If you’ve never owned a rental property, it’s easy to see why you might think that all landlords are able to rake in healthy returns. However, as any experienced property owner can attest, not all properties are equally profitable, and not all landlords are equally successful.
So, if you’re currently shopping around for your first rental, it stands to reason that you’d want to maximize your chances of success. Luckily, with the help of the following pointers, you should be able to do just that.
Look for Rentals in Popular Areas
Getting stuck with a rental property in an area where housing demand is on the wane can be a deeply frustrating and financially burdensome experience. Even a rental that has a lot to offer in terms of space and amenities is liable to have its profitability hindered by an undesirable location. So, if maximum returns are what you’re after, try to limit your investment options to properties located in popular, profitable locales.
When seeking out desirable locations, there are a number of things you’ll need to keep an eye out for. For example, robust property values and rent prices are often good indicators of abundant demand for housing. Large populations, strong growth rates, and solid job markets are also tenets of favorable populations. Golden State-based investors on the hunt for the best places to invest in real estate in Southern California would be wise to keep this in mind.
Prioritize Applicant Screening
The desire to fill units is perfectly understandable. After all, if a unit is bereft of residents, it isn’t making you any money. However, regardless of how desperate you are for new tenants, foregoing a proper screening process is liable to hurt you a lot more than it helps you.
In the absence of a good screening process, you’ll have a very difficult time determining how high-risk rental applicants truly are. Just because someone is able to say all the right things in-person or over the phone doesn’t mean they’ll be able to keep up with rent or abstain from causing problems for their fellow renters. Furthermore, if a tenant decides to stop paying rent, you may find evicting them to be a very lengthy and bothersome process.
Fortunately, you can nip all of these undesirable outcomes in the bud by committing yourself to screen every person who submits a rental application. When screening a rental applicant, make sure to obtain proof of income, as an applicant who lacks regular income may have trouble staying current with rental payments. You’ll also need to take some time to consider an applicant’s credit score and eviction history (provided, of course, they have one). Furthermore, in the interest of maintaining a safe rental, have a look at their criminal history, as well – again, assuming they have one.
While screening rental applicants isn’t 100% guaranteed to prevent you from taking on problematic tenants, it can dramatically reduce your likelihood of doing so. If you have no interest in personally carrying out the screening process, get in touch with a dedicated screening service.
Be Responsive to Tenants’ Needs
It should come as no surprise that uncommunicative landlords who regard the needs of tenants as unimportant often have trouble retaining renters. Furthermore, landlords who fit this mold frequently garner negative online feedback, thus limiting interest from new rental applicants.
In the interest of avoiding such outcomes, consistently make yourself available to tenants and provide each of them with a phone number and email address at which you can be reached during the workday. Secondly, make a point of responding to voicemails, emails, text messages and other tenant communique in a timely and courteous manner.
You should also make property maintenance one of your top priorities and promptly address any maintenance issues tenants bring your way. Failure to do so can compromise a property’s safety and livability, facilitate costly repairs and potentially even land you in legal trouble.
There’s little wonder as to why so many people view rental property ownership as a lucrative venture. After all, from the perspective of a renter, a landlord does nothing but sit back and wait for rent checks to roll in. While there’s no denying that some landlords are more attentive to their duties than others, there’s a lot more to succeeding in this field than many non-landlords realize. First-time rental property owners looking to bolster their odds of success would do well to heed the tips outlined above.
Writing an Effective Rental Agreement
Writing an effective rental agreement is key for first-time landlords and can help protect both the tenant and the property owner. When drafting a rental agreement, it is important to consider your state’s landlord-tenant laws and act in accordance with them. Be specific about the arrangement, cover all details including how long the agreement will last and note any terms of renewal. Keep in mind that you cannot restrict basic rights for tenants such as their ability to organize or make improvements to their unit.
It is also helpful to lay out expectations for late payments or other breaches of contract, such as article holdover or using the property as a vacation rental without consent. Consider writing clauses that define pet regulations to prevent a tenant from secretly adding a pet after move-in without prior consent. Lastly, include document authentication as part of your process so that everyone signs off on any changes before they are made official.
Additionally, using an online property management platform that’s designed specifically for landlords helps them manage their properties more efficiently while eliminating paperwork hassles, reducing costs associated with marketing vacancies, collecting late rent payments, and interacting with tenants in a timely manner. A system like this also simplifies bookkeeping tasks by making financial documents accessible when needed, organizing records related to each unit (leases, etc.) as good tracking cash flow & expenses related to ongoing repairs & maintenance jobs, etc.