Renting out a property is an idea that is appealing to many people, but there is more to just collecting rent money at the end of the month when you are a landlord.
Rental properties can become time-consuming and it is a huge responsibility that you will have to deal with. It is an investment that can be financially rewarding if you know what you are up against and if you know how to manage it properly.
Here are a few factors you might want to consider before renting out your property:
You are in it for the long haul
Property investment is a long-term strategy, as it can take a while before it starts paying off. A rental property is likely to reach a stage where it starts paying off itself or even making a profit but this will take time.
In other words, it is rare that rentals cover the costs from the outset (‘cash flow positive’). You might have to carry some of the costs in the beginning, but the rental amount is bound to increase over time which will reduce the amount of money that you as the landlord will need to cover.
This, however, will not happen overnight.
The bond won’t be the only expense
As the landlord, you need to consider the different costs. This does not only include the bond, but also things like maintenance expenses, insurance, property rates and taxes, and possibly the legal fees of an attorney when it comes to drawing up legal documents.
You will also have to deal with difficult tenants if the situation arises and you will have to collect the monthly rental from them – a task that will prove to be quite difficult.
You will probably also have to set money aside for unexpected maintenance around the house if it is required.
Have a checklist
Having a checklist is handy when the renter moves in and out in order to make sure that nothing is overlooked. It will ensure that the property is assessed and nothing is overlooked. The same checklist can then be used when the tenant moves out.
Include the following things on your checklist: check whether the stove is in working order, check lights and electrical points, ensure the geyser is working, check for leaks, and check that the gutters are unclogged and cleared of any debris.
Make sure the contract includes all the details
The contract should be as detailed as possible and include all stipulations and rules that the tenant should adhere to.
It should avoid any possibility of future misunderstandings or misinterpretations. The more detailed the contract, the less chance of ambiguity!
If the aspects of the tenancy are dealt with in the contract, there will be no space left for interpretation on the part of the tenant.
Some of the important factors you should consider highlighting are tenant behavior, breakage cost, the preferred method of payment, and the date when the rent is due.
Vetting and selecting the right tenants
- The financial success of your investment will be dependent on the type of tenants that you choose to do business with.
- Prospective tenants must be vetted before a rental agreement can be concluded.
- Try and obtain the tenant’s previous rental history, reasons they are moving, their place of employment and income.
- References should be contacted in order to verify the information given.
Using the services of the rental agent during these processes will be very helpful. It is illegal to discriminate against tenants, but it would be unwise to select the first person that you meet with.
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