Becoming a landlord is the dream of many people. But the journey from tenant to landlord can both be exciting and very challenging. To excel in this new venture, it’s important you have the right protection.
To make things easy for you as a first-time landlord, follow these tips to protect yourself and your investment.
Create a Good Bookkeeping System
One of the common mistakes newbie landlords make is not keeping proper records of expenses and income when renting out their house for the first time.
Without proper bookkeeping, it’s difficult to know if you are making or losing money. Get organised by keeping a detailed record of all the purchases you make to maintain the house and the cost of labour, amongst other things.
Important paperwork should be collated and filed away safely online. If any dispute arises, the documents will be crucial.
Carry out Rigorous Background Checks on Tenants
Before you rent out your property to people, you need to ensure that they are going to be good tenants.
Getting the perfect tenant is a blend of meticulous checks, a frank discussion, and following your instincts. To properly screen your tenants, do the following:
- Ensure they have a stable job
- Look at the credit reports
- Ask their former or current landlords
- Run a background check
- Require a guarantor
- Demand a significant security deposit
These checks and requirements sound over the top now, but they will pay off in the long run by helping you find good tenants.
Get Landlord Insurance
Landlord insurance provides significant protection for your rental property and enables you to rent out your property with peace of mind.
The policy covers damage to your property, injuries arising from the use of your property, loss of rental income and liability claims.
Even with the most stringent screening, you may end up with some bad tenants who are always late in rent payments. Landlord insurance protects you against these unpredictable situations. Ideally, it would be best if you also made it mandatory for your tenants to get insurance.
Make Rent Collection Easy
Whether you are new in the real estate business or you are a veteran, late rent is a common and major issue.
The more obstacles you can remove in the path of prompt rent payment, the better things would be for you. To make it easy for your renters to pay their rent, have them do bank to bank transfers. Require your tenants to use online banking to set up direct deposits. This will prevent excuses as the process is programmed to be executed automatically at the end of each month.
Have a Written Rental Agreement
A tenancy agreement is a must to avoid issues down the road. The agreement will set expectations so that both parties know what to expect from each other. More importantly, it provides legal cover for you in case issues arise that require court settlement.
Have your tenant sign the agreement before you give out your properties. Avoid entering into oral and gentleman agreements – they are not binding in many legal situations.
With the right protection, you can expect a smooth and successful real estate investment. It pays off to take the time and stress to do the right checks and set up the right systems before renting out your property.
In the long run, going through the stress of screening and vetting tenants to find the good ones is preferably compared to the expensive and difficult process of having to evict bad tenants.