Top Tips for First-Time Landlords
If you’ve recently purchased your first investment property, or have decided to rent your home out while you travel or because you have to move, it can be a little daunting becoming a landlord for the first time. However, there are numerous steps you can follow to make the process as stress-free and profitable as possible. Read on for some tips you can follow today.
Remember It’s a Business
For starters, make sure you enter the role of landlord noting that you’re running a business. You need to treat the process of renting and managing your property seriously if you want to make any kind of profit out of the endeavor. As such, it’s best not to rent out your property to family members or friends. This can get tricky if they don’t pay on time or cause damage or other problems.
As well, always screen potential renters by checking out their credit history and seeing if they have had any run-ins with the law. When it comes to payments, expect on-time deposits and chase late ones, and don’t fall for sob stories from tenants about reasons why they are behind on their rent.
You also need to set up a separate account away from your personal one for the deposits and costs to transact in and out of. Plus, you should get advice and assistance from the kinds of people who can steer you in the right direction with your rental, such as accountants, lawyers, insurance companies and the like.
Keep receipts for every transaction, don’t outlay more money than you can feasibly get back, and make sure the property is set up in a way that is legal as per rental laws. In addition, protect yourself by insuring your property against catastrophes such as fire, floods, landslides and the like. It also pays to compare home warranty products to cover yourself against expensive repairs inside the home.
Choose the Right Rental Agency
Next, while you can choose to look after the renting of your property yourself and all the administration and other tasks that go along with that, it’s often best to hire a rental agency that specializes in the location. Looking after properties can take a lot of time and energy and, if you don’t have any experience, you could find yourself dropping the ball and making too many mistakes.
Make sure you choose the right rental agency and agent for your needs. Talk to a variety of offices in the suburb or city where you property is located, and find out about their experience in managing properties in the area, the kinds of reports you will receive and what they cost.
Don’t just think about the standard weekly percentage they’ll take from your rent, either; find out about things like how much they charge to find a tenant and to draw up leases and if they have any extra charges such as cancellation fees if you end a contract or fees for arranging repairs and maintenance at the property.
Put Everything in Writing
It’s also essential to put everything in writing, so you have a paper trail that’s digital and/or handwritten. This will help to cover you legally and financially if anything goes wrong. For example, if you choose to utilize a rental agency, you’ll need to have a contract with them that details what they will and won’t handle for their fees and any particular responsibilities you have as the owner. The contract should note how long you will be using their services, what their exact fees are, and more.
You’ll also need to ensure that the people who rent your property have signed a detailed contract. This is usually organized by the rental agency (who will likely have a template document they use which can be tweaked as necessary for special terms), or you can create one yourself if you are managing the property.
Speak to Your Accountant and Lawyer
Before you sign anything, always speak with your accountant and lawyer. Your accountant will educate you on what you can and cannot claim on tax when it comes to expenses like loan costs, rental agency fees, maintenance and repairs, insurances, etc. They may also advise you on how to set up your property ownership. For example, it may be best to put it into a trust or company name to minimize taxes on rental income and capital gains.
Your lawyer should check over contracts to ensure your interests are being protected. They will advise you on your rights and responsibilities as a landlord, too. It’s best to have your legal representative look over mortgage paperwork and sale contracts before you purchase a rental property, to be sure everything is in order.