When you decide to buy a piece of real estate in order to pursue a business as a landlord, you are making an exciting and potentially financially-freeing decision. After all, simply owning property is an excellent investment. In addition, taking this property and turning it into an apartment or other form of rental property can provide for a steady flow of income. Nonetheless, there are several things you should know before you buy that first piece of real estate and enter into the world of renting.
Consider the Maintenance
One of the first considerations you need to make when you buy real estate and decide to become a landlord is the cost of maintenance and upkeep. Remember, you still own the property and, as the landlord, you are responsible for maintaining it. If you are not a handy person or if you simply do not have the time it takes to complete repairs and perform maintenance on the real estate you buy, you will need to hire someone to do this for you. This might mean hiring a property manager, which will cost you about 5% of the gross income you earn from your rentals.
Learn the Law
The laws affecting real estate and rentals will vary from state to state. Therefore, you need to make sure you are aware of the laws affecting you in your state. Although there are some variances in these laws, the basics are essentially the same - your tenant has all of the same rights of ownership except for the right to sell the property. In addition, as long as the tenant pays rent, he or she has the right to live on the property. At the same time, they do not have the right to damage the property in any way.
The law requires that you keep the real estate in a "habitable condition." Although there is a bit of gray where this is concerned, the law is understood to mean that the property must have working locks on its doors and windows, the heat must work, and the roof cannot leak.
Know How to Find Tenants
Before you sink your money into a piece of real estate that you plan to rent out, make sure you have a good idea as to how you will get tenants. In addition, be sure you are clear on the laws when it comes to interviewing and screening tenants. There are several discrimination laws in place that limit the types of questions you can ask a potential renter.
Before you purchase that real estate, set your standards so you know what you will and will not accept from a tenant - and make sure your standards are all legal. Some areas to consider include:
- The price of rent
- Whether or not you will accept pets
- The number of allowable occupants
- The amount of your security deposit
- Whether or not utilities are included in the rent
- Any minimum income requirements you expect from your tenants
- Whether or not you will accept HUD Section 9 participants
Make sure your standards are clear to all potential tenants before you even begin the interview process.
By carefully considering each of these factors before you make a purchase, you will be better able to determine whether or not being a landlord is the right step for you.
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