8 Things to Consider Before Becoming a Landlord

Becoming a landlord means investing in a rental property that can help you achieve financial freedom and earn a passive income. However, you must understand the type of commitment before you purchase a property. Currently, rent prices are higher than ever, and many buyers are priced out of homeownership because home prices have also risen. Becoming a landlord is a great way to earn extra cash, but it can be a time-consuming and costly undertaking. Here's what you need to think about before becoming a landlord. 

1. Time and Financial Commitment

Investing in rental property requires significant time and financial investment, so you should consider these two things before you start looking at properties. Remember, being a landlord is a business, and you'll need to manage your tenants, your finances and deal with any issues with the rental. Of course, you can have another job on top of being a landlord, but you should be able to quickly solve problems if they arise and make being a landlord one of your top priorities. 

Time and money go into maintaining a home, and you should always be available for tenants, especially if there's an emergency such as a flood. If you don't have time to dedicate to your business, then you can consider hiring a property manager that will do some of it for you. However, this is an additional expense on top of marketing to find a tenant, maintenance, repairs, and legal fees associated with rental documents. If you're not sure whether becoming a landlord is a wise financial decision for you, consider working with a financial advisor who can help you assess your options.

2. Knowing Where to Buy

   It's typically best that landlords find quality rental property so they can attract the best tenants. Homes that are fixer-uppers are lower in price, but you might need to spend a significant amount to get them fixed up enough to attract tenants. You'll need to consider the location of your rental property so that you can get the best price. Most tenants are willing to pay more for rentals near public transportation, grocery stores, and other types of conveniences. 

    

   Buying a fixer-upper will be tempting because you'll assume you can get a great return on your investment. However, if nobody wants to rent the property, then you've lost money. 

3. State and Local Laws

4. Before you purchase property with the intent to rent it out, make sure you understand state and local laws regarding tenant rights, landlord laws, and zoning ordinances. You should also check with the homeowners association because some of them might not allow homes in the neighborhood to be rented. 

    

   You should also be prepared to pay fees or taxes on your rental property or have regular inspections so you aren't faced with fines. Next, you'll need to learn about tenant and landlord rights so you can ensure you're not breaking the law or putting anything in the lease agreement that could get you into trouble. Remember, if you don't follow the proper guidelines, then your lease might be invalid. 

5. Legal Advice

6. You'll need to ensure your agreement with the tenants is valid. If a tenant doesn't pay rent and you need to take them to court, you don't want to find out your lease isn't legally valid because you made a few mistakes. To ensure your lease meets all of the requirements, work with a lawyer that specializes in real estate. Paying an attorney to write or look at the lease will ensure that it can hold up in the courts. 

    

   You should also look for legal counsel in case you need to take a tenant to court for any reason, including non-payment. 

7. Maintenance Planning

8. Maintaining the property will allow you to catch problems before they create problems. For example, you can ensure all of the appliances are working properly and the home is safe before something breaks down and adds to your costs. 

    

   If something does break, it's a good idea to have a repair company available to fix it as soon as possible. Your tenants will need emergencies, such as a leaky toilet, fixed immediately, and it's your legal obligation to do so to ensure their home is safe. 

    

   Not only that but acting quickly can keep your tenants happy so they're more likely to live in the rental for years, and you won't have to find another tenant to replace them. 

9. Expenses

10. Every business comes with expenses, so you must set some time aside to deal with these costs. Many new landlords make the mistake of not saving for capital expenditures, such as repairs to the roof, appliance replacements, and more. Eventually, you will need to replace the roof on your rental or buy new appliances, so it's something you should always be prepared for.

11. Tenant Screening

12. When renting out your property, you want to ensure that a tenant can afford to pay rent on time every month and will be respectful of the property. When accepting new applicants, you should make sure to run background and credit checks on all of the adults that want to live in the home. At that time, you can verify things such as their income and whether they have any pets. You should also call their previous landlords to ensure they were respectful to their neighbors and the property itself. 

13. Collecting Rent

14. Collecting rent from tenants will be one of your top priorities as a landlord. After all, you have to make money from your business. You can make collecting rent easy by providing your tenants with an online payment portal so they can set up auto-pay and never miss a payment. Of course, you can also collect money deposits or checks. 

     

    Since we live in the digital age where most tenants are used to making payments online, it's best to set up a website or with a payment provider that can help you accept rent from tenants. 

    Final Thoughts

    Becoming a landlord means giving up your nine-to-five if you want to have multiple properties, but if you have a single property, you can still keep your day job to help you pay for expenses that come up. While there are many benefits to investing in real estate, it's not for everyone. Make sure you understand everything that goes into being a landlord and what you'll need to do to make it happen. 

Marné Amoguis

Marné Amoguis holds a B.A. in International Business from UC San Diego. She is a contributing writer at 365businesstips.com where she loves sharing her passion for digital marketing. Outside of writing, she loves traveling, playing music, and hiking.