You’ve probably heard real estate gurus talk about how you can generate lots of monthly passive income by renting out your investment property or primary home to tenants. However, they don’t often tell you about all the challenges landlords face when dealing with tenants. For instance, you must know how to screen tenant applicants properly and create lease agreements with the correct provisions to protect yourself. If you don’t have experience doing this, you could be in a bad financial or legal situation in the future.
Here are some things you need to consider before renting out your primary home or investment property to a tenant:
Write a Comprehensive Lease Agreement
The lease agreement is the primary legal document between you and your tenant. It outlines all the responsibilities and legal rights each of you has in the rental arrangement. As the landlord, your lease must abide by the rules of the Fair Housing Act and other rental laws of your local and state government. In addition, most lease agreements will include term dates, rent due dates, eviction terms, pet policies, and which parties are responsible for making repairs.
Create Digital Records
Create digital copies of your most essential records because it will make managing your rental properties so much easier. For instance, make copies of all deposit receipts, maintenance records, and all email communications with your tenants. That way, you can prove everything you did to satisfy the tenants and their demands.
In addition, you should request that your tenants submit their rent payments online too. After all, checks can bounce, and cash is not traceable. Online payments eliminate these hassles by creating a digital record of the tenant’s rental payments.
Understand Your Local and State Rental Laws
Please research your local and state rental laws before renting your property to a tenant. Then you can avoid making bad decisions that could put you in legal jeopardy and risk losing money. First, check with your local municipality to verify if you’re even allowed to rent your property to a tenant. Sometimes a municipality will have specific rules about renting out properties, especially concerning inspections and tenant’s rights.
Talk to a real estate attorney or financial advisor to get further clarification on the rules and laws of your area.
Understand All the Expenses Involved
Renting out property has expenses attached to it. You cannot just spend all the tenant’s rent money on whatever you want as disposable income. There are expenses associated with your rental property, such as property maintenance, management, insurance, and taxes. These are common rental property expenses that get deducted from your disposable income. Talk with a real estate professional to learn how your disposable income can stay higher than your monthly property expenses.
Managing Your Property and Tenants
Tenants will always bring up issues, such as something breaking in the house and wanting it fixed. If you don’t have the time to address these issues frequently, you’ll need to hire a property manager to deal with them. Then you can relax and let your property manager deal with the tenant’s issues regularly, including collecting their rent payments. Although it is not required to hire a property manager, you could find it a valuable investment if you want to save yourself time and stress from dealing with tenants.
Being a landlord is difficult because you must devote a lot of time and money to keeping your tenants satisfied. But if you research and plan your finances properly, you could turn your rental property into a lucrative investment that generates passive income every month.
Contact a real estate professional to learn more about how you can turn your house into a profitable rental property.
You can contact Alfano Law Office by calling (603) 856-8411 or at this link.