Thinking about renting a property to earn some extra cash? Becoming a landlord can be a rewarding way to generate passive income. But if you’re not prepared, it can have a steep (and costly) learning curve.
Getting started as a landlord is the hardest part. But if you, do it right, you’ll enjoy a guaranteed income with relatively little work (depending on how many properties you’re letting).
Here are a few tips to help new landlords learn the ropes.
1. Find Out if You Need a License
It’s currently not a requirement for most landlords to get a license before letting a property, but some must do so. For example, if you’re letting an HMO (house in multiple occupation), you must be licensed.
For HMO property advice and information on other landlord license requirements, check with your local council. The only nationwide license requirement is for HMO landlords, but local councils are able to set licensing requirements for landlords renting other types of properties within their jurisdiction.
Renting a property without a license can result in large fines and legal ramifications, so make this your first step on the road to becoming a landlord.
2. Inspections Save Money In the Long Term
Many landlords avoid having regular inspections done because they can cut into profit margins. But these inspections will save you a lot of money in the long term.
And it’s not only because finding an issue early will cut down on repair costs (although this is a great reason to schedule regular inspections). It’s also because hazards that crop up are a violation of the law. If a tenant is harmed because of unsafe conditions, you will be held liable.
That means if a tenant complains about an electrical problem, mold, or a broken rail, you may already be in violation of the law. Tenants can contact the city council if they wish, and you may be fined.
The cost of fines, legal fees, and repairs makes inspection costs seem like pocket change.
It is recommended that landlords perform inspections every 6 months.
3. Always Screen Potential Tenants
The worst tenants are sometimes the nicest people. That’s why a tenant’s application and interview don’t provide enough information on whether you should rent to them. Make sure to do thorough background checks and credit checks on applicants.
If you’re renting an HMO, you should also ask for references from previous landlords and bosses. You want to get an idea of their payment history and if they often miss rent deadlines. But it’s just as important to find out if they got on well with previous housemates and coworkers.
Conflicts among tenants lead to higher turnover and more work for you.
4. Be Strict Yet Understanding
The relationship between landlords and tenants isn’t just transactional. You’re in the business of people, and you need to manage the relationships and expectations of your tenants. You can do this by being strict with the rules yet forgiving in certain situations.
For example, you should always enforce payment deadlines. But if a tenant who always pays on time misses a deadline, there’s no reason to seek penalties (even if penalties are included in the rental agreement).
Lax rules and an informal attitude may suggest to tenants that you don’t take the job seriously. If your tenants think you don’t care about the property, they won’t take care of it either.
Just remember that being strict on the rules applies to you as well. Popping in unannounced or making demands that are not included in the agreement will also cause tenants to lose respect for the property and your relationship.
5. Get Landlord’s Insurance
Rental properties (especially HMOs) depreciate faster than single-family homes. When multiple adults are living or working together, every part of the space undergoes more wear and tear from the washing machine to the stairs.
Damage will occur at a more frequent rate than you expect, and you will be responsible for paying for repairs and replacements. Landlord’s insurance from a Cincinnati insurance agency helps to offset some of these major costs, and it covers your legal fees if you need to go to court with a tenant.
Landlord’s insurance also covers fire, accident and theft, which is more common at rental properties than single-family homes.
Are you ready to let your first property? Becoming a landlord is a business decision, but it’s also a great opportunity to work with people and provide a service to those in need. Follow the tips above and you’ll be sure to have a rewarding and lucrative future as a landlord.