Even in such a turbulent economic situation, one thing is for sure: owning property is one of the best paths to accumulating long-term wealth.
This is even more so the case if you’re a landlord. Most landlords amass a portfolio of several properties, each of which generates passive income. Over time, your ability to make money increases exponentially, offering the opportunity for practically infinite scaling. As such, if you’re considering becoming a landlord or have just started, you have a great future ahead of you.
Of course, nothing worth doing in life is easy, and while some people may assume being a landlord is just easy money, that couldn’t be further from the truth. Succeeding takes a huge amount of effort, and most find this to be daunting in the beginning.
To help you get started on your journey, this article will cover seven rules to live by, ensuring you’re doing all you can to progress forward.
1. Screen Tenants Properly
One of the most fundamental elements to being a good landlord is screening your tenants properly. You don’t want to just let anyone into your property, and an interview alone, while helpful, won’t tell you all you need to know.
The best way to go about it these days is a standardized rental application. These collect all the data you need to determine whether or not a client is a good fit from a practical perspective, covering income, employment status, credit score, and more. These initial forms are at the cornerstone of an effective screening process. And from there, you can conduct an interview for smaller details, build a relationship with your potential tenant, and finalize your assessment.
2. Buy on a Factual Basis, Not on an Emotional One
When purchasing a property with the intention of renting, it’s essential to consider the place through the eyes of a potential tenant and how cash flow will be affected, rather than just choosing somewhere you personally would want to live.
These can be very different things, and it’s key to make that distinction so that you’re not buying somewhere infeasible to rent. Investigate the predicted profitability by analyzing the mortgage payments, insurance commitments, maintenance costs, vacancy risk, taxes, and so on. Only after you’ve built a factual picture like this can you make an informed decision.
3. Include Proper Infrastructure Before Letting
When a tenant complains of a problem, it’s usually something that could have been fixed beforehand, so you should always try to install proper infrastructure before you ever consider renting the property out.
HVAC units are expected, and you will always need to ensure the plumbing and electrics are safe and fully functional with no signs of degradation. It’s also important to have the roof checked for damage, and have it repaired promptly if it exists.
Then you have the core safety elements. Fire alarms, carbon monoxide detectors, and heat detectors in the kitchen, as well as functioning house alarm systems, are vital.
4. Maintain an Appropriate Emergency Fund
Despite your best efforts, it’s still possible for an emergency to happen at some point. While you can’t prevent every eventuality, you can make sure you have a suitable amount of money kept back to pull yourself out of a hole if you find yourself in one.
This doesn’t have to be a tremendous amount, and how much is best for you will depend on how many properties you have. In general, you should have enough to cover two or three large repairs at each place.
Image Credit: Pexels Photo by Alena Darmel
5. Always Think Long Term
As is the case with any big investment, it’s essential to think long term. This is something that will take a lot of time to build, and you’ll need to have a far-off goal to work towards if you’re going to stay motivated to see it through.
This means you will also need to be patient. Don’t rush anything, as making rash decisions is a quick way for things to come crashing down. Instead, be calm and measured with each choice you make, and always reach out to an investment advisor if you’re struggling at any point. You will almost certainly experience a few blips here and there, but progress isn’t measured by how few problems you have – it’s all about how you deal with the inevitable ones that come your way. Remember: every stumble is an opportunity for growth.
6. Prioritize Building Strong Relationships With Your Tenants
The relationship you have with your tenants is extremely important. Not only should you be providing them with a nice place to live as part of your duty as a landlord, but it’s also key to consider retention. A tenant who feels respected is much more likely to stay, and in fact, tenant duration may well be the biggest determinant of your success. Sourcing potentials can be a lengthy process, and so your goal should always be to build towards stable, repeat tenants rather than constantly looking for new ones.
You should be responding promptly to any requests, and don’t automatically be on the defensive if a tenant has a problem. It’s about being measured in your response and clear in your communication.
7. Learn the Local Laws
Understanding the law as it relates to your operation as a landlord is one of the most complex yet critical elements of being involved with this kind of business. What’s more, the rules are different depending on where you’re based, and things continually change, so you’ll need to keep a close eye on everything over the long term.
Think rent increase restrictions, eviction procedures, habitability standards, fair housing compliance, and so on. You’ll need to understand each of these inside out to ensure you’re doing things by the book.
Wrapping Up
There’s certainly a lot to learn as you endeavour to become a great landlord, and it won’t happen overnight. Take your time to dig into each of the sections above, and after a few weeks, you will feel much more informed. Good luck!
Top Photo by Ivan S
