Accidental landlords typically come into their role as property manager unexpectedly. When this happens, landlord advice may be offered by well-meaning friends and family. However, it’s important to consider specific property management tips for landlords to help avoid common mistakes and make the most out of your new role.
How Does One Become an Accidental Landlord?
There are a few common ways you become an accidental landlord:
- A home is inherited, but you don’t want to live in it or sell it.
- It’s too expensive to sell the house, so you bring in a renter.
- You experience a change with finances that make taking on a tenant the best solution.
Once you’ve taken on the role as a property manager, a few new landlord tips can help save you stress, money, and more.
Choose Tenants Wisely
New landlords may be tempted to sign the first tenant that applies, but it’s recommended to exercise caution. Any potential renter needs to fill out an application and as the landlord, you need to verify their personal references, work history, and credit history.
A criminal background check also may be performed. If renting to family or friends, go into the tenant/landlord relationship with open eyes. You may be tempted to seal the deal with a handshake or verbal agreement, but it’s best to consider signing actual contracts.
Legal Contracts and Obligations
The American Apartment Owners Association (AAOA) offers landlord advice and easy access to tenant laws in all 50 states. Tenant laws vary by state and protect both the landlord and the renter. It’s critical new landlords understand their obligations.
The AAOA site has forms new landlords may find helpful, from basic rental agreements to a move-in/out checklist and late rent notices. It may be a good idea to consult with a legal professional when drafting your rental agreement.
All rental unit and property rules/regulations must be clearly stated and clauses for repairs, damages, pets, and late payments should be addressed.
Remember, when setting the rent price, if it’s too high for the area or the type of rental, it may be more difficult to find a tenant. This can cost more money over time.
Don’t Overlook Insurance
According to the Insurance Information Institute (III) if you’re planning to lease your home for longer than six months, it’s likely you’ll need a landlord or rental dwelling insurance policy. These policies provide coverage for:
- Physical damage to the home’s structure by fire, wind, lightning, snow, and other similar problems
- Damage to your personal property that the tenant is allowed to use: washer/dryer, appliances, and items like a lawnmower
A landlord policy also has liability coverage for medical and legal expenses if the tenant or guest is hurt while on property. If your property is damaged and you can’t rent it out during the insurance-covered repairs, the policy may also cover this loss of rental income.
Your tenants should carry their own renter’s insurance that covers their belongings. As a landlord, you can set the lease to include a requirement for the tenant to have their own insurance.
Budget for Repairs and Maintenance
Every landlord should include general repairs and maintenance in their overall operating budget. This cost then can be considered when determining what rent charges. In addition, any maintenance and repair work should be done professionally and quickly. Tenant law will dictate how long a landlord has to perform certain repairs.
Prepare for Vacancies
You won’t always be able to find a renter. Landlords need to expect vacancies and be prepared financially to deal with the loss of rental income. It can be helpful to add 8- to 10-percent to the rental fee to cover vacancies and repairs.
Require a Deposit
Most renters expect to pay a deposit, a designated fee the landlord holds until termination of the lease. This money may be returned in full to the tenant if at the time of move-out there’s no damage or violations of the rental agreement. However, if needed, the deposit may cover repairs. It’s common for an additional deposit to be charged by the landlord if the tenant has pets.
Landlord advice can make a difference for the first time property manager, helping to avoid mistakes and costly problems. For some, taking on renters works great. However, it can be a time-consuming “job” and there are many ins-and-outs to learn to be an effective landlord with a steady stream of rental income.
If you’re not ready to take on the challenges of being a landlord, it might be time to sell the property. Look to HomeGo for help with any property sale and leave the work to our team of professionals.