Are you considering renting out some of your property or investing in something new? Are you wondering about the realities of being a landlord?
When considering investing in real estate, many folks only know that they will be collecting monthly rent and enjoying their income. Yet owning property is a big responsibility, and you’ll want to be certain you’re prepared for all that it entails.
Here’s what you need to know about the hidden costs of being a landlord.
1. You’ll Be Working Hard
Becoming a landlord involves plenty of daily responsibilities. Initially, it’s important to find the right tenants, as the wrong ones can cost you plenty of money in rent and repairs.
Finding tenants means you’ll need to know where to advertise, as well as where to get quality credit and background checks. You’ll need to show the home to quality tenants whenever you get some interest.
Many landlords are also involved in making daily repairs. These could involve fixing leaky faucets or broken circuit breakers.
If you aren’t handy but remain committed to renting out the property, you could hire a quality property management company to take care of these issues. You’ll also need to think about things like ice and snow removal.
Landlords will have to deal with potential liability issues. These could involve swimming pools and knowing local safety codes. You’ll want to check daily for any potential problems to avoid lawsuits.
Of course, you’ll also need to collect rent each month and take appropriate action against those who don’t pay it.
2. You Can Ask For Help
The task of becoming a landlord involves some expertise that you might have. That’s okay!
You can enlist the help of experts who can help you make sure you’re keeping your business above board. They can help you price your rent based on the local market, check local laws, and stay on budget.
You may need to call a local property management company, accountant, or lawyer to help you out. If you’re unsure who to go to, check with other local landlords you trust. They can point you to professionals who will help you keep everything legitimate.
3. You’ll Need Insurance
It’s important to have the right insurance if you choose to become a landlord. For example, landlord insurance can help to cover the building itself in case of an event such as fire or lightning.
If you’re renting out a room in a single-family home, you may need homeowner’s insurance. Most landlords will also need liability coverage, which can help you if a tenant is injured on your property and you are found legally responsible. In addition, renter’s insurance can help protect your tenant’s property.
If you’re in the process of renovating or just waiting for your first tenants to arrive, you’ll need a special type of insurance for vacant buildings. Talk to your local representative to make sure you’re covered.
4. Start Small
Many landlords recommend starting small if you aren’t used to all of the daily responsibilities of becoming a landlord. Maybe you live in half a duplex and can rent the other unit out. Or perhaps you have an extra dwelling unit on your property that you’re allowed to rent.
When renting units onsite, you know that you’ll be maintaining the property anyway. The added income from a tenant is a bonus. And you’ll get a feel for the paperwork and legalities involved in renting to someone else.
5. Get Ready For Paperwork
Some of the paperwork involved in becoming a landlord can be handled by a property management company. But even if you plan to hire one, you should be familiar with it so you know what you’re responsible for.
You’ll need to keep very accurate records for legal reasons. This means keeping track of mortgage payments, insurance premiums, and taxes.
Many of these things can be written off as long as your bookkeeping is strong. If it isn’t, you may want to consider making a good hire.
It’s also important to know about local landlord-tenant laws. Examples of landlord responsibilities include keeping locks on properties and keeping space liveable.
In addition, you’ll need to write your own rules for property usage and make sure your tenants adhere to them. As much as it’s no fun to be strict, you’re often better safe than sorry.
6. Be Prepared
Being a landlord could be less time-consuming than you think. Yet it’s important to be prepared for the worst just in case you’re faced with a problem. These are inevitable in any profitable business.
Besides insurance, you should have some savings in place. You can use it in case of an emergency or unexpected vacancy. Initially, aim to have enough put aside to cover the cost of owning, insuring, and paying taxes on the property for at least one year.
You can also have strict rules for tenants. Put the most important ones in the lease.
For example, you may not want anyone subleasing or smoking on your property. These offenses could be so important that they would result in an eviction. It’s important to have your tenants sign a paper stating that they have agreed to all of your regulations.
The Realities Of Being A Landlord
Being a landlord can be a rewarding way to develop an excellent source of passive income. However, it’s not without its complications. If you’re interested in becoming a property owner or manager, make sure that you’ve done your research and taken the right precautions before breaking in.
Don’t stop getting smart about your investments and lifestyle now. For more great advice, read our blog today.