Becoming a landlord can be a great way to make money.
However, it is not as simple as investing in properties and finding renters. It requires a significant commitment and a lot of work.
In addition to the time and effort that goes into maintaining the property and finding tenants, you also need to consider many of the legal issues associated with renting out a property. You also need to be well prepared to answer any questions for landlords your tenants may have.
For people who are considering becoming a landlord, your ability to understand these issues and protect yourself accordingly can be the difference between success and failure.
The following are 6 things every landlord should know before renting out a property:
Tip #1 – Get it in Writing
This might seem obvious to some, but many first-time landlords believe a handshake agreement is enough for a rental property.
The idea that people will keep their word simply based on a verbal agreement is nice, but it is not something you can count on. If an issue does arise and you do not have a contract, it can be very difficult to prove the terms of the agreement.
Every tenant should sign a lease agreement that clearly states all of the terms. It may seem like more of a hassle to deal with a lease agreement, but having documentation can protect you and your rights in the event of a dispute.
Tip #2 – Understand the Terms of the Lease
Having a lease agreement is a smart move, but it won’t do you much good if you do not understand the terms. As a landlord, you will have contractual obligations under the terms of the lease. This will include things like maintenance, rent collection, utilities, and your legal rights to enter the property.
If you don’t have a full understanding of the lease agreement, you might run afoul of the terms. If this occurs, your tenant could file a claim against you or you might find yourself on the wrong side of the local (housing) authorities.
Tip #3 – Learn About Your Tenant’s Rights
Regardless of whether they are outlined in the lease or not, tenants have certain legal rights.
Landlords have an obligation to understand these rights and to uphold them. You’ll need to do some research to learn about the rights that apply in your area.
Tip #4 – Know Your Rights as a Landlord
Respecting the rights of your tenants is important, but you also need to understand that you have rights as a landlord.
For example, as long as you provide adequate notice, you have the right to enter the rental property to perform maintenance. Additionally, you have a right to evict the tenant if they violate some of the terms of the lease.
Make sure you know your rights and are aware of their limits, too.
Tip #5 – Check Tenant Finances
Don’t take a prospective tenant’s word for it when they assure you they have the finances to pay the rent. Even if you are desperate to fill a rental unit, you have to realize that it is much easier to find new renters than it will be to evict a person once they are in the apartment and not keeping their side of the agreement.
Have potential tenants fill out a rental application that provides you with financial information. You could also require a credit check and income verification from the person’s employer.
Tip #6 – Get a Security Deposit
A security deposit provides the renter with an incentive to care for the property.
By collecting a security deposit, you also let the renter know that you expect them to leave the property in a reasonable condition.
Furthermore, it is a valuable form of protection because you can keep some or all of the security deposit if there is damage to the property.