One of the best ways to gain passive income and expand your wealth is to own rental properties and become a landlord. According to research, at least 36% of Americans live in rental properties, with rental prices that over time. Since the majority of tenants are still unable to buy a home due to the Covid-19 pandemic, the demand for rental properties will increase in 2021. When it comes to learning how to become a landlord for beginners, learning how to invest in rental properties is important.
What exactly is a landlord? A landlord is essentially the owner of a single-family house, condominium, multi-family home, or apartment that is leased or rented to a tenant.
Being a Landlord – How to Make it Into a Business
The following are the steps to being a landlord:
Purchase an Income Property
If you do not already own a house, the first step is to purchase a rental property. A good investment property will be within your price range, in good condition, and has the potential to produce a good return on investment.
The Mashvisor Property Marketplace is a perfect place to find off-market properties in top-performing markets, such as tenant-occupied rentals, bank-owned homes, short sales, foreclosed homes, and auctioned homes. Real estate market research is a critical phase in determining the best locations to invest in real estate in 2021. Filters such as venue, listing style (traditional or Airbnb), budget, number of bedrooms, and desired cash on cash return will help you find exactly what you’re looking for.
Analyze the House
Once you’ve found the perfect property, use the Mashvisor Rental Property Calculator to assess its investment value. This calculator can calculate startup costs, monthly recurring expenses, occupancy rate, rental income, cash balance, cap rate, and cash on cash return. Mashvisor’s machine-learning algorithms are trained on reliable real estate data from Airbnb, Zillow, and the MLS.
Being a Landlord Consists of Understanding Landlord-Tenant Rules
Being a landlord necessitates familiarity with and adherence to local, state, and federal landlord-tenant laws. The Fair Housing Act is one of the most relevant federal statutes that landlords should be mindful of. This legislation makes it illegal to discriminate against tenants based on their faith, national origin, gender, ethnicity, disability, or familial status.
Purchase Landlord Insurance
Landlord insurance can protect your home from unexpected loss and incidents such as explosions, burglaries, floods, and natural disasters. If you’re a first-time landlord, talk to an insurance provider about what kind of coverage you’ll need. However, landlord insurance does not protect the contents of the tenant’s home. As a result, you should allow your tenants to obtain renters insurance.
Prepare the house for rent by doing the following: Cleaning up, making any required repairs, installing improvements, and bringing the home up to code are all part of making your house for rent by owner move-in ready. This will make the investment property more secure and appealing to tenants.
Being a Landlord is About Setting Reasonable Rent
If your rent is too high, you will not be able to find tenants. On the other hand, charging a low rent means foregoing future income. Determine the rental rate of comparable rental properties (rental comps) in the region to determine how much to charge.
Find and Screen Tenants
You can advertise your houses for rent by the owner through posters, open houses, social media advertising, or word of mouth. Make a point of conducting a background and credit check on all prospective tenants. When you are a first-time homeowner, screening is an essential aspect of how to rent a home.
Sign the Lease Agreement
The real estate lease agreement lays down the ground rules and requirements for both the owner and the tenant. Before any use of the paper, let a legal professional review it. Before you rent the property, both you and your neighbor must sign the lease.
Maintain the House
Being a landlord entails routine maintenance activities. These include HVAC unit servicing, gutter cleaning, pest control, and property walkthroughs. If you don’t have the time or expertise, you can outsource these responsibilities to a competent property manager.
What you Should do Before you Become a Landlord
Being a landlord can be very profitable. Venture in both the short and long term, there are substantial risks that real estate investors should be aware of. Investors may purchase a rental property before fully understanding what it takes to run a successful real estate company. Here are some of the most common risks a landlord could possibly face:
1. Long-Term Vacancy
Due to difficult economic conditions, poor property quality, setting the rent too high, poor marketing, or being in an undesirable location, a rental property may experience extended vacancy. To prevent this, conduct thorough research before purchasing a house. Set a fair rent and use effective marketing tactics.
2. Unsatisfactory Tenants
Having a reckless tenant can be a landlord’s worst nightmare. Bad tenants may cause a variety of issues, including nonpayment of rent, property harm, and complaints from neighbors. A rigorous tenant screening process would reduce the likelihood of having such tenants.
3. A Slowdown in the Economy
Nobody can forecast economic conditions in the future. In the event of an economic downturn, good tenants will lose their jobs and be unable to pay their rent. An unwanted outcome would be to lower your price. It is best to have several rental properties in various locations to plan for the unexpected. Since you have a well-diversified real estate portfolio, an economic downturn in one area would not necessarily impact all of your assets. In continuance, a Section 8 landlord, may guarantee your income from a property.
4. Unanticipated Repairs
When you become a landlord, you must expect to maintain your property. Tens of thousands of dollars in maintenance costs could be incurred by tenants. Although insurance will cover some unforeseen expenses, others will have to be paid for out of pocket. To reduce this risk, avoid investing in properties that are more than ten years old. In addition, before signing on the dotted line, have a licensed home inspector inspect the house.
5. Sluggish Property Managers
A sloppy property manager means weak tenant placement, an increased risk of vacancies, and poorly managed rentals. Before hiring a property management firm, do your homework. Checking feedback from former or current clients should be part of this process.
Despite these drawbacks, being a landlord is an option worth considering. Before you invest in rental property, make sure you have a being a landlord checklist to help you get ready. How much profit can you make on a rental property? The return on investment for rental properties is determined by a variety of factors such as location, home condition, amenities offered, and rental marketing skills. Sign up for a 7-day free trial of Mashvisor, followed by a 15% lifetime discount, to begin searching for and reviewing investment properties for sale across the US market.