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You get to choose your tenants, determine how much you want to charge in rent and make any renovations you want to the property. However, there’s more to being a landlord than meets the eye.
If you’re a new landlord, you need to know what steps to take to make the most of your rental property. Below, we go over five tips every new landlord should follow.
1. Require Renter’s Insurance
Unfortunately, accidents can happen, and when it comes to rental properties, accidents can be extremely costly.
Whether a tenant left the stove on and your property caught fire or a burglar broke through a window and stole valuable possessions, your tenants may hold you accountable for the damage inflicted on their belongings.
If this is the case, you can end up in mounds of debt paying your tenants back.
To avoid a sticky situation like this, make it a requirement for tenants to purchase renters’ insurance. Renters’ insurance is similar to homeowner’s insurance but protects the belongings of renters. Some situations where renter’s insurance will cover your tenants include:
- Damage to personal belongings
- Water damage
- Cost of staying in a hotel
2. Screen Your Tenants
Arguably one of the most important tips a landlord should follow is screening your tenants. Buying a home costs a lot of money. When you buy a home with the intention to rent it out to strangers, you can never fully predict what will happen. A tenant background check can help you get a fuller picture of who will be occupying your rental property. A background check will give you the following information:
- Criminal reports
- Eviction reports
- Credit reports
- Employment history
- Proof of income
The last thing you want is to approve a tenant who has a track record of evictions and inconsistent employment. To ensure you get your rental income every month, make sure you screen your tenants.
3. Get a Pet Clause
Many websites and landlords will tell you to never allow pets into your home. Why? Because they can cause damage to your property if not trained properly and can cause disturbances to neighbors. While this is true, we’re here to say that you should allow pets, and here’s why: pets draw a larger pool of applicants. Depending on your location, you may have trouble finding tenants to occupy your rental property. Prohibiting pets can shrink your applicant pool even further, as 67 percent of US households own pets.
To combat the risk of property damage from a dog chewing your molding or a cat peeing on the carpet, charge a “pet rent.” Adding a pet clause or addendum to your lease will allow you to collect extra income each month to pay for repairs and deep carpet cleaning.
4. Make Profitable Renovations
If you want to increase your rental property’s value, consider making some renovations. Updating the appliances, installing a new shower, or laying down hardwood floors are all profitable renovations you can make to charge more per month. But it’s important to make smart, lucrative decisions when making renovations.
If you’re flipping a house in a not-so-great neighborhood, you don’t want to go overboard and install intricate crown molding in the living room, a marble countertop in the kitchen, and lay down a new patio in the backyard. Why? Because these heft expenses won’t lead to a high enough rent rate. When getting into real estate, do your research and look at the properties in the neighborhood and try and look for pictures online. Doing so will allow you to make decisions on what renovations will be profitable or not.
5. Document Your Property
Before you have your tenants sign the lease and occupy your property, go through and document it by taking photos. You don’t need a fancy DSLR camera to do this; your phone will work just fine.
To document your property, go through and take pictures of every room, appliance, and other features and fixtures.
This way, if the tenant damages your property and claims it wasn’t them, you can use your photos as evidence and charge them appropriately.
Becoming a new landlord can be an overwhelming experience, especially with all the documentation and keeping up with regular maintenance.
However, with these five tips at hand, you’ll be able to find amazing tenants and make a substantial passive income from this side hustle.
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