Real estate is a fast-growing industry with amazing benefits and predictable cash flow. One way of entering the world of real estate is by becoming a landlord.
Becoming a landlord might seem overwhelming, but it is an amazing investment that can give you plenty of positive cash flow.
Whether you want to become a full-time or part-time landlord, you will face many challenges, and it is important to learn how to avoid common mistakes.
This guide will teach you how to become a successful landlord and navigate you through the rental process.
First, however, let's discuss what exactly a landlord is and their responsibilities.
What is a landlord?
A landlord is a property owner who leases their property to tenants in exchange for rent payments.
If you want to learn all about purchasing a rental property, check out this guide: How to Purchase a Rental Property
Landlords have the potential to form great success if they manage their properties and assets correctly.
In the next section, we will explain what it means to be a good landlord via their responsibilities and duties.
What does a landlord do?
One of the most notorious characteristics of landlords is that they hold many responsibilities. It is important to know these responsibilities to avoid legal and logistical wrongdoings.
Landlord responsibilities include:
- Lease agreements
- Tenant screening
- Understanding landlord-tenant law
Below, we will be going over each one of the pre-referenced responsibilities and explaining why they are the keys to success for your rental property.
To succeed as a landlord, budgeting needs to be a high priority.
Landlords need to budget for all sorts of things, including the initial purchase of the property, property taxes, maintenance costs, and any future expenses pertaining to it.
You want to keep your tenants happy and remain reliable when problems arise. Remember: if you have no tenants, then you have no income.
If you do not budget accordingly, your tenants will suffer the consequences, which will in turn affect your income.
Want to own rental property but don't know how to get a loan, learn all about it here.
Although drafting a lease agreement by yourself is not unlawful, it is not recommended.
Having a legal professional write your rental agreement will ensure your protection if your tenant breaches the contract.
Legally binding agreements are complicated to craft; contact a legal professional to ensure your protection under the law.
A well-maintained property is more than looks and aesthetics; it requires safety and functionality.
Working carbon monoxide detectors, for example, are required in the state of Florida, so ensure that your maintenance checklist is up to your state’s standards and abides by local laws.
Once you are ready to rent out your property, tenant screening is an essential part of your role as a landlord.
Tenant screenings have helped many landlords secure good tenants.
Troublesome tenants can cause problems that can financially strain a landlord, so credit checks and eviction reports are especially important when choosing a tenant. Credit checks and eviction reports are essential in choosing a tenant.
Understanding landlord-tenant law
Becoming familiar with your state’s landlord-tenant laws can help avoid unnecessary legal conflict.
These laws vary by state, so ensure that you become familiar with your state's landlord-tenant laws and local landlord-tenant laws.
Also, abide by your state's fair housing laws.
In order to find tenants, tenants also need to find you. Marketing your property can help you reach a large pool of prospective tenants and achieve just that.
Resources such as Trulia and Zillow Rental Manager are great listing websites that can help you attract renters. Although more costly, you can also contact a real estate agent.
On these sites, you will be able to upload pictures of your property, so make sure you take quality pictures to impress any potential tenants! They are also free to use, so take advantage.
So, now that we have discussed important landlord duties, we will discuss exactly how to become a landlord in the next section.
How to become a landlord
Being a landlord is a hard job that takes a lot of organization and responsibility, but it also is not as scary as it seems.
In order to become a landlord, you must first:
- Purchase a rental property
- Get the property tenant-ready
- Find the perfect tenant
- Finalize the lease agreement
If this sounds like a lot, your observations are spot on.
Below, we will be explaining each of these steps in detail and help ease the process for you.
Purchase a rental property
The most crucial and obvious step in becoming a landlord is to own rental properties, however, it is not as easy as it sounds.
When purchasing a rental property, you must ensure that it fits your budget and that it will bring you a good return on your investment, otherwise known as ROI. Also account for property value over time.
There are endless resources on Google that allow you to calculate the ROI of a rental property. So, before purchasing, make sure that the investment is sound and that you won’t lose money on it.
Get the property tenant-ready
Oftentimes, properties will not be move-in ready right after purchase. Getting a property move-in ready entails many tasks.
You must perform your due diligence as a landlord and understand landlord-tenant laws on required amenities, such as functioning facilities and air conditioning.
In this step, you should also ensure that the property looks well-maintained, especially if you will be uploading pictures on listing websites.
Find the perfect tenant
Finding the perfect tenant is the most underestimated task you will encounter as a new landlord.
A bad tenant can cause severe damage to the property and your assets. On the other hand, a good tenant will optimize your investment and make your life much easier.
The key to finding great tenants is to have a large pool of applicants to choose from, which is why listing your property is so important.
Also, ensure to run eviction, credit, and background checks as these can tell you a lot about your tenant’s rental history.
Interviews are also a great way to get initial impressions of your prospective tenant.
Finalize the lease agreement
Rental agreements are more than a simple tenant-landlord agreement, they play a vital role in your protection in terms of liability.
As previously mentioned, it is important that you consult a legal professional to craft your rental agreement. We recommend that you revise the rental agreement with your tenant, as this avoids any gray areas and displays everyone’s role in maintaining the property.
After you revise the lease with your new tenant, also provide them with a copy. If there are any disputes or disagreements both you and the tenant will be able to quickly reach the document.
After getting your property up and running, you will notice the consistent upkeep and attention it requires. In the next section, we will go over property management and discuss your options.
Should you hire a property manager?
After renting your first property, you might feel experienced enough to buy another investment property.
Acquiring more properties means more passive income for you, but also more work and responsibilities.
As you will learn through experience, properties are a huge commitment and take a lot of work to upkeep. Maintaining happy tenants is another difficult never-ending task. These responsibilities can get overwhelming and take huge amounts of your time and energy. For this reason, many people hire property managers.
In the upcoming section, we will discuss how a property manager can help you, as a landlord.
What can a property manager do for you?
Property managers will help maintain your property while you channel your time and energy into other things. They can:
- Manage rent and fee collection
- Advertise and screen prospective tenants
- Maintenance and repairs
..and much more.
Below, we will be outlining these responsibilities and how they can benefit you as a landlord.
Manage rent and fee collection
After acquiring a few properties, you will notice the difficulty in collecting rent, down payment, security deposit, and other fees, especially if the properties have different locations.
Although monthly due dates are implemented, the more properties you own, the more problems arise from collecting rent. Also, tenants may sporadically have difficulties paying timely rent for countless reasons.
If you choose to physically collect checks, you might find yourself spending hundreds of dollars and miles on rent collection alone.
A property manager can do all of this work for you and ensure that your tenants are paying rent on time, saving you precious time.
Advertise and screen prospective tenants
Advertising and tenant screening is very draining for all landlords.
Taking pictures of the properties might require you to drive long distances and invest in expensive equipment.
A property manager or a property management company can take care of the advertising for you.
In terms of tenant screening, a property manager can:
- Conduct interviews
- Monitor the application process
- List property and handle communication
This means that you don’t have to worry about finding potential tenants anymore, as the property manager will do that for you.
Maintenance and repairs
Maintaining and repairing your property is a constant, non-negotiable when owning rental properties.
In accordance with your lease agreement, you will be responsible for the upkeep and repair of certain aspects of the property. Not upholding your end of the rental agreement can cause legal repercussions.
Property managers will aid in quick repairs which will keep your tenants happy. They will also track maintenance requests to make sure that all of them are being taken care of.
Although property managers can serve as great assets to your team, the grass isn't always greener. In this next section, let's discuss some of the challenges that come along with hiring a property manager.
The drawbacks of having a property manager
Now, although hiring a property manager can help you keep track of your properties, there are cons that come along with hiring one.
Some of these cons include:
- Lose a percentage of rental income
- Hand over some control of rental property
- Differences in the screening process
In the next few sections, we’ll discuss these drawbacks and how they can impact your business.
Lose a percentage of rental income
Property managers can cost a big percentage of your rental income, especially if you need to hire one for each property. Based on the monthly rent price, you may be paying up to 12% of that to the property manager.
Hand over some control of rental property
With someone new managing your property, some things might not be executed to your liking.
This can cause some conflict with your property manager and wind up giving you a bigger headache than without one.
Differences in tenant screening
When screening tenants, many of the decisions are subjective and based on personal opinions. This can become a problem as you, the landlord, lose some control in the screening process.
There is, however, a way to bring back all control to the landlord, which will be discussed in the next section.
Gain control with DoorLoop
Losing control of your investment property can be one of the scariest experiences of becoming a landlord. Most landlords hire a property manager to keep their property in order but end up doing the exact opposite.
You might be asking yourself if there is a way to organize your investment property without losing control... Well, luckily, DoorLoop has got you covered.
Property management software can get you the best of both worlds in terms of control and property management. It can give you the independence to make and implement your own decisions while getting you the help you need.
With DoorLoop, you get to enjoy your autonomy while receiving the following benefits:
- Features like a streamlined maintenance management system
- Bringing all your accounting into one place designed for property accounting
- And automating tasks like automatic listings and automatic rent payments
As you have learned, becoming a landlord can certainly become a challenge at any scale. If you do not like to relinquish control of your investment properties, but like the idea of property management, give DoorLoop a try and schedule a free demo today.