Updated January 5, 2021
5 Simple Steps to Becoming a First Time Landlord
In our current HGTV era, more and more Americans are finding their way into the world of real estate. Many are trying to flip houses, becoming real estate agents, or taking on rental properties as a first-time landlord.
So, if you're considering a leap into the landlord game, or if you've already taken the leap and are looking for some practical tips, check out the following five simple steps!
1. Advertise Online with Clear, Attractive Photographs.
As a landlord, you're already benefiting from a market that's favoring renting over buying. You are also definitely working in a market that privileges internet-savvy operators. The vast majority of renters conduct their housing research online. Through traditional web searches and real estate applications like Rentometer, Trulia, and Zillow.
These platforms necessitate that you take care to market your property attractively. People now expect dozens of posted pictures before agreeing to come for a walk-through. They don't want to waste their time with a property that won't suit their needs.
However, this can work in your favor if you take the time to capture high-quality photographs. These pictures can highlight the key selling points of your property. They can set you apart from many other landlords who fail to grasp the importance of advertising.
2. Carefully limit your renovations.
As a first-time landlord, the temptation may arise to try to make your rental property perfect. Renovations are certainly part of the game, and for many landlords, they are a source of enjoyment. It's vital to carefully consider your renovation decisions to ensure that the renovations will pay off.
For example, installing top-of-the-line countertops in an apartment that will likely draw younger tenants. These tenants have no concept of the various value countertops add to a rental. This represents the kind of mistake that separates successful landlords from landlords who flop. While it's important to take pride in your property, make sure it's a sensible pride!
3. Cover Your Bases with Homeowners' Insurance and Warranties.
You're likely familiar with the concept of homeowner's insurance. You pay a premium in exchange for peace of mind in case tragedy strikes (e.g., fire, hail, theft). Most banks require proof of this type of insurance during the mortgage process, so don't expect to avoid this cost.
But many first-time landlords are less familiar with the second type of coverage, the homeowner's warranty. These warranties cover systems and appliances that are not protected under standard homeowners' insurance policies.
These warranties can be extremely valuable. It is unlikely that tenants will attend to the details of the upkeep of essential systems or appliances. If you are providing items like appliances as part of your leasing agreement, consider a quality homeowner's warranty. Otherwise, you may get sucker-punched with a costly replacement that could quickly turn an expected profit into debt.
4. Know the applicable laws in your location.
The last thing you want as a new landlord is a court date. Being a first-time landlord may seem like a simple transaction between you and your tenant(s). It is vitally important to research the pertinent federal and local laws so that you are protected from lawsuits.
For example, the federal government has fair housing laws that dictate how you can screen your potential tenants. Similarly, requirements are in place regarding the leases' content and format that you'll sign with your tenants.
Knowledge of these laws is not something you want to procrastinate; know the laws BEFORE you start your renovations, advertisements, and leasing agreements.
5. Avoid allowing pets, if possible.
Even if you're a pet lover yourself, consider restricting or banning pets from your rental property. You can charge a nominal fee to allow pets. This may seem like a reasonable way to make some extra cash as a first-time landlord.
Still, experienced landlords routinely argue that those fees rarely cover the associated costs. You will have to deal with the wear and tear that pets cause on a property. This wear and tear often require expensive replacements between tenants. For example, dogs often damage flooring, baseboards, and carpeting, which can eat away at your profits.
These types of projects can often be great ways to make money. Still, they can also prove to be very intimidating for first-timers. These projects are quite different from the images they've acquired from their favorite TV show.
The following guest blog post was contributed by Kristina Marshall.