If you’ve been considering making extra money renting out a property you own, you’ve no doubt already discovered how much stress and planning is involved with being a landlord. As you think about whether or not earning money by renting out properties is right for you, consider these tips:
Be sure you’re up to the task. There’s no doubt about it, being a property manager is extremely tiring. No matter how good your policies and systems are, there will still be lots of stress involved with your job. So make sure that your return on investment is worth the time, energy, and expense that goes into it.
Have a system in place for absolutely everything. Whether it’s a policy for late rent or handling violations of your property rules, consider every possibility. Then think about how you will handle it. Then make sure you stick to it. It can be hard to enforce your no-dog policy. Especially when you have an otherwise good renter who breaks the rules with an adorable puppy. But do so you must! Above all, be sure to insure your property. And encourage your tenants to get renter’s insurance too.
Don’t be the landlord. Earning money with rental properties isn’t easy. In all situations, refer to yourself to your renters as the property manager. This will take the sting out of any bad news you have to break. If someone asks a tough question, saying you have to check with the owner can buy extra time.
Take stock of the place and decide how you’ll use it. You’ll attract the quality of renters that you want by offering competitive rents for the area. When deciding on tenants, be sure to have a decent screening system in place, especially if your property is more expensive. Check every applicant’s credit, and run background checks on them too. Ask them to provide details of their monthly income and employer phone numbers. It’s also a good idea to get the names and numbers of their previous landlords to make sure that they’re good tenants.
Decide if you’ll offer a furnished space. Depending on your area and on the specific needs of the people who are likely to be living in your units, you’ll want to make different calls. For example, short term leases might be more suitable to furnishing than long-term leasing units. Consider how much you think you can charge extra for a furnished apartment, and then try to find some good resources for low-cost furniture to get your best return on investment.
Figure out the best ways to advertise. Depending on the demographic you are catering to, you will have different options in advertising that will be most effective. For example, if you are catering to an older market, you will probably want to combine print with web advertising, with a slight emphasis on print. If you are advertising to a young and trendy demographic, make sure you are active on all of the most popular rental assistance websites and apps.
Be professional. Make sure your rentals and your building look professional, even if you are just renting a room out of your home. Go to a website that specializes in professional looking, but inexpensive rental signs and place it in the yard while you’re looking for a renter. Also, make sure to keep your space looking really nice and tidy. Be ready for last-minute drop-ins at all times. Keep the yard and front foyer area looking nice by having a table with business cards, brochures, etc.
If earning money with rental properties was easy, everybody would do it. There’s no doubt that you need to invest a certain amount of time, money, and energy when trying to turn a significant profit from renting out even just a single room in your home. Make sure you are really getting the most for your money by planning ways to cater specifically to your target demographic and by figuring out exactly what you want out of a renting relationship.
Photo Credit: turkeychik
I think this type of business should just be the same just like how each business started because I used to rent an apartment. But, I noticed that the services or treatment of landlords changed later on or as days went by, which made me transfer to another one.
Never take pets. Tenants generally will not care for companion animals properly, and they will allow them to destroy your property. No dogs, never. If the tenant’s dog bites someone, they are off the hook because they have nothing. You as the landlord are responsible and you can be successfully sued for everything you own, including your own home. You can lose the money and real estate accumulated over a lifetime from one dog bite. The tenants will tie a dog outside and it will destroy the lawn, pile up feces which the tenant does not notice, howl and disturb the neighbors. If left inside the dog will claw the woodwork, chew the carpets , defecate and urinate in the house. Cat urine in your building will necessitate tearing out carpets if you’re lucky, and flooring, sub flooring and low sheetrock if you are not. Cat bites someone? You as landlord will get sued for that. Tenants can’t pay the rent because they are paying for pet food, that’s your fault. Don’t get me started on FAKE “companion animals” with a certificate and a cute jacket with lettering off the internet.
Thanks for the tips, Karen! Although I have pets, I agree with you — and I would not allow pets in my rental property either.
I’m a landlord and operate pretty much contrary to the entire article. I am certainly upfront about being the property owner. In fact, that is why I can emphasize the place is important to us and they must be responsible. I first built a one bedroom cottage for a senior who was soon to be homeless. It is a very nice place and being a carpenter I installed many features that make it special, like recessed LED lighting that highlights the tongue and groove vaulted ceiling….stuff like that. That first renter is now in a care home and the new tenants are in their early twenties just starting out so we give them a break on the rent. They are most appreciative. Yes, I do have insurance and did urge them to get renter insurance, but a dog is most welcome. Cats, no. Cats scratch the drywall and trim to sharpen their claws, etc etc. But people need some joy and love in their lives and nothing does that better than a dog, imho. If they don’t measure up I know their family and they will kick their butts for me. We are also planning to buy an old place right next door to us simply to protect our situation. In all cases any new tenants will be by word of mouth.
It is my belief that many many landlords are greedy bastards and only add to the conflicts between the two parties. Especially the ‘renter corporations’ who are in it for the biggest buck return they can squeeze out of people. But that is just my opinion. I do accept that many tenants are just as bad, but a good relationship between the two parties can be very productive. Here is just one example. When the new ‘kids’ came over for the first interview we sat in our house and talked. They asked when they should pay their rent? I asked them if one date worked better for them than another? They asked if they could pay on the fifth of every month as that was their payday. Sure, what difference does it make to me? But I did stipulate, no cheques….cash by email transfer, only. That way I don’t have to go to the bank, ever. So from the first day we have started out working together. When it snowed I plowed their driveway by 6:00am so she could get to work on time. They thanked me profusely. And I leave them alone. They need their privacy. It works as a win win for both parties. We also stipulated no smoking indoors, respect the neighbours, and basically treat the home as if it were their own and all should be good.
If owners can not do their own maintenance they will have to hire it done. That extra cost must be passed on. I think landlords must be able to be able to do some basic repairs at the very least. Being a landlord is more than just a spreadsheet exercise.
Tenant selection is crucial. It is also fraught with opportunities for the Government and groups of specialty lawyers to sue you. Inform yourself of discrimination laws in your state / municipality and follow them. Keep a loose-leaf notebook with clear plastic sheet protectors and put EVERY tenant application in it. Important to ask all prospective tenants the SAME questions on your check list. After the check list questions you can ask any other things. If you don’t ask them all the same things on the check list you will be sued.
I check IDs. Not just the paper documents because they are for sale on any city street corner for a hundred bucks. You can use E Verify and other avenues. I take photos of them, their social security card, car and license plates. Confirm how many occupants.
Have a check list: Where they work, how long, what salary, who is their immediate boss, how long on the job? They must be able to prove their income. When they start telling you they work off the books and have no documentation, look out! Where do they live now, how long? Any bankruptcies and evictions on their records? You will look these up and if they have lied to you about past history you don’t want them. Do criminal background check. You are mostly NOT allowed by law to use this particular and fascinating information but it is nice to know. Do not tell them you know!
Get an iron clad contract drawn up by an aggressive contracts lawyer, not the “do it all guy” on the corner. I am a big believer in specialty lawyers. Include only very short grace periods. Have a vigorous per day late fee after 5 days. Include the old, “In case of unpaid rent no notice is required to file to evict on the first day after the grace period and you will be responsible for all costs” clause if it is legal in your state.
I also include a clause that if they skip on any rent or damages costs that they accrue 15% a year on the unpaid balance and this debt is not dischargeable by bankruptcy. Friend got left with lots of rent owing but since she had included this clause (She said, “Thank you Karen.”) when the deadbeat hit the lottery for lots of money the state withheld all the money including interest owed to Edna and gave it to her since the state disburses the lottery winnings!
Screening: First of all, LOOK IN THEIR CAR. If it’s awash in dirty diapers, fast food detritus, soda and beer cans, that is how they will keep your place. Don’t rent to them and make notes on their application about condition inside car. Pictures are very good too.
It is better to have the place empty than have it occupied and have to spend months and lots of money evicting the wrong tenants and cleaning up after them.
There’s TONS more you need to think of and to do to get the right tenants.