel appliances…
Think about the language used in your advertising – As your mother always said, choose your words carefully. If you’re going to request a bankground check or credit check (both of which I recommend), say so. If you’re not going to allow smokers or pet owners to lease your home, say so. It is better to set your expectations in renters up front.
Expect the unexpected – One of the facts of being a landlord is there will be surprises. Create a list of things that may occur and how you will handle each one. If the washing machine breaks, what will you do? Perhaps you will purchase a home warranty before your first tenant moves in so these type of repairs can be absorbed by the home warranty provider.
Thoroughly review each application – Be wary of renters who say they must move in to your place this weekend (or worse, tonight!). This may be a red flag indicating the person has been recently evicted, or kicked out by his/her previous roommate. Create an application process you plan to follow, and stick to it. During the process, you will want to do things like require proof of identity, the contact information to the tenant’s last two landlords, employment information, and/or references.
Consult the advice of professionals – Becoming a landlord is a business decision. Consider seeking the advice of a REALTOR, tax accountant, insurance agent, and/or attorney before agreeing to lease terms.
Be prepared to say “no” – Just because the right tenant doesn’t come along in the first week, doesn’t mean you should accept any application that comes along during the second week. Not every prospective tenant will be a good fit for you.
If you need to lease a home, but don’t have the time, hire a property management company – For a fee, of course, a property management company can relieve you of a lot of the stress associated with becoming a landlord. Not all property management companies are created equal, though, so interview several companies before choosing one.
If you’d like a more secure way to collect rent, consider electronic payment – PayPal is the first electronic payment provider that comes to most people’s minds, but consider this new website, PayYourRent.com, too. According to this article, the CEO of PayYourRent.com, Kevin Eberly, said, “What we do is we set up a merchant account that will send funds directly from the tenant’s account right into the owner’s account. It’s all completely electronic. The owner will receive an email that the payment has been made and the money will be deposited in the account.”