Renting out your property can be a smart financial move but it’s also a relatively complicated process that you need to fully understand before getting started. What are some of the key points to look into before you rent out your property for the first time?
Make Sure You Understand the Local Laws
The very first thing to check is the current rental agreement regulations. They vary according to where you live and any changes to the law can make this activity either more or less attractive for landlords. Therefore, you need to look for details of any upcoming changes or current proposals, as well as the rules currently in place for landlords.
Investigate and Calculate a Suitable Price
Crunching the numbers is another vital step to working out if renting out your property is a good idea financially. Investigate the local rental market fully to accurately find out what you can expect to earn each month, and then you can see whether it’s still a good idea. Remember that the list of outgoings should include taxes, repairs, and any mortgage repayments still outstanding on the property. The rental yield is the difference between income cash and outgoing expenses. Any figure over 6% is generally considered to be a good return and Houston and Arlington in Texas are among the top American cities in terms of yield.
Consider Whether to Upgrade the Property
The next issue to consider is whether upgrading the property is a sensible decision. This means calculating the cost of making any changes and then seeing how much this would raise the rent by. The decision will be influenced by the local market, as the presence of a thriving rental scene for more expensive properties may help you to make up your mind on this matter.
Work Out the Maintenance Costs
On-going maintenance is one of the costs that new landlords often forget to take into account. These costs can bite deeply into your profits and could even mean that you end up losing money on the rental deal. While it’s impossible to know what could go wrong in the future, by looking back at past maintenance costs you can get a reasonably clear idea of how much you can expect to pay out in the future.
Get the Right Kind of Insurance
One of the next questions you may wonder about is what the best kind of coverage would be to be prepared for any unforeseen maintenance costs. It’s important to invest in insurance that covers the loss of business income, pest infestations, plumbing issues, as well as potential tenant damage. Where does liability lie, and could you, as a landlord, receive compensation for tenant damage at all?
The right kind of insurance is needed to start with, as a normal household insurance policy is unlikely to cover you leasing the property. On the other hand, a landlord’s insurance policy is typically designed to protect you from accidental damage caused by tenants, such as certain types of fire or water damage. Expect to see wear and tear damage excluded, but it’s always a good idea to check the exact conditions.
Choose a Professional Lease Agreement
The lease agreement that you sign is hugely important, as this is where the key terms of the rental agreement are listed. You can do this with the help of a legal expert or else look online for details of what to include. Online templates help you to write this document quickly but be sure to find a model that’s well-written and approved by a legal expert. Sometimes, the time saved in putting together this agreement too speedily can lead to major issues later on.
Work Out How to Collect the Rent
Another point that needs to be resolved before you go any further is how you will collect the rent each month. This is now made easier through the emergence of online wallets like Venmo and Apple Pay, but it can still be one of the major sources of conflict and wasted time. For some landlords, it makes sense to use the services of a real estate agent to make this easier, although this will eat into your profits.
Find Suitable Tenants
Finally, the task of renting out a property is made far easier if you find the right kind of tenant. Ideally, you want someone who pays on time and doesn’t cause you any hassle. This is why most landlords now look to carry out a background check on applicants, to try and save themselves from a few headaches later on. You have to treat prospective tenants equally by law but should take into account factors such as their credit rating and whether they have a solid rental history.
By considering all of these points, you can make a sensible decision that allows you to rent out your property in the best way possible and with little or no hassle.
