Landlords have the opportunity of making profits off of real estate either as a side venture or as a career. If you are thinking of investing in real estate to rent, here are a few facets you should consider.
Marketing is the first step in finding tenants. In order to create a solid marketing strategy, you may want to research the ads in your area. The most successful ads typically have in-depth details about the property itself, the area, and numerous photos. Take high-resolution photographs of your property from various angles, so prospective tenants can properly visualize the environment.
Screening tenants is possibly the most critical part of being a landlord. Your tenants ultimately determine what the next year or years of your leasing relationship will be like. In order to screen a tenant properly you must first know what you are looking for. Typically, landlords look for tenants who show good character and responsibility. But how can you tell if that person is right for you property? Below are just a few things to look out for:
- Credit Score. In order to secure a unit, a renter needs to have a good credit history. Their credit report shows their history and experience with creditors, which may give you a good idea as to whether they will be responsible enough to pay your rent. If, for example, they have poor credit due to a failure to pay on time, this is likely a candidate you want to screen out of the process. However, if they lack credit due to their age, you may consent to the tenant to have a cosigner.
- Current Income. Whether or not you allow for cosigning, it is still important to know a tenant’s current income. Most landlords agree that the tenant must make three times the amount in rent, or if there are multiple tenants, to make a combined income three times the rent. This ensures that the tenant has a safety net should unexpected expenses occur during the month.
- Eviction History. If your prospective tenant has a past eviction, this should signal a huge red flag for you. A prior eviction is an almost sure sign that they are going to neglect paying rent and possibly vandalize your property. Chances are, you probably have candidates in your lineup with evictions in their past.
- Criminal History. Landlords differ on who and who they do not accept in regard to criminal history, and for good reason. Fortunately, you can get everything you need through a background check from a service like SmartMove. Typically, landlords have a cap on the number of committed crimes a tenant has accumulated. For example, a landlord may not accept a candidate who has committed more than two crimes in five years, and so on. The nature of the crime may determine this as well. Some states offer incentives to those who house convicts, so you may want to research this in your area.
- For some landlords, referrals are not mandatory, however, they can be insightful. Candidates should preferably send referrals in a sealed envelope directly from the person who wrote it. Keep in mind that not all referrals are authentic, but it can yield significant insights into the person’s character.
Budgeting for Repair and Maintenance
Unless you are handy with a hammer and a screwdriver, you may need to have a maintenance worker on hand. Maintenance is just part of the job of a landlord, no matter how new or old your property is. Make the most of what you have by staying on top of your tenant’s needs, and fix any issues right away. Remember that it may be less expensive in the long run to invest money where it needs to be invested.
Mediating with Tenants
As a landlord, you are the CEO, CFO, and the HR department. There will be times when you have to deal with hiccups, such as a tenant calling you in desperation because their roommate left and won’t pay rent. You may also need to stay firm on the policies in your contract. This is never easy, but you must remember that you are the boss, and ultimately you have the power to enforce your contract and mediate a solution.
Know Your Goals
Becoming a landlord is an excellent opportunity to accumulate profits in the long-run. If you want to be a landlord, make sure you understand your financial and personal goals so you can optimize your career and lifestyle.