20 Things To Know Before Becoming A Landlord - Main Image

Being a landlord is a massive undertaking. Though the benefits are huge, there are still a few things to know about becoming a landlord before you make the giant leap. The term landlord refers to the owner of the real estate property (house, condominium, townhome, warehouse, etc.) that is being rented or leased to a person or business. 

Responsibilities of a Landlord


 

When you're a landlord, there are certain things you're responsible for, such as appliance maintenance, water damage, and various leaks. In addition, there are certain things that the tenant is responsible for, such as lawn care, changing light bulbs, and carpet cleaning. However, with all those responsibilities on your mind, it might spook you, but there are many great things about becoming a landlord.

For example, earning a passive income, building your real estate portfolio, and securing your future. Our guide will share all the things to know before becoming a landlord. We’re sharing the fine-tune details, facts, stats, and more. Keep reading to find out whether being a landlord should be in your future or not.

Benefits of Being a Landlord


 

There are many benefits of becoming a landlord. Whether you're looking to simply rent out a portion of your occupied house or invest in another property and rent that out, the benefits are enormous and, when done right, immensely profitable.

  • Renting out space will create a passive source of income.
  • It's a great way to save and fund retirement without taking on additional employment.
  • There are various tax deductions and benefits to becoming a landlord.
  • You always have a fallback plan if an emergency happens. (Assuming you're rental is a different property)

A few other benefits to note are that being a landlord, and you can give low-income and middle-income families home at a price they can afford. Many landlords charge astronomical prices with frequent rate increases, and families can't always afford that. By becoming a landlord, you can choose to be different and to be an excellent landlord. 

Now that you know about being a landlord and some of the benefits let's dive into some details you should know before you take that leap.

Benefits Of Being A Landlord - Passive Income

1. Complete a detailed background check.


 

A detailed background check is necessary if you're considering becoming a landlord. A detailed background check will share past evictions and rent problems with you, so you can choose a tenant based on something. A background check will also give you a picture of the potential tenants' financial history. It also can put you in contact with previous landlords and hear first-hand stories about the potential tenant. Therefore, creating a detailed background check is imperative. This will help to reduce problem tenants, people who aren't going to pay rent, tenants who leave behind damage, and more. 

What A Background Check Can Reveal:

  • Information about employment history
  • Criminal history
  • Credit history
  • Missed payments
  • Bankruptcy

A background check can tell you vital information about the potential tenant. It's essential not ever to skip this part. It's arguably one of the most critical parts of being a landlord. A background check will enable you to approve good-quality tenants. 

2. Don’t be reliant on rental income for survival.


 

Becoming a landlord, whether you're renting out a room in your home or the entire home itself, you mustn't be going into it with the rental income being necessary for your personal living. You might be surprised by this. Of course, a rental will generate an income, but it will also require income to maintain, rent out, etc. If you set up your living expenses to not require the rental income, then you'll be able to manage it with much less stress. 

Imagine if you're reliant on that rental income and the tenant skips on paying. Now you potentially have two payments late/missed (the rental from the missed rent payment from the tenant and your own payment). The extra income is great and appealing. However, if the rental income doesn't come through, you will be in a bit of a pickle. 

Don’t consider being a landlord strictly for the income. It is also a job; sometimes, collecting the rent can be awkward and challenging. Anticipate this, and prepare when you’re becoming a landlord. 

If you require extra income, then consider a second job, a side hustle, or asking for a raise. Becoming a landlord requires dedication, work, and drive.

Don't Be Reliant On Rental Income For Survival - Extra Income

3. Get comfortable with uncomfortable conversations.


 

Being a landlord, you’re likely going to have some uncomfortable conversations. Perhaps the tenants' rent is late, the neighbors complained about the noise, or the suite is just too smelly and causing a disturbance. To consider becoming a landlord, you need to check with yourself on your confidence in uncomfortable situations. Sometimes you might encounter these on phone calls; however other times might require head-on assertiveness. Assess your confidence and ability to handle things such as:

  • A rent check bounced.
  • Someone reported drugs on site.
  • The tenant is violating a policy.
  • Excessive noise complaints.
  • Dealing with eviction.

These are just a handful of the many possible awkward and uncomfortable conversations you might have to have with a tenant as a landlord. 

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4. Have a lawyer review all the paperwork.


 

Unless you've been to law school before becoming a landlord, having a lawyer go through the contract is a good idea. This is helpful to ensure that the lease is correct, with adequate information, and will be enforceable if necessary. A lawyer can also ensure all intended terms and conditions that you, as a landlord, have noted. For example, the rules around visitors, parking, noise, etc.

5. Hire a rental project manager.


 

Before becoming a landlord, you should hire a rental project manager to manage the property if you're not living on-site. There are several reasons this would be majorly beneficial. Properties with property managers tend to have longer tendency occupancies and happier tenants. In addition, a property manager can help with keeping reports neat and organized, keeping the property in excellent condition, and being able to stay on top of maintenance. 

6. Educate yourself on the housing laws. 


 

Before you take the step to become a landlord, you'll need to educate yourself on the various housing laws that pertain to you and the prospective rental property. For example, landlords should be aware of the Fair Housing Act and the Fair Credit Reporting Act. 

Educate Yourself On Housing Laws - Housing Laws

7. Keep proper expense records.


 

Make sure that you can be organized and neat. Being a landlord requires a lot of paper trail and bookkeeping. For example, all receipts should be tracked, along with expenses, any payroll you might have, and any other costs associated with the rental property. This could include lawn care, home repairs, and more. Keeping clear and organized records is also helpful for warranty items such as fridges, freezers, and other appliances. So it is recommended that one should develop an organizational system to always stay on top of it.

8. Create a pet policy.


 

Whether you wish to allow pets or not is your call when you’re becoming a landlord, but the policy needs to be clear and signed. The signing means that the tenant understands and agrees to whatever the policy is.

9. Set up a system to allow online rent payments.


 

Allowing prospective tenants to pay their rent online will ease a lot of stress for them, increase their feasibility in being able to pay it, and likely, increase the number of rent payments received on time. We live in a very digital world, and the easier the bills are to pay, the more likely they will be paid. An online payment system is a must before becoming a landlord. Ensure you're comfortable using it so that you can teach tenants.

Setup A System To Allow Online Rent Payments - Online Payment

10. Create a long-term plan to improve the property to increase rent.


 

Having a plan in mind before becoming a landlord will be helpful. Consider what renovations you wish to make in the future and how they'll increase the rent potential, increasing your profit. Take careful consideration into what type of renovations, what type of décor, and other trends that aren't timeless. Opt for décor and styles that are timeless and clean. This will help to maximize the efforts of the renovation. 

11. Create an air-tight screening process.


 

The screening process is the process of finding new tenants. The screening process includes the showing, the application, and the background and financial check. Make sure to never skip out on any parts. The screening process is what will find good quality tenants that will pay rent on time. 

12. Make a schedule for property maintenance. 


 

You don't want to be on the journey of becoming a landlord of a property that receives community complaints because of its appearance. A property maintenance schedule will ensure that the grass is cut, gardens are watered, and all the other needs are taken care of.

Make A Schedule For Property Maintenance - Schedule

13. Ensure you have the proper insurance.


 

If you're becoming a landlord to a tenant in your home, it's important to ensure that your property is insured correctly because of the new tenant. Ensure that your home insurance is compliable with a tenant and what additional third-party liabilities need to be changed and altered. Insurance is important.

14. Anticipate/plan for unexpected expenses.


 

If you're the owner of property already, then you're aware that there can always be unexpected expenses. Before becoming a landlord, it's vital to ensure that your financial situation is in the correct order. You have to be ready for anything.

15. Teach yourself basic handyman skills.


 

Knowing basic handyman skills can save you an enormous amount of money. For example, basic plumbing, caulking a sink, finding a stud, hanging up a picture, etc. So instead of continuously hiring out, save money and do as much of it yourself as possible.

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16. Treat the rental property as a business.


 

Even if the rental property is just a room in your already-occupied home, it's still important to treat it like a business. This will help you see the rental as a business endeavor and keep it in perspective. If the rental property is a different structure, still treat it like a business. It's an investment and needs to be taken care of. 

17. Set a fair rent price.


 

The rental price is based on several factors such as the neighborhood, the number of bedrooms, bathrooms, if there is a yard, the crime rate, and more. Do some research around what rentals are going for in that area and price yours fairly.

18. Create a proper rental application.


 

A simple google search can give you a renters lease template. However, before becoming a landlord, you must ensure that the rental application is complete and transparent. For example, are all the terms and conditions clear? Is the parking fee added in? Is it clear who is responsible for the additional utility fees?

Create A Proper Rental Application - Rental Application

19. Require tenants' insurance.


 

Some tenants don't know that they're responsible for their own insurance and that property insurance doesn't insure the home's contents. Make sure this is clear and understood to avoid a headache for yourself. 

20. Enforce and follow all rules and policies.


 

Make sure to establish a professional landlord-tenant relationship. Enforce the rules of your tenancy agreement. 

By being hands-on and active in being a landlord, you'll create a positive landlord-tenant relationship, and that's a solid beginning to a great rental experience. In addition, you avoid any misunderstandings and miscommunications by using excellent screening tools, being a great project manager, and creating detailed terms and conditions. 

Schedules and planners can be used to stay on schedule for various property management things such as changing the furnace filter, cleaning vents, covering air conditioning units for the winter, and more. Keep in mind the housing laws for the region in which the rental property is located and always have a lawyer go through the lease to ensure accuracy.

Enforce And Follow All Rules And Policies - Rules

Becoming a landlord means you'll be wearing a variety of hats. Landlords are responsible for many things and have to do many things. It's a twenty-four-hour job. Some days might not feel like any work, while others might feel like nothing but a headache. A visit to change a furnace filter might turn into an all-afternoon fixing a clogged sink pipe, but that's part of the job of becoming a landlord. 

Every day is a surprise. While earning passive income, you'll also learn how to be an excellent landlord. There is a learning curve, so be gentle with yourself and open to opportunities! It might surprise you how rewarding becoming a landlord really is!