You’ve finally bought an investment property to bring in extra money to your annual income. While you probably realize this, it isn’t as simple as just buying the land and house and collecting your cash. There’s a ton of red tape that you’ll have to cut through to make it a viable profit center (permitting, zoning, etc.). However, that doesn’t mean that it isn’t going to be worth your effort – a recent study from the Joint Center for Housing Studies of Harvard University found that the rental market has been seeing increases over the last ten years straight, and the amount of Americans renting is at a 20-year high of 35 percent.
The following is a list of tips to help you prepare for some of the things you are going to encounter along the way to finding a tenant and capturing a successful flow of income.
Determine the Cost of Rent
At the absolute least amount, you are going to want to charge enough in rent to cover the cost of your mortgage payment, along with taxes and insurance. If you bought the house many years ago or live in an area that is undergoing development, you are going to want to double check what properties are currently going for in your area as they may have changed since you bought.
Providing appliances in the home is a great way to boost the total cost of rent you can charge potential tenants. Did you buy a new refrigerator and stove for the kitchen recently? Could they use an update? However, if there are frequent issues with the appliances, it is your job as the owner to repair or maintain them (at cost). Much in the same way a commercial standby generator is a benefit to the owner of a business (raising the property value as well as providing security to the business), it also falls on the owner to maintain the property.
Additionally, having a standby generator on your premises is another great appliance that can boost the salability of the property.
Screen Tenants Carefully
Picking the right person to live in your can make all the difference and is one of the easiest ways to make your time as a landlord a positive one. Some factors you’ll want to check before becoming involved with a tenant:
- Employment History: do they move around a lot? You can learn a lot about a person by how long they stay in one job.
- Credit History: Do they have any unreasonable outstanding debts? What is acceptable debt is entirely up to you to decide.
- Income: You’ll want to know that the person renting your house is going to be able to pay the bill with a steady flow of income.
- Background Check: If you feel you need an additional level of security, you can perform state and federal level background checks at an institution like the National Tenant Network.
Remember, this is your property, and you can rent to anyone you like – but, a careful approach to protect your investment is always advised.
You may feel that you are fully capable of managing the property yourself, especially if you don’t want to charge the additional 4 to 12 percent (of monthly rent) that comes with a professional property manager. However, it may be a small price to pay to be rid of the headache of dealing with tenants – especially if you have multiple properties.
If you’ve decided that you do want to get a property manager, you should also be just as vigilant in their vetting as you were with finding a tenant. Getting a property manager isn’t just about finding the best deal – while that is important, you shouldn’t make that the deciding variable. You should look into what the hours of the management company are – do they have a strict 9 to 5, Monday through Friday schedule? If so, what happens if there is an emergency on the weekend? You may find that you still have to come to the tenant’s aid on top of paying the property manager, essentially for nothing.
As stated earlier, it’s important to remember that this is your investment, and you can approach renting just about any way that you’d like, but being smart, thorough and vigilant are great practices.