If you have an investment property and are looking to rent it out, there is much to learn about the process. An additional monthly income sounds enticing but be sure that you are prepared financially and realistically for what it means to buy, maintain, and rent out an investment property, especially if you plan to be the landlord as well. Reading up on the subject on the Internet is always a good starting place, but here are five specific tips on renting out your properties and what to know.
- First of all, choose the actual properties carefully. You will want to pick a good area to invest in and where rentals are common and sought after. Finding a decent rental follows the same principle as buying a good property: location, location, location. Your location will always have a high demand if it is situated in a good neighborhood with good schools, parks, shopping, and the like nearby. Try to find a location that you yourself would be happy living in and that includes all the amenities you and your family would be looking for. Also look for a place with good curb appeal. It’s easy to rent out a property in a nice neighborhood with well-kept lawns and folks that show they care about their community.
- Next, do some competitive research to establish a fair rental price. Be sure that you are basing this number off of real estate comps based on number of beds/baths, square footage, etc. Don’t forget to factor in those hidden costs such as property taxes, state taxes, insurance, and a repair budget. When you are considering what to include as a repair budget, experts recommend saving enough money for a major expense such as a roof and then adding some cushion to that amount. Even good tenants may cause more damage than you ever thought possible, so be prepared to put back a hefty sum to fix what’s broken and worn. (A good tip is to plan frequent visits in order to keep on top of the property’s condition.)
- Once you have some inquiries, screen your prospective tenants carefully. Be sure to run the background checks that cover all criminal records, financial, bankruptcy/foreclosure check, eviction records, and so on. If you don’t know where to start with the screening process, find a reputable company that offers tenant screening services. Spending a few dollars to screen applicants upfront will avoid you having to chase a deadbeat for rent every month. A bad tenant can also do thousands of dollars’ worth of property damage if you aren’t careful. Give every applicant a fair chance by being clear and honest about the property, rent, and how you would like things to work between the two parties. Have a standard rental application that you can pass out or provide electronically to everyone who asks for one. One of the best ways to find good tenants is by word of mouth, so don’t be afraid to ask your friends, family, and social media to put out the word.
- After you have chosen a good tenant, keep them happy. Some easy ways to do that? Communicate your expectations with your tenant. Don’t want animals in your investment property? Say so in the initial meeting or rental agreement. You also want to make it easy for them to pay on time with an online payment system or some other convenient way. Fix any problems promptly and do regular maintenance as needed. Maintenance will cost you, but it almost always costs less than the cost of carrying an empty unit.
- If you do manage to find good long-term tenants, consider not raising the rent on them in order to entice them to stay in your property for as long as possible. Although you may not be able to raise the rent annually, having and keeping good dependable tenants is always a good way to save money. They will be more likely to not cause damage or need as many repairs if they are as attentive to the property as if it were their own. Good long-term tenants can also save you money by postponing the process of finding and screening the next set of tenants on a biannual or annual basis.
Keeping these five things in mind will help you rent out and manage all of your investment properties to the best of all possible tenants for years to come.