Becoming a new landlord comes with a lot of brand new territory. And if you go in without a plan, it can quickly become overwhelming. Owning rental property is a lot more complex than most people realize – with dozens of moving parts and responsibilities. If you want to succeed from the start, you need to make smart decisions that protect your investment and minimize stress.
Whether you’re renting out a single property out of necessity or you’re planning to build a real estate portfolio, here are the five smartest things you can do to set yourself up for success.
Become Proficient at Weeding Out Bad Tenants
Finding the right tenant might be the most important aspect of being a landlord. A great tenant pays rent on time, takes care of the property, and follows the lease agreement. A bad tenant, on the other hand, can lead to late payments, property damage, and the headache of dealing with the threat of eviction.
Tenant screening has to go beyond just a quick conversation and a handshake. You need a thorough process that includes checking credit history, verifying income, reviewing rental history, and running a background check. A tenant with a history of late payments or evictions is likely to cause the same issues for you.
It’s also important to call previous landlords. While credit scores and background checks tell part of the story, speaking to a prior landlord gives you direct insight into how a tenant treated a previous rental. Ask if they paid on time, followed the lease, and left the unit in good condition.
Skipping the screening process to fill a vacancy quickly might seem tempting, but taking the time to find a reliable, responsible tenant will save you money and stress in the long run.
Hire a Professional Property Manager
Many new landlords start out thinking they can handle everything themselves, only to quickly realize that property management can quickly turn into a full-time job.
Hiring a professional property manager can take a huge weight off your shoulders. A good property management company will handle tenant screening, lease agreements, rent collection, maintenance requests, and even legal issues if necessary.
Another benefit of working with a property manager is the professionalism they bring to the table. Tenants tend to take their responsibilities more seriously when dealing with a third party rather than an individual landlord. A management company also helps remove the emotional aspect from decision-making, enforcing lease terms and late fees without hesitation.
Know the Laws in Your Area
One of the biggest mistakes new landlords make is not educating themselves about local and state landlord-tenant laws before renting out a property. Ignorance isn’t an excuse when it comes to legal matters, and failing to comply with housing laws can lead to serious consequences, including lawsuits and fines.
Every state has different laws regarding security deposits, tenant rights, eviction procedures, and fair housing regulations. Some states favor landlords, while others heavily protect tenants. Understanding the rules before signing a lease can help you avoid costly legal battles down the road.
For example, you need to know how much notice is required before entering a rental unit, how to properly handle security deposits, and what steps you must take before starting an eviction process. Missteps – such as failing to return a security deposit within the legal time frame – can result in penalties that could have been avoided with proper knowledge.
The best way to protect yourself is to consult a real estate attorney or property management company before leasing your first unit. They can guide you through the legal requirements in your area and ensure that your lease agreements comply with the law.
Set Up a Clear Lease Agreement
Your lease should cover rental payment terms, security deposit details, maintenance responsibilities, late fees, pet policies, and tenant obligations. It should also specify what happens in the case of early lease termination, subletting, and property damage.
Many new landlords make the mistake of using generic lease templates they find online. While these may provide a basic framework, they often don’t comply with local laws or fail to include details specific to your property. It’s best to have an attorney or property manager review your lease before using it to ensure it’s legally sound and enforceable.
Plan for Maintenance Costs and Emergency Repairs
Many new landlords assume that rent payments will flow in like passive income, only to realize that unexpected repairs eat into their profits. Setting aside at least 10-15 percent of your rental income for maintenance and emergency repairs ensures you have funds available when something goes wrong
Beyond budgeting for repairs, having a network of reliable contractors is just as important. You don’t want to be scrambling for a plumber or electrician in the middle of a crisis. Establish relationships with local repair professionals ahead of time so that when an issue arises, you have trusted people ready to respond quickly.
Adding it All Up
The landlords and real estate investors who succeed in this industry over the long-term don’t just collect rent checks. They learn how to manage their properties and treat people well. And if you can do the same, you’ll have no problem being successful.
