How to Become a Landlord: 10 Steps to Start Strong

Learning how to become a landlord and applying that knowledge can lead to rewarding and lucrative experiences.

But, there’s more to it than sticking a “for rent” sign in the yard and calling it a day. You’ll also need to learn how to effectively manage a rental property, adhere to all applicable state and federal landlord-tenant laws, and use systems to take some of the workload off your plate.

In this guide, we’ll provide you with everything you need to know as a first-time landlord, from selecting the perfect property to screening tenants to choosing the right property management software. So if you’re new to renting out property and want clear, realistic steps on how to do it, you’ve come to the right place.

Step 1: Understand What It Takes to Be a Landlord

Before you buy that perfect property, it’s important to pause and consider what becoming a landlord is really all about. Being a landlord is about investing the time and effort required to maintain a property, ensuring legal compliance at all times, and effectively managing your tenants to provide a positive rental experience.

While rental properties are a great way to earn passive income, you’ll also sometimes have to navigate a poorly timed emergency repair call at 2 a.m. Renting property can offset or completely pay your mortgage payment each month, but missed rent payments can add up and become a headache when you find yourself chasing down a tenant to collect rent.

Filling your units with tenants can be an excellent way to fund property improvements, adding value and equity. However, empty units do not generate revenue, and finding the right tenant can present challenges.

But once you’ve run through the pros and cons of becoming a landlord and still want to move forward, ask yourself: Are you ready to treat this like a business?

Step 2: Get Your Finances and Credit in Order

Before learning how to become a landlord, you’ll need to learn how to buy a rental property. That starts with getting a picture of your finances, including your credit score and current debt-to-income ratio. Banks won’t lend to you if you’re not already a responsible borrower, or if the rental property’s expenses will push your finances under water.

As you get closer to making your first investment purchase, you should expect lenders to take a deep look into your personal finances to understand if you can afford the investment. You’ll also have to save money for the down payment, while keeping a reserve for repairs and startup costs to ensure the property is ready to accept tenants.

Once you’re in a financially sound position and you have the funds ready to go, it’s time to choose the perfect rental property.

Step 3: Choose the Right Property Type

When deciding on the right property type for your first time landlording, there are a few paths you can follow. You could choose to buy a single-family home, opting to ease into becoming a landlord. Alternatively, you could purchase a multi-family unit, such as a duplex or triplex, and dive in headfirst, potentially enjoying a higher cash flow and facing more complex tenant management challenges.

It’s also important to understand the area where the rental sits. Vacancy rates, rent demand, expected amenities, and neighborhood needs all impact your ability to fill the unit. The more you can understand about the community’s expectations, the more equipped you’ll be to meet those expectations.

Pro tip: As a first-time landlord, think about starting small, even with a house hack. Buy a multi-family property and live in one unit, while renting out the rest. This strategy will provide you with valuable landlord experience while minimizing your overall risk. Just make sure to use a room rental agreement to make it official.

Step 4: Run the Numbers Before You Buy

You’ve looked around, done your research, and found the perfect property. However, before you buy, run the numbers to ensure the property will actually generate a profit.

The first step is to examine your cash flow — subtract the monthly expenses for the property from what you expect to collect in rent. For example, if the rent is $2,100 and the expenses (mortgage, property taxes, maintenance, insurance, etc.) are $1,700, that means your monthly positive cash flow is $400. Not bad.

Next, review your cap rate, which helps you to compare properties. Cap rate is your net annual operating income divided by the property’s value. So, if you net $9,600 per year on a $200,000 property, that’s a 4.8% cap rate. Related to the cap rate is ROI.

ROI stands for “return on investment,” and it measures how much profit you’re earning on the money you’ve invested in the property. To calculate ROI, divide your annual cash flow by the total cash you’ve invested. A higher ROI is linked to a more efficient use of your money, and a low ROI may indicate that the property is too expensive to maintain or the rent is too low.

When crunching the numbers, it’s also important to budget for expected and unexpected costs that pop up over the year, which will allow you to maximize your profits while planning for the worst.

Step 5: Learn Local Landlord-Tenant Laws

One of the most important aspects of learning to become a landlord is to understand your local landlord-tenant laws thoroughly. Federal, state, and local governments pass landlord-tenant laws that outline the rules and guidelines for renting property. Drifting out of compliance or flatly ignoring these laws can have a drastic impact on your rental business; you must understand them before listing your property.

Landlord-tenant laws cover things like security deposit handling, fair housing regulations, and serving notices, among other matters. Since each state has its own laws regarding housing, check with your local housing authority to make sure you fully understand the rules and follow them to the letter.

Step 6: Use Software to Self-Manage

As you get ready to list your property and accept rental applications, it’s time to figure out how to manage the day-to-day operations of the rental unit. While some landlords opt for expensive property managers to take the work off their plate, there are now other options for landlords to make effective use of their time without breaking the bank.

Property management software, like TurboTenant, saves you time and money by streamlining your daily workflow and automating many of the tasks that can slow you down. Instead of sending property managers to collect checks, property management software can provide your tenants with online rent collection. Landlord software can also provide you with online lease agreements and conduct tenant background checks.

If you have a cell phone or laptop, using powerful property management software will consolidate all your management tools into a single, user-friendly interface.

Step 7: Get the Property Rent-Ready

As you learn how to start being a landlord, you’ll begin to develop processes to make your job easier each time you have a new tenant filling one of your units. The first time you get the property into rent-ready shape might take some trial and error, but once you do it a few times, you’ll start to find the efficiencies.

First, make sure that the unit’s safety features are all in proper working order. Test locks and smoke detectors, refill and check fire extinguishers, and clean the unit to maintain it in good, habitable condition. This is also a good time to complete any cosmetic upgrades that can enhance the unit’s overall appeal, such as new paint, lighting features, and flooring.

Here’s an easy-to-use, rent-ready checklist that you can use or adapt for your property:

• Change locks or rekey doors
• Test smoke and carbon monoxide detectors
• Deep clean the kitchen, bathroom, and floors/carpets
• Repair any broken fixtures or outlets
• Paint walls and repair dents, cracks, or holes
• Update lighting fixtures and cabinet hardware
• Check HVAC and plumbing for leaks or problems

Step 8: Market the Property and Screen Tenants Properly

It’s impossible to learn how to become a landlord without knowing how to market your property and properly screen potential tenants effectively.

Writing an appealing listing can attract upstanding applicants, helping your property stand out from the rest. Use high-quality photographs that highlight the key features of your rental unit, and use honest, upbeat language when describing the property. Emphasize the qualities that make your unit a superior option to all the others in the area.

Post the listing on popular web platforms, social media groups, or use yard signs to attract potential renters. If you use property management software like TurboTenant, rental advertising is quick and easy. Create a single listing and we’ll push it to dozens of highly trafficked rental listing sites.

When screening your applicants, make sure you conduct a thorough check of their credit and rental history, and verify income and references to ensure you’re accepting tenants who are least likely to cause any headaches during their tenancy.

Keep in mind: Fair housing compliance is not optional. You must treat all applicants equally, regardless of their unique characteristics.

Step 9: Create a Rock-Solid Lease Agreement

A rock-solid lease agreement is a landlord’s best friend. It establishes the rights, responsibilities, and expectations for all parties during a tenancy. Some details that a solid lease should include:

• Rent amount, due date, and applicable late fees
• Term of the lease
• Security deposit details
• Maintenance and utility responsibilities

Using a state-specific lease agreement is a great way to make sure you’re following the specific laws of your state and stay on the same page with your tenant. Consider asking your tenant to complete a move-in inspection checklist when signing the lease, which will help identify any potential physical damage to the unit. This checklist can then be referenced when the tenant moves out to eliminate security deposit disputes.

Step 10: Set Up Systems for Rent Collection and Maintenance

The final step in learning how to become a landlord is to set yourself up for success by establishing effective processes and automating as much as possible.

Using landlord software or mobile apps for rent collection and rent reminders can help ensure on-time payments from your tenants. Maintenance tracking can help you stay on top of routine maintenance needs while prioritizing emergency repairs as they pop up. Landlord software can also help you keep good records through rental property accounting software tools for tax time.

The Final Word

Now that we’ve gone through the steps, the question of how to become a landlord is probably a lot easier for you to answer. Becoming a successful landlord means starting with preparation, and by walking through these steps one at a time, you’ll be well-positioned to achieve success.

Renting property should be thought of as a long-term business, and when you take the time to plan each move carefully, you’ll set yourself up to be in business for a long time.

So, how do you become a landlord? Follow these 10 steps, establish good processes, and sign up for TurboTenant today!

How to Become a Landlord FAQ