Management for Independent Property Owners
Independent property-owning and renting out the second property you own to tenants is a great way to make a secondary income. Whether you need to cover some additional expenses you have or are looking to save for something special like a vacation or retirement, renting out a secondary property can give you the extra cash flow you have been looking for. However, many people think renting out a secondary home has to be a stressful ordeal. That’s simply not the case.
The following are some great ways to help make the process a little less stressful on you as a landlord while allowing you to enjoy the secondary income that comes from renting out your second property:
Do Your Real Estate Homework
Do some research about the area where your rental property is located and understand the real estate market in your neighborhood, town, or city. Understanding what the local real estate scene looks like is crucial to being able to market your rental property effectively in the area you are renting your property in.
Set A Competitive (Yet Reasonable) Rate
Smaller, independent landlords will have to be sure they are asking a reasonable price for the property they are renting out. Look at other similar (comparable) properties in your area to the one you are renting out. Note the prices they are asking and then consider the price you want to ask.
Remember, if you are setting a top-notch rate for your property, you will likely attract more demanding renters who will expect near-immediate responses to problems. They will expect premier service in every aspect from the amount of maintenance they require on the property to the location and amenities your rental has to offer.
However, if you set your rental prices a little below market value (even $100 – 200 a month can have a big difference) and make it more of a “bang for the client’s buck” and they are less likely to be as demanding and the expectations aren’t likely to be quite as high as they would be if they are stretching their budgets to pay top dollar for the property they are renting.
If you can still make a profit while going a bit below market value, it might be worth considering. It’s up to each individual landlord as to how much they want their tenants to pay and how much they want to have to handle when it comes to day-to-day issues that can arise on the property and how engaged they want to have to be in the entire rental process.
Consider Background Checks
Before accepting an application from a tenant, consider if a background check is something you want to require a tenant to get before moving into your property. Background checks can reveal important information such as prior evictions (meaning they are notorious for not paying their rent on time) or other criminal or illegal activity they might have in their backgrounds. Having tenants without an extensive history of run-ins with the law can help ensure you are less likely to have issues with the people living in your rental going into the future.
Require Proof Of Employment/Income
Before you rent your property to anyone, it’s recommended you require them to have a minimal level of income to ensure they can afford to pay their rent each month. It’s recommended someone renting your property has an income of at least 2.5 to 3.0 times the monthly rent rate. For example, if you are renting your property for $800/month you want those people to be making anywhere between $2000 and $2400 a month, which means they are spending about 1/3 of their income on housing expenses, which is the maximum recommended when someone is creating an affordable budget they can stick to.
Requiring proof of employment such as previous pay stubs or employer information can help ensure information included in their application is accurate. This ensures they have the means to pay their rent each month (on time) and avoid eviction issues moving forward.
Know the Laws In Your Area
If you are looking to understand when you can schedule inspections of your property or have other similar questions, you must understand the laws in your area. You are required to give certain notices before you inspect properties or enter the premises. Laws will vary state-to-state but legally notice must be given and the tenants have a right to know when the landlord will be coming by to do inspections or handle other business related to the upkeep of the property and state of the property.
Knowing the laws when it comes to potential evictions are important, too. While landlords never want it to come to that situation, knowing how long you have to give as notice for your tenants will vary based on the area in which you live, but knowing these laws are vital for a landlord to ensure you are not breaching your tenants rights while they are staying on your property.
Knowing these laws in your area as a landlord is vital as it can help you avoid legal trouble with tenants for breaking those laws. It can also help you avoid lawsuits for invading the privacy and rights of your tenants.
Be Descriptive When You List Your Property
Writing your property’s description and overview to advertise through newspapers or on the internet can be a challenge for many new landlords. Simply be descriptive as you can. Describe the POSITIVE features of your rental property (i.e. spacious, upgrades that have happened, new renovations you have done, new flooring that went in, new paint jobs that were done to the place, etc.). Anything to make the property look clean, new, and attractive will get more prospective clients interested in the property.
Also, be sure to list the FEATURES your rental property has to offer. Even stuff that might not seem like a big deal to you as a landlord will provide your tenants with a more pleasant convenient stay, so mention it! Having things like a dishwasher, washing machine, and dryer on the premises will greatly increase your property value. A complete kitchen including counter space, a sink, stove, oven, microwave, etc. allows tenants to cook their own meals.
Mentioning if any other expenses are covered in the rent will also help. This includes simple things like trash pickup, lawn maintenance, water, sewage, electricity, etc. any little expenses covered helps the tenant save money, and that’s a huge perk to any renter on the market for a great value for their money.
State Your Pet Policy
Pets are a large part of many families today. A study by the American Veterinary Medical Association (AVMA) as of 2012 states that about 37 percent of households include dogs and another 31 percent include cats. Allowing pets to live at your rental property with appropriate down payments (generally $150 – $300 non-refundable fee per pet) or for a small monthly rent addition ($15 – $20 a pet is common) will bring more people to being interested in your rental property. Limiting the weight of the pet (i.e. under 30, 50, etc. pounds) and having pet restrictions on aggressive breeds is common and most places will allow two pets per unit (some more at the landlord’s discretion).
Allowing other small animals from hamsters or guinea pigs to ferrets or birds will also increase the marketability of your unit as people often have a variety of different “miscellaneous” pets that will be living with them.
These pets are often like family and many people will not be interested in rentals in which their pets are not allowed to join them. Allowing animals in the rental may be key to finding the quality tenant you are looking for to inhabit your property.
Make Contracts Legally Binding
Once you write up a contract with a tenant and sign it, make it legally binding by having the contract notarized. Notarization will usually cost a nominal fee per signature ranging anywhere from $2 to $20 but can save you a lot of headaches and issues if the need ever comes for one party to take legal action on the other. Most notarizations that are related to property rentals or mortgages are usually on the more expensive side of this aforementioned range.