Becoming a Landlord: Here’s Some Things You Need to Know
If you need to relocate or have inherited property, it might be worthwhile to rent out your home. Although becoming a landlord can be a smart investment option, it’s not cut out for everyone.
Because we regularly deal with Massachusetts-based landlords who are eager to get out of the industry, we believed it was worthwhile to make sure people understood what dealing with tenants entails. Before you put up a “For Rent” sign, consider the following:
You should have money to fall back on.
Dealing with tenants ultimately is a business transaction, so it shouldn’t come as a surprise to learn that your bank account must have some working capital. These funds will pay for multiple contingencies. For instance, if you’re still paying for a mortgage on the home, you’ll need to pay much more when the property isn’t rented out. You’ll also need funds if the tenants don’t pay rent. While these are worse case scenarios, they are likely to occur at some point.
You’ll require finances even if you’re free-and-clear of property expenses. Tenants will need to you to make repairs at times. If you try to resolve such issues on your own, they will be concerned.
Homes require ongoing maintenance. You must be mindful of this if you plan on becoming a landlord.
Before you rent it out, the unit must be in top shape.
There are a couple of reasons for this. To begin with, you need to convince tenants to sign a lease. If the home is in poor shape, you will have difficulty asking for rent at the current rate. Tenants who are willing to move into a badly maintained home should raise red flags.
You must also be aware of the landlord-tenant law. You are obligated to offer safe housing if you’re taking money from tenants. If any of the unit’s problems make the property an unsafe place to live in, you could open the doors to both legal and financial issues.
This is an ongoing struggle. The home will need to be revitalized each time a new tenant moves in. For some tenants, this will be effortless. For others, it will be a major hassle.
Refrain from becoming a long-distance landlord.
Trulia.com suggests living close to the property you’re renting out so you can check in on it consistently. Living nearby also lets you save money if you choose to do maintenance work on your own. If you’re unable to live nearby, consider hiring a property management company to handle this issues on your behalf. You can expect a business like this to take about 10% of the home’s potential revenue.
Your homeowner’s insurance policy will need to be updated.
Your claims might be denied by your homeowner’s insurance if your policy isn’t designed to carry tenants. An older policy won’t be applicable. Consult your insurance agency to obtain a new quote before moving any further. You may have to take the new insurance policy’s costs into account when coming up with a monthly rental rate.
You must be knowledgeable about the Landlord-Tenant law.
If you don’t want to educate yourself, you’ll need to retain a quality real estate lawyer. You may wind up going to court to evict a tenant. If the tenants feel like you didn’t comply with your obligations, you might be the one facing a lawsuit. A lease acts as a legal contract. Legal disputes are costly. A real estate lawyer can aid you in reducing risks. They can also help you draft a lease agreement. In the event of a sudden issue, it’s practical to have a lawyer on hand to turn to.
You must thoroughly screen tenants.
There are plenty of horror stories about bad tenants out there. Some didn’t pay rent; others took half a year to evict. Tenants have conducted illegal activities on the premises; others damaged the unit to an almost unrecognizable state. If your tenants are properly screened, you can bypass these issues. It might be an extra expense to cover, but in the long run, finding the right tenant will save you time, money, and stress. You need to ensure that they have the ability to treat the property like their own and pay to live in it on time. Screening tenants can help you determine your rental criteria (perhaps someone with a criminal record is not a suitable candidate, for example).
You have more choices.
If this article has scared you away from becoming a landlord, you’ll need another approach to handle your property.
We purchase properties in Massachusetts as they are, allowing you to bypass repair expenses. You’ll receive a check as soon as the home sells and use it to pay off the rest of your mortgage…or anything you want!