Do you have extra space that you’ve thought about renting out? Are you considering whether to invest in a rental house? Becoming a landlord is not complicated, and many people earn a nice side income this way, but there are a few points you should be aware of before you make the leap.
1. Managing property takes time
If you’re renting out a house that you don’t live in, you should carefully consider whether you have time to spend on managing it. Finding qualified tenants and making sure they uphold their rental agreement can be challenging, and keeping your own side of the agreement will definitely require some effort. Doing your own repairs may save you money, but you’ll need to consider what your time is worth. If you’re looking for an easy, hands-off situation, you’ll want to hire a property manager. These professionals typically charge 8 percent to 10 percent of the property’s monthly rent for their services, but they will find and screen renters, collect rent and call repair companies as needed for emergencies. (You will pay those repair bills.)
2. Do some homework ahead of time
Your city and/or county have landlord-tenant laws, and you should become familiar with those laws before you create your rental agreement. Contact your local government offices and ask for a copy of those regulations. You can buy or download a basic rental agreement, and change anything on it that doesn’t apply to your situation. Decide on late fees and other policies ahead of time, and have everything written in your agreement before you interview your first tenants. Talk with an accountant about how your tax situation will be affected, and also check with your insurance agent about your coverage. If you’re renting out part of the house you live in, your own homeowner’s insurance will probably cover everything — but if you’re renting out another dwelling, you’ll likely need the protection of landlord insurance.
3. You need to be well-organized and confident
Being in charge of someone else’s dwelling place is not for the faint of heart. In all likelihood, there will be times when you have to deliver difficult information and make firm statements about what is and is not possible. It’s also very important to keep all your paperwork in order, including copies of every agreement and every payment your renters make. Walk through the rented space when your tenants first take possession, and ask them to sign a copy of the walk-through checklist before they move in.
With a bit of preparation you can learn the ropes of becoming a landlord, and mutually benefit from providing someone with a fairly priced, well-maintained home.