When done right, real estate investing can be a lucrative and reliable investment opportunity. Among other things, it can help you earn passive income and help you gain some tax relief.
If you’re contemplating buying a rental property, by all means, go for it! With sound management, becoming a landlord can help you achieve financial freedom for many years to come.
That said, being a landlord isn’t always easy. This is especially true for first-time landlords. There are so many challenges you’ll need to overcome to make your investment worthwhile.
Besides finding the right property, you also need to know other fundamental things, such as how to find and screen tenants, how to price your rental and how to understand the law.
Here are 7 essential tips to help you achieve your goals as a landlord:
Tip #1: Surround yourself with the right team.
Landlording is a team effort! To succeed, you need to surround yourself with certain professionals. These are people that can help you keep your properties in tiptop condition, solve legal problems, secure reliable renters and help in balancing the books.
Regardless of how many units you have, forging great relationships with such people allows you to rely on them when necessary. So, make sure your team includes a general contractor, a property and casualty insurance agent, a property inspector, a real estate agent, a real estate lawyer and a certified public accountant.
Alternatively, simply hire an experienced property manager. This is particularly important if you’re an absentee landlord.
Tip #2: Understand what the Fair Housing Law entails.
The Federal Fair Housing Law was passed in 1968 and stipulates that no tenant or buyer should be treated differently based on a protected class. The 7 protected classes are race, familial status, disability, color, religion, sex and national origin.
Many cities in Texas have also passed their legislation and added other classes as well. The city of Austin, for example, has added gender identity and sexual orientation to the list of protected classes.
The following are examples of how you can find yourself violating this key legislation.
- Refusing a tenant’s service animal because you have a “no pet” policy.
- Applying different selection criteria when screening prospective tenants.
- Asking a prospective tenant anything to do with their “familial status.” For example, if they’re pregnant or how many kids they have.
- Denying a disabled resident reasonable accommodation.
Whether you do these things knowingly or unknowingly, you risk facing serious legal implications. There is no excuse for not educating yourself on the Fair Housing Law.
Tip #3: Invest in the right renovations.
If you are thinking of renovating your property, it’s important to know which renovations are worthwhile and which ones aren’t. Unlike your own home, you need to invest in renovations that:
- Better compete with other rental properties in your area.
- Increase your property’s value.
- Attract higher-quality tenants and those that will stay long-term.
- Reduce your rental property’s maintenance and operating costs.
So, which renovations can add the most value to your Texas rental property?
- Adding popular amenities. For example, washer and dryer in-unit, fenced-in yard for pets, air conditioning, storage space and dishwasher.
- Creating an open floor plan. These are popular nowadays and can help you make rooms feel larger and brighter.
- Updating the curb appeal. You can do things like trim back trees and shrubs, paint the entire exterior, add a small garden and plant new grass.
- Remodeling the bathroom. You can install shelves to help add more storage without taking up more room. You could also convert the bathtub into a walk-in shower.
- Remodeling the kitchen. For example, by investing in new countertops.
Tip #4: Know how to market your property effectively.
With the advent of the internet, long gone are the days of using yard signs and advertising in the dailies when looking to get a tenant. Today, your marketing strategy needs to have an online approach. One study found that a staggering 61 percent of apartment searches start with either an apartment listing site or a search engine.
Firstly, have a website. Ideally, your website should have detailed descriptions about your properties and be accompanied by photos that are professional and show the space’s appeal.
Secondly, you need to know how to make use of the hundreds of listing sites out there. Examples of such sites include Craigslist.org, Move.com, Apartments.com, Zillow and Realtor.com.
Tip #5: Know how to screen tenants properly.
As a serious landlord, tenant screening is something that you can’t afford to ignore. If you do, the consequences may be disastrous.
Tenant screening is the process of separating the potentially good tenants from the bad by doing some inspections on prospective tenants. A good tenant screening process should involve checking and verifying each prospective tenant’s income level and credit rating, as well as their criminal, rental and employment background. When screening tenants, make sure the process is fair and equal to avoid the risk of being accused of discrimination.
Tip #6: Prepare a detailed lease or a rental agreement.
Having a solid lease agreement is key to running a successful rental investment. It will help you protect both your property and interests.
The following are some of the details to include in the agreement:
- Names of all legal tenants.
- Restrictions on illegal activity.
- Landlord entry rules.
- Who is responsible for what in regard to property repairs and maintenance.
- Important rent rules, such as when the rent is due, where rent is to be paid, acceptable rent payment methods and amount of late fees, if applicable.
- The term of the tenancy.
Tip #7: Collect a security deposit.
The security deposit helps serve as a motivator for tenants to keep their property in good condition during their stay. Here are the rules that you should keep in mind in regards to security deposits.
There you have it. 7 essential tips to help become a successful, first-time landlord. Remember, to succeed, you need the experience, skills and knowledge. OmniKey Realty can help you in this regard.