Because of the recent pandemic tanking the country’s economy, both employees and business owners are looking for extra sources of income. If you’re fortunate enough to have a room or property you’re not using, you can always rent them out for a good amount of cash. The average monthly apartment rent in the U.S. is around $1,468. Sure, a lot of it goes to utilities and upkeep, but it’s still additional income.
The way you can rent out your property is more flexible than ever, too. You have the common long-term rental, where you provide your tenants with six to 12-month contracts. There are also short-term rentals that allow tenants to stay in your property for a few days to a few months. Applications like AirBnB can help put your listing out there and get a consistent flow of clients throughout the year. ;
Renting also allows you to make money while you’re waiting for a good time to sell. However, it’s not recommended to rent your property out if you want to sell your house quickly. And if you decide to move back to that property again, you can always do so, as long as you don’t have any active tenants there.
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There are a variety of benefits to renting out your property. However, there are also a variety of ways it can go wrong. So, if you want your first-time landlord experience to be smooth, here are mistakes you should avoid.
Improper or Non-Existent Tenant Screening Practices
As a first-time landlord, talking to someone interested in your listing can be exciting. After all, you want to get fast returns on the improvements and other investments you’ve made to make your property attractive and liveable. However, you shouldn’t just accept the first tenant to knock on your door. While they’re rare, problem tenants do exist. They can cause a variety of problems, from deferred payments to actual property damage.
Make sure to conduct a thorough screening of your tenants before presenting a contract to them. Ask them to fill out a tenant application form. Here, you’ll see their residence and employment history. Do your due diligence and call up the people in charge.
Verify if they do make as much money as they claim they do every month with their employer. Ask their former landlords about their experience with the applicant. Check out their credit report too, so you can find out whether they pay their bills on time or not. Move on to the next tenant at the first sign of trouble.
Forgetting to Get Proper Insurance
Your property’s household insurance does not provide enough coverage for when you’re renting it out. Its policy should have a loss of income insurance as well, as damage and destruction of your property will cause you to lose rental income. You should also get separate liability insurance. This will cover you in case you get sued because of matters like negligence and slips and falls. Consult with a lawyer to ensure you’re covered for the appropriate amount of money, in case of litigation.
Unclear and Unwritten Terms
Every landlord has their own set of terms and conditions. Maybe you’re not too keen on pets because their waste is a pain to deal with or you want to have strict payment rules because you absolutely need the income.
During the consultation, negotiation, and contract signing stages, you should ensure that your tenants are made aware of and understand these terms. It’s also vital to put them in writing in your contract to make sure you have a legal document to point to, in case you get into arguments with your tenant about them.
Maintenance issues are tempting to put off, especially if they’re minor. After all, they cost a lot of time, effort, and money. However, your tenants pay you not only to stay in your property but also for you to keep it in good condition. A small leak today can be a mold infestation or rotting joists a few months later. You don’t want to lose tenants, or worse, get sued for negligence for forgetting to fulfill your responsibility as a landlord.
Make sure to respond quickly to tenant complaints about your property. If you’re not getting any so far, make sure to do monthly maintenance. Get a professional inspector to check every aspect of the property to ensure that every possible issue is repaired before they do any real damage.
Putting your property up for rent is a great opportunity to earn passive income during this pandemic. If you don’t manage it properly, however, it could end up costing you more money than you earned from it. Avoid these mistakes and you’re sure to get a steady stream of satisfied tenants.