Are you thinking about a rental property investment? Owning rental properties can be the gateway to an income and financial freedom if you do things right from the beginning. Sure, you’ll make mistakes at first but you’ll learn from your mistakes along the way.
Use these 7 tips to avoid some common problems.
- Expect your property taxes to skyrocket
Even before you become a landlord, you’ll need to know how owning rental property investments will alter your tax bill. Don’t be like one new landlord who opened the tax bill for her first rental, only to find her taxes had increased by 280%
You may be expecting an increase – this will differ state to state – depending on exemptions, etc. Research the property tax caps on rental properties as opposed to your primary residence.
- Draw your line in the sand
As a first-time landlord, don’t be afraid to set out some ground rules for your tenants. It’s okay to stick to the terms in the lease and by setting firm ground rules you’ll be letting tenants know that the rules matter. There are consequences for late rent payments, damages, or anything else.
One of the worst things a landlord can be is non-confrontational. Sure, it’s hard at first, but by setting some non-negotiables, you’ll save yourself countless hours of stress.
- Good tenants are priceless
Appreciate the really good renters, who take great care of the lawn and keep the home clean. These are the tenants who decorate for the holidays and look after the property as if it were their own home.
One landlord was so delighted with the family in his one rental property that he decided to not raise the rent that year. As he says, “I’m losing some revenue by not raising rent, but the peace of mind that comes with a tenant who takes such good care of the property is worth it.”
- Bad tenants can do more damage than you know
Every longtime landlord will have a horror story – or six – to tell about the kind of damage bad tenants can leave behind. This can include broken windows, missing doors, damaged frames, broken toilets and filthy carpets.
Your best defense here is to be aware a lot of destruction can happen in a short amount of time; the only way to prevent it is to visit your properties often. Keep in mind the 80/20 rule; approximately every fifth tenant will suck. They can look good on paper, but will the prospective tenant part with their income to pay the “boring” expense of rent? Will they keep the home in reasonable condition?
- Expect the unexpected
Wear and tear happens; furnaces burn out, air conditioners fail, appliances pack up. Rental property investments cost money for upkeep.
Work it right and most of those funds will come straight from the renters themselves. Your rental property investment should bring in a tidy profit each month; save up a “repair-and-refurbish” fund to deal with those surprise repairs that always come at the most unexpected (and worst) times possible.
- Being a landlord is not for the lazy
Rental property investment means you screen prospective tenants carefully, establish ground rules and keep an eye on your property at all times. Be respectful of your tenants and their families and save for the inevitable repairs.
You should be friendly, but not friends. This is a business; It’s true when defining how nice to make a place. It’s true when selecting tenants; character matters.
Go on the Internet to learn about finding and screening tenants, creating and signing leases, and managing rental properties investments.
Most tenants pay the rent on time, don’t disturb other tenants, and don’t wreck the place.
Be proactive. Stuff happens. The difference is you’ll be prepared.