Buying a second real estate property is a wise investment strategy for the right entrepreneur, and using that apartment or house as a rental property can bring in a steady monthly income. If you’ve recently invested in a second property and want to dip your toe into the pool of real estate renting, use these tips to guide your business decisions.
Get an Education
A rental property can only be profitable if you know exactly what you’re doing, and education is a crucial component of rental property management. Network and connect with local real estate investors that have already been successful in renting out their own properties; these individuals are guaranteed to be your best resource for what works and what doesn’t in your particular area. Attend real estate seminars, read up on any available literature, and take your time with each step of the process—at least on your first go-around.
One of the most important facets of your real estate research: reading up on landlord-tenant law. Federal regulations cover the habitability of your rental property and go in-depth into anti-discrimination practices. Many states abide by specific landlord-tenant regulations that cover a host of issues, including level of access to the property, eviction notice, use of security deposits, and more. Do your due diligence and assess the laws governing your property to ensure you stay on the right side of the law to reduce liability.
Attract Great Tenants
Every landlord’s ultimate goal is landing the ideal tenant; this individual pays rent on time every month, communicates respectfully, takes care of the space, and stays for a long time (meaning no turnover costs for you!). To attract the ideal tenant, make sure you’re creating a tempting listing. Have a professional photographer take well-lit photos of the home, write a detailed listing that highlights all the important features and amenities of your property, and post it on the right channels. You can find tenants on sites like Craigslist for free, but to truly attract the cream of the crop, you may need to pay to put your posting on a more refined site. Consider ForRent.com and attract a new subset of the renting population—perhaps those who are willing to pay better rental rates.
Run Thorough Background Checks on Applicants
You’ve posted the listing, and applications are flooding in. Most important piece of advice when placing a tenant: don’t jump on the first one that applies. In this competitive rental market, you can be choosy. Take your time vetting each of the candidates, and run thorough background checks to make sure all of their information checks out. Besides checking their credit and criminal history, it’s important to check if they’ve been forced out of a rental situation before—huge red signal that they’ll be a problem tenant. This article from TransUnion details how to check if a tenant has been evicted; you can either contact their references one by one, or use an online screening service. Whichever route you choose, don’t skip this part of the process—it could save you a great deal of frustration later.
Maintain the Property
Think of your second property as an extension of your own home; while you may not be living in it, it’s still your responsibility to maintain. If you’re not skilled in maintenance tasks, it’s important that you have a trustworthy, responsible maintenance person on hand. Be sure to include language in your lease that speaks to inspections. While laws prohibit landlords from showing up unannounced, you can indicate your desire to complete periodic inspections on the property from the start. This will help you manage the condition of the property and spot problems soon after they arise.
Be Patient
Renting out your second property can provide long-term financial benefits, but it’s important to be patient. You won’t profit immediately; it may be months before you break even on the place. However, with a little fortitude and determination, you can set yourself up for reliable income for years to come. Keep these tips in mind and make your real estate venture a successful one.