Becoming a landlord is easy. Doing it right? Not so much. There are quite a few things that you need to think about before you embark upon this journey– and some may not always be obvious. Today we’ll be covering some of the hidden “gotchas” that often catch first-time landlords by surprise.
Background Checks are a MUST.
Every long-term landlord has an entire folder of “tenant horror stories” — and most of them begin by foregoing a comprehensive background check. Any tenant can seem to be reliable and stable when you first meet them. It’s only later that you may discover that they don’t pay rent, don’t clean their home, or don’t intend to vacate once they’re behind. A comprehensive background check will reveal tenants that have skipped out on rent, damaged property, been evicted, or simply have exceptionally bad credit scores. Do not skip the background check!
Prepare for Repairs.
Rest assured, there will come a time when you’re called in the middle of the night because a refrigerator has broken, a heater has malfunctioned, or the toilet is overflowing. It’s your responsibility to get this fixed in a timely manner. Consider having a maintenance company on contract or purchasing a home warranty. If you aren’t a handy person yourself, there are many times when you’re going to have to find someone last minute to make late night, last minute repairs.
Brush Up on Fair Housing Laws.
Do you know what to do with a tenant’s property after they leave? What a “self help” eviction is? How quickly someone has to get their deposit back before you have to pay triple the sum? Fair Housing Laws outline the laws and regulations surrounding the landlord-tenant relationship. If you don’t know the laws, you can easily find yourself on the wrong side of them — not all of them are intuitive.
Make Sure You Have Enough Insurance.
Homeowner’s insurance is not enough to protect you if you’re going to be a landlord. Not only should you have a homeowner’s policy specific for landlords, but you should also require your renters to have renter’s insurance as well. If there’s a fire, flood, or other disaster on your property, you need to make sure that not only your own property is insured, but also your tenant’s, otherwise you could be found to be liable for their losses as well as your own.
Develop a System for Record Keeping…Yesterday.
From leases to correspondence, every document is important when you’re a landlord. If your tenant claims that they sent you a rent check, can you prove they didn’t? If you sent a notice asking for late rent, did you retain a copy of it? You need to collect correspondence in the event that there are disputes later — and you need things such as videos and photos of walkthroughs to document any damage that occurs to your property. Without the appropriate financial record keeping, you may not even know if you’re actually making money!
Learn Now, Thank Yourself Later
Of course, it isn’t always possible to anticipate every accident or issue that could occur — that will come with time and experience. First-time landlords have a lot to learn if they want to make a profit and avoid legal troubles. The more preparation you do in advance, the less likely you are to experience problematic tenants and unexpected emergencies. Even if you decide to hire a property management company, it’s wise to understand the basics so you know exactly what you’re paying for!