Investing in rental properties is among the most popular methods of generating passive income. However, if you’re a first-time investor, there are a number of things you’ll need to learn before proceeding to purchase your first property. When many people consider the prospect of being a landlord, they tend to focus exclusively on potential rewards and pay little mind to the actual work such a role entails. So, if you’ve been thinking about getting into the rental property game, take care to heed the following tips.
Have Properties Thoroughly Inspected
On one hand, it’s important to act fast when investing in highly sought-after properties. On the other hand, acting too fast can result in quite a bit of regret down the line. After all, if you wind up with a money pit on your hands, you’re likely to lose a lot more money than you stand to make. With this in mind, make a point of having every property you’re seriously considering purchasing thoroughly inspected by seasoned pros. Having knowledgeable plumbers, electricians and building inspectors give the property a good once-over can provide you with tremendous peace of mind and prevent you from making huge investment mistakes. You can also save yourself from ill-advised purchases by carefully considering real estate crowdfunding pros and cons.
Carefully Evaluate Renter Applications
Evaluating renter applications is among the most important tasks many landlords attend to. Depending on the laws in your state, evicting delinquent renters may be next to impossible, so when going over applications, it pays to do your homework. For example, if you discover that a prospective renter has a history of late rent payments and/or evictions, it’s probably a good idea to proceed on to the next application. This individual may not be a bad person, but taking a chance on someone with a history of skipping out on rent is unlikely to work out in your favor.
Become Familiar with Fair Housing Laws
Every property owner should have a strong familiarity with fair housing laws. As the name suggests, these laws are designed to prevent rental applicants from being rejected based on criteria like race, gender or religion. Furthermore, violating these laws is liable to land you in hot water and result in you becoming the subject of costly lawsuits. Going against fair housing laws can also cause lasting damage to your professional reputation, as many people will understandably be hesitant to rent from someone who discriminates against applicants on unfair grounds. To help prevent this from coming to pass, make a point of brushing up on state and federal housing laws in advance of reviewing your first batch of rental applications.
Plan for Periods of Vacancy
Even if a property is located in an in-demand area, you shouldn’t assume that it will never be vacant. Virtually every rental property has been unoccupied for periods of time that range from several weeks to several years. So, while it’s possible that one of your properties will be perpetually occupied, it’s recommended that you plan for periods of vacancy nonetheless. Placing a little bit of money in an emergency fund at the end of each month can help ensure that you won’t be in danger of losing a property every time it’s without a renter.
Hire Dependable Maintenance Staff
A lack of dependable maintenance staff is among the chief complaints renters lodge against landlords – and it isn’t hard to see why. Property owners are responsible for fixing a broad assortment of issues, and if maintenance staff, who are representatives of property owners, are unable to complete crucial tasks in a timely and professional manner, it’s only natural that renters would grow frustrated. So, unless you want to deal with constant complaints and see your properties trashed on the web, make sure the maintenance personnel you hire are highly skilled, courteous and responsible.
It’s easy to see why investing in rental properties holds so much allure for passive income seekers. When viewed from the outside, owning rental properties seems like a no-lose situation. However, as any seasoned investor can attest, this is far from the case for most landlords. This isn’t to say that investing in rental properties is a perilous, unfulfilling endeavor, but rather that you shouldn’t dive into this type of commitment unprepared. First-time investors looking to get the most out of rental properties will be well-served by the pointers discussed above.