Rental property is one of the most promising types of investment to have in your portfolio. It has long-term investment benefits such as real estate appreciation, tax benefits, and regular cash flow from renters. However, it requires a lot of effort and dedication to manage a rental property. Some of the challenges you’ll face include; lack of diversity, unpredictable tenants, insurance expenses, time, and management issues. It is vital to have insurance for your property; this will ensure protection from financial losses if an unanticipated happening ensues on your property. If you file a claim and feel a discrepancy in the amount your home insurance has compensated you and the premiums you’ve been paying, you can always ask for a home insurance audit and thus arrive at the appropriate homeowner’s insurance cost. Below are the essential factors you should consider and some important things you need to know before owning and renting your rental property.
How you’ll market the rental property
Statistics indicate that most renters use social media platforms while searching for properties to let. Therefore, the most effective way of marketing one’s rental property is by preparing online rental listings and promoting the listing on social media platforms. The online rental listing should be attractive and detailed enough to capture tenant’s interests and tell them the apartment’s features. The majority of renters would like to know the rental price, physical location, amenities, the number of bedrooms, and nearby attractions—the more informative the online listing, the better. Tenants will also be interested in visualizing the space of your rooms, so it’s vital to upload clear photos of every room and shared space. An attractive online rental listing should include the best features and state your expectations to attract responsible tenants.
Understanding the Governing Law
One of the fundamental things you should understand before owning a rental apartment is whether the law in your locality allows homeowners to rent out their houses. As a real estate investor, you should ensure that you always adhere to the law. Among the things you should understand first before renting out your house are; the tenancy agreement to rent collection, terminations, inspections, and the basic knowledge of the local Tenancy legislations. It would help if you also learn about local housing and federal laws in your market to understand your rights and obligations as a real estate investor.
Have the right Property Management
The key to success for any business career is good management. Managing real estate requires a lot of effort, organization, time, and attention to detail. Suppose you want to save on time and hassle associated with owning a rental property, such as rent collection, marketing your property, and solving tenant issues. In that case, you should hire a property manager. A good property manager can assist you in managing several rental properties to avoid being overwhelmed with landlord responsibilities. Hiring a good manager allows you to hand over the role of keeping a habitable space for your tenants if you don’t live near your property, thus allowing you to attend to other duties you may have.
Written Lease Agreement
Before renting out your property, you should understand how to write a rental agreement. A written agreement ensures that both the landlord and tenant understand their rights and obligations and are ready to abide by the agreement. A good lease should assure fair housing and comply with the local market’s tenant, rental, and insurance laws. A valid lease agreement should be specific. You should set rules you want to include: rent payment deadlines and due penalties for late payments, security deposit, lease term, who is responsible for repairs and maintenance, rules of behavior, and pet policies. A written rental agreement strengthens the relationship between the landlord and tenants.
Set the Correct Rent Price
To come up with the right rent price, you should do enough research on the current fair rent price in your real estate market. Setting a sensible rent price is vital. The rent rate you charge will either attract or repel tenants. Since rent collection is the primary source of income for most rental property, always consider how setting a rent price affects your financials. Prepare a list of expenses and compare the costs with your rental income. Fixed expenses to include in the list comprise property taxes, insurance fees, and mortgage payments. Variable expenses, on the other hand, should consist of repairs, utilities, and property improvements. By comparing income with expenses, you will be able to determine how rent price affects your monthly net income.
Create a Tenant Screening and Follow up Processes
Tenant screening assists in finding responsible renters who will pay rent on time and also protect your property. Ensure that of the applications you receive, you filter out and select responsible tenants. Some characteristics of responsible tenants include those with a good rental history and who don’t have a criminal record.
In conclusion, good management of your rental property, collecting rent effectively, finding and screening tenants, every step along the way, matters for the success of your investment.