So you’ve purchased an investment property — congratulations! With a little luck and a lot of hard work, you should be able to profit from your savvy investment and generate income through rent. But rental properties are not without their risks and pitfalls, so you’ll need to be smart and careful. To help you along, we’ve laid out a few helpful tips for new landlords. Read up and start perfecting your rental strategy!
Don’t try to do everything yourself
The equation is simple. Your profits will equal the rent you receive minus the costs you incur in managing the property. So, in one way of looking at things, everything that you do yourself instead of hiring someone else to do will directly increase your profits (by lowering your costs).
While this is true, you can also end up costing yourself a lot of money (and some of your sanity) by stretching yourself too thin and trying to do things that you’re simply not qualified to do. You should be smart about outsourcing work, especially in areas where a botched job will cost you. So much needs to be done — you can’t do it all yourself, at least not well!
Consider working with attorneys, tax professionals, and property management firms. Streamlined outsourced solutions can be more cost-effective in the long run than a misguided DIY effort.
Use landlord software
Another way to drastically reduce your workload as a landlord is to use landlord software. Landlord software handles all kinds of tasks for you, from advertising your property to potential tenants online to performing extensive background checks that will help you screen for problem tenants.
Landlord software would be well worth the investment even if it were pricey — but it’s not. In fact, free landlord software may be your best bet. You’ll find powerful tools built into rental listing websites and other landlord-friendly websites and services. Find one that feels right to you, and take some work off of your plate.
You’re a modern landlord, so why try to get by with the low-tech solutions of yesteryear? The future is a helpful place for landlords, so start living in the now.
Choose tenants wisely
Your income property relies on its tenants to make money. Without a tenant on your property paying rent, you aren’t earning money. You’ll want to fill vacancies quickly, but be careful — as bad as having a vacant property is, it is even worse to have your property occupied by a bad tenant.
Deadbeat tenants who don’t pay rent render your property unprofitable while taking up space that should be reserved for paying tenants. But eviction is costly and time-consuming, and you may find that legal costs aren’t worth the money you’d recoup in back rent or other expenses. And what if your tenant is destructive? You could put your property in danger by renting to the wrong person. This is one of the biggest risks and drawbacks of being a rental property owner.
You want to make sure that you’re renting to a reliable tenant who can afford the place. That’s why you do background checks and credit checks.
Be careful about renting to people you know, too. Family members and friends may seem like ideal tenants, but the tenant-landlord relationship is its own beast, and trying to be professional and fair with tenants you know well can be difficult. You can end up putting a real strain on your relationships and your finances if you’re not careful.
Your better bet is to stick with the usual way of getting tenants and rent to someone you do not know — but whom you can count on because they fared well in their background check and credit check.
