Investing in your first rental property can be an exciting experience, but you need to take a few precautions if you want this journey to be as stress-free as possible. A single mistake could end up costing you thousands or result in a lengthy and complicated legal battle. Here are a few simple tips that will help you bypass some of the most common mistakes that new landlords make.
List and Track Additional Expenses
Your monthly mortgage payments will be just one of the many expenses that you need to plan for in the coming years. Property tax, rental income tax, HOA fees, maintenance, and utility bills could end up costing you more than the mortgage itself. Luckily, you should be able to deduct many different expenses including income tax, operating costs, depreciation, and repairs. Those deductions might end up saving you thousands when it comes time to file your taxes.
Double-Check All Rental Unit Laws
Rental property laws can be extremely complex, and you should carry out some research before you hand over the keys to your first tenant. You will need to follow very specific rules regarding safety, sanitation, security deposits, and evictions. Even if your tenant fails to pay rent or damages your property, you could end up wasting thousands on legal fees if you don’t adhere to those laws.
Thoroughly Screen Your Tenants
The single most important step in this process is screening all potential tenants as thoroughly as possible. Spending a little extra time going over a tenant’s history could help you avoid major issues down the road. In addition to running a credit and background check, you also need to contact previous landlords and employers. If easily accessible and public, you might also be a good idea to browse through their social media—especially platforms like Facebook, Instagram and LinkedIn. By checking out their profiles, you will be able to gain a better perspective of who your applicants are, their personalities, and if they’re the type of people you’d want as tenants.
If you still feel comfortable with the tenant after doing all of your research, then go ahead and schedule an in-person interview. If you think that they were good but just have a few minor questions about anything you may have come across during your research, take the initiative and ask some questions. It could be possible that something was taken out of context or a good explanation had not previously been provided through your other resources.
Consider Hiring a Property Manager
Taking care of rental property can be exhausting, and you might want to think about working with a local property management company. Those businesses usually offer a wide variety of important property managing services including move-in inspections, move-out inspections, damage assessments, dispersal of security deposits, rent collection, and maintenance services. For a small monthly fee, you will have peace of mind knowing that your investment property is being taken care of. Doing this may also free up your time—time that can be put towards other real estate investments and build your property empire.
No matter what steps you take to protect your property, accidents can still happen at any time. That is why you should invest in landlord insurance that covers issues such as theft, severe weather, and legal problems with your tenants.
