Nobody is exempt from the learning curve that comes with managing your first rental property.
Like learning a new skill or opening a new restaurant, it will be challenging in the early stages.
You will make mistakes, but don’t let that deter you.
In this article, we’re going to give you tips on how to manage your first rental property. With this foundational knowledge, you can minimize mistakes and enter this venture with your eyes wide open.
Research Your Area and Set Your Prices
Your first order of business is to research the average rent price and the number of rental properties available in your area. Figure out the answers to these questions:
- What is the average income in the area?
- What is the average family size?
- What is the average rental price?
- Does your location have any extra-special benefits (e.g., bus line access, easy highway access, off-street parking) that you can charge more for?
Understanding the area your property is in will help you set a reasonable price and generate revenue.
Establish Your Tenant Requirements
It’s essential to set expectations for tenants before you have tenants. If you start this process with your ideal tenant in mind, the odds are better you will attract the tenants you want.
The Fair Housing Act makes it illegal to discriminate based on race, color, national origin, religion, sex, familial status, and disability. However, you can develop a list of what you’re looking for when it comes to renters. Things like income, credit score minimum, required references, smoking or non-smoking, and proof of employment are good examples.
Advertise Your Property
Devise a marketing strategy and market your property. Your strategy will probably include tactics such as listing your property on Zillow and Apartments.com, using social media platforms like Facebook and Instagram, and virtual tours.
The idea here is to do what works best for you, but make sure the data backs up your decisions. Build a marketing plan that meets your ideal potential tenants where they are.
Write and Review Rental Contracts
Once you find a tenant, it’s time to set up a rental contract. Make sure to gather some excellent examples from other landlords or reputable sources like the American Apartment Association website.
You should include information about rental payment timing, eviction procedures, maintenance details, and property rules in the contract. Additionally, be sure to state the amount and collect a security deposit when finalizing the agreement.
It also might be prudent to hire a lawyer to review the first contract you create to ensure you don’t leave anything out. After your first few contracts, you will have a template to work off and more knowledge, so you most likely won’t need a lawyer then.
Communicate With Your Tenants
Tenant communication is a critical, yet often overlooked, part of managing a rental property. Great communication creates a bond of trust between you and your tenants that will prevent certain issues and minimize others. By fostering trust with your tenants, you create an environment of proactive communication regarding maintenance issues, rent collection, and more.
Communication is the foundation of all good relationships. Your tenants will appreciate your efforts and reciprocate. As a new landlord, this will take a lot of pressure off you and help your tenants have a wonderful experience.
Perform Regular Maintenance
A large part of your success as a new landlord depends on being as proactive as possible. When it comes to maintenance, make sure your property is up to code and schedule annual check-ups of appliances like AC units, furnaces, and water heaters.
Try to repair things yourself when possible. Do-it-yourself maintenance saves you money and makes things easier for your tenants. With YouTube, you do many repairs by watching a “how-to” video.
Large, complex repairs may be unavoidable. If a repair forces a tenant to move, you will be responsible for their housing in the interim. You might want to have a backup plan ready for such emergencies. Or, if you prefer and your tenant agrees, cancel the rest of their lease or rental contract.
Manage Your Taxes and Accounting
Now that you’re a landlord, you need to be aware of the taxes and other accounting information you must handle.
To make your business accounting easier, follow these tips:
- Hire an accountant to do your taxes; the cost is worth it. They’ll help you increase deductions and make sure you submit accurate forms.
- Keep a thorough record of all money spent on maintenance and other basic property upkeep; these are deductible.
- Set up separate bank accounts for your business expenses to ensure that your personal finances do not get confused with business finances.
- Put aside money to cover taxes and other fees that may surprise you.
The critical thing here is to keep thorough records. If you track expenses and stay organized, you’ll be fine.
Establish a Method for Rent Collection
As a new landlord, you need to figure out how you’re going to collect rent. Some landlords still prefer old-fashioned methods like checks dropped off or mailed to them. Others have adopted technology that helps them get paid quickly.
In today’s world, online rent collection may be the best option. Platforms with automatic late fee reminders and efficient payment processing will make your life easier. It also means there’s a communication trail stored in one centralized place.
Consider Property Management Software
Property management software can provide excellent support for many tasks, including online rent collection. These tools offer countless benefits and make your life exponentially easier.
Beyond rent collection, property management software can help you with tenant screening, accounting, maintenance requests, advertising, online lease signing, and much more. This technology can be especially useful for new landlords. It can help you stay organized and keep you from getting overwhelmed with your new business.
If you’re worried about expenses adding up, there are free property management tools out there that have just as many great features as paid tools.
Hone Your Business Acumen
It’s important to understand that once you buy a property, you will be running a business. Property management includes tasks like rent collection, reporting to credit bureaus, and ongoing maintenance repairs. You’ll be wearing a lot of hats, so make sure you set yourself up for success.
Do your research and network with experienced property managers. Understand local laws and how they may impact your rental property. It will also come in handy to have some knowledge regarding accounting and tax rules.
You don’t have to become a tax expert or a lawyer specializing in contracts to run a property. However, the more you know, the better.
Managing your first property can seem like a daunting task. And it certainly won’t be easy. But if you go into it with an open mind and a working knowledge of what to expect, you’ll be fine.
By embracing the tips in this article, you’ll be working from a solid foundation. It won’t guarantee a perfectly smooth ride, but it will make your life easier.
Lastly, enjoy the ride! You own property, which is an achievement in and of itself. You’ll make mistakes the first go around, but you’ll learn from them. And one day you’ll look back on your early management days with a nostalgic smile.