Renting out your property is a good strategy for “waiting out” a down market. It helps prevent vandalism, lets you enjoy some tax deductions, and helps you earn passive income for idly-sitting properties. It may sound simple at first, but renting out properties may cause more trouble than it’s worth without proper planning. To make sure you end up making reliable profits, below are the steps you need to consider:
1. Learn Your Responsibilities
Being a landlord has plenty of responsibilities aside from coming over once a month to collect payments. As a landlord, it is safe to assume that something could go wrong during a lease. Facilities may require repairs; payments will be late, and tenants may cause costly damages to the property at any given time. That said, it is your responsibility to be aware of such events and be prepared for the unexpected costs.
2. Refurbish Your Home
Simply put, nobody wants to live in a rundown home, especially with the availability of rentable properties in a down market. At the very least, you must clean the property from the inside out. Aside from being presentable, make sure all appliances and facilities work properly to increase the value of the property.
To being attracting tenants, you should be acutely aware of all the positive aspects of the house. Create a list of these qualities to be used in future advertisements. To improve your success, highlight sought-after features such as a garage, a dryer, and air-conditioning. It also won’t hurt to use words that appeal to shoppers such as “state-of-the-art”, “gourmet”, and “wood floors”.
3. Get Professional Help
Make sure to consult professionals that can help you understand the laws and local regulations that apply to landlords. Seek their guidance in identifying which expenses are tax-deductible, what are your local community’s rules concerning rental properties, and so on. A real-estate attorney should help you in the right direction as you prep your home for tenants.
Aside from having a foolproof transition to landlordship, hiring professionals to aid your cause has plenty of other benefits. For example, you get to know your way around contracts and how they can be used to protect your property from damages.
4. Price Units Competitively
Remember that the real-estate market is a highly competitive industry, especially in populous and busy locations. If prospective tenants come to you, expect that they will also scout the area for better alternatives. That said, it is important to price your properties competitively to ensure optimal profits while minimizing vacancy.
When it comes to pricing, remember that you should also have a clear idea in mind on who will be interested in your property. According to surveys, the price of real-estate properties per square foot is $7.5 to $12 for multifamily complexes, $16 to $20 for retail, $14 to $24 for offices, and $6.5 to $12 for self-storage units. Also be sure to consider the unique qualities that set your property apart such as a rooftop, al fresco dining areas, and exclusive parking.
5. Screen Your Prospects
Finally, make sure your tenants go through an intricate screening process to minimize the chance of late payments and unexpected damages to your property. A rule of thumb is to check their credit histories and request a security deposit before handing over the keys.
If you have a multifamily property, you should do a background check to ensure tenants can safely cohabitate with others. Keep in mind that you will be involved in possible disputes or incidents between tenants one way or another. Aside from criminal records, which is the big elephant in the room, you must also identify the personal habits of individual residents that may be disruptive to other people.
Despite the many benefits of being a landlord, you should not be too keen to enter the industry especially if you’re not willing to learn the twists and turns. Though things may sound a little bit simpler after reading this post, you should expect plenty of tight corners before you can make reliable passive income with your real-estate property.