By: Ian Pearson
Being a landlord could be a very profitable occupation, the one that is also interesting and fulfilling. However, anybody who is considering becoming a landlord should be aware of the time and money that need to be spent on investing in a property, maintaining it and actually renting it to somebody. It is a real business in rental property, which means there are numerous duties included in this sort of business. Before plunging into this endeavor, make sure you understand the whole picture and what will be expected of you.
The good thing about renting your property is that you will be able to successfully deal with your monthly mortgage payment thanks to the monthly rent you get from your tenant. Not only that, there's also a chance some of the money could be used for potential repairs and necessary maintenance. However, you should also inform yourself if you are eligible for certain tax benefits such as:
- Depreciation - you need to inquire about the possibility to claim tax deductions annually for depreciation and specific details.
- Insurance - maybe it would be possible to deduct the cost of insuring the property, as the majority of insurance types are deductible. The important thing is to choose the right kind of insurance for your needs.
- Property management - expenses such as advertising, maintenance, insurance, utilities etc., namely necessary and ordinary expenses, can also be regarded as deductible.
- Mortgage interest - you could be able to deduct the whole interest in case you want a loan so as to buy or improve the existing property. The deduction of property tax cost could also be possible.
Financial and legal obligations are the most important ones, including the monthly mortgage payment, repairs and complying with all local and state laws that relate to rental housing. Not only that - you will be expected to be available at any time in case a problem occurs at the property. If unavailable to come, you have to have somebody designated to act on your behalf. Lastly, maintaining a safe property appropriate for a tenant's living is also obligatory.
Finding a Tenant
When looking for a tenant, you must make sure both of you are satisfied with the conditions. Firstly, you need to offer fair housing laws in order not to discriminate the tenant in any form. Next, your advertisement should provide true information about the property, highlighting positive characteristics. When it comes to renting price, the easiest method to determine a fair and objective price is to include operating expenses, but also to try to get a favorable return on the property and to be competitive on the market. In order to be really competitive, associate yourself with someone like Sydney removalists and have them as an option in case your future tenant needs them - this is how you will stand out from other landlords. Once you have an interested tenant, you need to verify the potential tenant's income sources and check their credit history, so that you know they will be able to pay the rent each month. If they have a reference for you to read, even better.
Relationship With The Tenant
Once there is a tenant in the property, you need to provide them with a safe housing unit, which means:
- keep all sanitary, plumbing, electrical and other facilities in good condition
- smoke detectors need to be provided and fully functional
- building codes have to be fully complied with
- the tenant should be allowed to modify the property so as to adapt it to their needs
- repairs and checks should be performed regularly
Hiring a Property Manager
A property manager is responsible for marketing the property, choosing tenants, collecting rents and taking care of the property. In short, they take over many of your responsibilities. If you feel it would be much easier for you to delegate some of the responsibilities, a property manager is the best choice. Of course, you will be the one supervising the manager. When choosing the right property manager, try to find somebody who has experience in marketing, tenant relations, budgeting, maintenance and, ideally, somebody who is very well informed on local and state laws. Even though the property manager fulfills all of these conditions, you should still inquire about the candidate through their former employers, check their credit history and make sure they don't have a criminal and driving record.
Of course, after checking out all the responsibilities that you would have if you become a landlord, it's normal to feel unsure of making that decision. You could make things clearer if you become a part-time property manager working for somebody else, just to get the real feeling and learn the job. This way, it is easier to give up on the whole thing in case you don't like it.
If you become a landlord anyway, know that every future rental will probably be more successful than the previous one, as your experience grows with every tenant and every month.
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