Rental Properties: General Information And Advice

Rental properties can be a sound investment for many people; an investment that not only produces regular income but also one where capital growth can happen over the years. Whilst the returns can be slower than other forms of income such as trading shares, investing in property can be a lot less risky.

Although making money with rental property can be more difficult as well as time- and effort-consuming than other forms of investments, it is also safer – generally speaking, you can't simply lose anything, for example, due to a stock market crash. 

And if you're considering investing in real estate through a real estate website like rent street, you can first know what it is like to become a landlord. The basics are a real estate owner who leases his / her land to someone else. Don't be mistaken though – the landlord isn't a person who's just collecting his / her money at the end of the month. To become a landlord is both a company and a career, even if it is a part-time one. Thus, as a landlord, you have to think carefully and intend to make money. So, the question now is: How do you become a landlord?

1. Acquire A Rental Property

If you don't already own a rental property, then obviously the first step will be to buy a rental property. There are several things you need to consider when considering rental properties: location, type of house, average neighbourhood rent, mortgage, property taxes, etc. After all, the property you are buying will be the key determinant of how much you as a landlord can make. Concerning the venue, preferably you would like to buy a rental property near your place of residence. It will help you save on travel costs and allow you to show the property to prospective tenants, regularly inspect the property, and take care of some of the necessary repairs. If you are becoming a landlord for the first time, start small and easy concerning the type of house. Note, you are buying a property on which to make money, not your dream home for yourself and your family.

2. Calculate Expenses and Incoming Rent

Then do the calculations. Make sure there is money to be made on the local market before you even purchase a rental home. Calculate the rate of capitalisation. The cap rate calculates the rate of return on an investment property based on expected annual rental income separated by the purchase price. You need to get a more or less precise estimation of the rent you'll be able to receive from your potential investment property to determine that. 

The landlord revenue you earn in the form of rent is going to offset the monthly mortgage payments; it may even equal or surpass what you pay the bank. Yet don't forget to consider other costs when doing the calculations – which can add up to a lot. You'll need to pay property taxes, and that can be much higher than what you're paying for your home. 

Landlord insurance is also higher due to the higher related risks when you have tenants residing in an estate. Maintenance costs can vary greatly depending on whether you want to do your maintenance (which can be very time-consuming) or to employ a specialist. The good news is that you might be liable for some tax benefits on the cost of owning and maintaining your rental property: depreciation, insurance, mortgage interest, maintenance of land, travel expenses, and others.

3. Know Your Legal Obligations

Read about landlord-tenant rules. Next, there are federal regulations that you ought to be familiar with when operating as a landlord. You can not discriminate against tenants as a landlord based on race, colour, national origin, faith, age, disability, family status, children, etc. However, most states have more legal provisions relating to landlord tenants. This will take into account several issues such as security deposits, level of access to the house, warning that you need to send the tenants before you allow them to leave, etc.

4. Choose Your Tenants Carefully

You have to screen prospective tenants after you have purchased an investment property and are on the way to becoming a landlord. You should do a background check on prospective tenants and a credit check – the time is worth it. Whereas a credit score should not be the primary reason a tenant is admitted or refused, it is a valuable screening method. Take the time to test the references from employers and a former landlord in particular. You should also interview with potential tenants to ensure you comfortably communicate with them. Don't forget at all that discrimination against tenants based on the criteria mentioned above is illegal in many areas.

5. Have A Written Lease

The lease can be customised. Online standards types of lease are available which you can use as a guide. You need to adjust the deal in a way that suits your situation and expectations, though. Be concrete. Would you allow the cats, for instance? What kind of guy? How many people? Should dogs be leashed in open areas?

6. Keep The Property Well-Maintained

Inspect your property for rent periodically. That's why finding a place that's convenient for you is important. To prevent conflicts and misunderstandings with the tenants, state clearly how often in the lease documents you plan to carry out a property inspection. Three months are typically a fair duration which allows the tenants to keep an eye on the property without too much disruption. Remember to record your rental property's move-in condition by taking photographs to create a baseline. If you experience some issues during an inspection, issuing a warning and scheduling another inspection in a week or two is a smart idea.

7. Stay Organised And Maintain Good Records

Do correct bookkeeping and accounting. Beginning from the first day, don't delay this job until later as you get lost. You must be able to keep clear records of all sales and expenditures and provide photographic evidence. If you are subject to an IRS audit, you will need these documents to track the rental property operations, prepare financial statements, and provide evidence.

8. Managing The Property

Consider that a for rent by owner property manager is worth the job. A property manager comes at a premium but can save you a great deal of time and effort. A property manager will typically advertise the rental property, pick tenants, maintain the property, build budgets, and collect the rent. If you choose to hire a real estate manager, clearly identify his / her responsibilities. It depends on your financial situation, other commitments, and personal and professional skills whether you decide to go for a property manager or do these tasks on your own. 

Before you jump into a landlord, make sure you know what it all is like to become a landlord. While it may be a way of making money, it is not about quickly getting rich. Learn first about your responsibilities and proper laws. Becoming a landlord, after all, opens up a sector like any other, and it should be carefully considered and addressed.