There are many factors to consider when becoming a landlord and much of it is hard work, it's obviously not as simple as renting a unit and collecting rent. These are some of the biggest mistakes a first time landlord can make:
Not doing all the math: Financially this decision needs to make sense. Most of the expenses on the home should be covered by the rent that you collect, at the very least. If this is not the case, you will have to pay the rest yourself, and no landlord wants that.
Begin with calculating the monthly costs on the home each month, which include your mortgage payment, but there is more to it than that. Consider your homeowners insurance rates, and any maintenance costs. Now, take a look at what other homes in your area are renting for that are a similar size and construction type.
If you find out that the rent that you will be charging for the home do not cover the home's expenses, are you okay with this?
You need to use a lease agreement that is well constructed, as many landlords neglect to do this. You must protect yourself sufficiently from the legalities that come with having tenants.
There should be a lease agreement even if your rental is going to be occupied by someone you know personally.
Your agreement must cover everything that could possibly occur. Is a security deposit clause included? Does it say how much notice your tenant has to give you to terminate?
Another mistake landlords make is to not take an inventory which included photographs. You don't want to have an argument with the tenant as they are leaving about damage that they say was there before they moved in. However, it does happen. Go through the entire home and take a significant amount of photographs to protect yourself later if you need to prove that the damage after tenants move out was not there before they moved in.
It's surprising how often homes are not sufficiently insured. You probably have a policy on the home that provides protection for your personal possessions inside of the home, in a circumstance where your things are damaged or lost.
Upon turning your home into a rental you will want to update your policy to a landlord or dwelling policy which doesn't provide for the home's contents. If your tenants want to protect their personal property against loss or damages, they will need to purchase their own renter's insurance.
You need to take the time to know who your tenants are. Don't just accept new tenants because you want to rent the unit as quickly as possible to start collecting rent. The prospective tenants can appear to be kind and considerate, but turn out to be nothing of the sort.
Have your potential tenants fill out a rental application and make sure you do a thorough employment and credit check. Previous landlords should be contacted in order to find out how the applicant behaves as a tenant. If your prospective tenant has a history of being late on rent payments, this is something that you need to be aware of.
Not doing all the math: Financially this decision needs to make sense. Most of the expenses on the home should be covered by the rent that you collect, at the very least. If this is not the case, you will have to pay the rest yourself, and no landlord wants that.
Begin with calculating the monthly costs on the home each month, which include your mortgage payment, but there is more to it than that. Consider your homeowners insurance rates, and any maintenance costs. Now, take a look at what other homes in your area are renting for that are a similar size and construction type.
If you find out that the rent that you will be charging for the home do not cover the home's expenses, are you okay with this?
You need to use a lease agreement that is well constructed, as many landlords neglect to do this. You must protect yourself sufficiently from the legalities that come with having tenants.
There should be a lease agreement even if your rental is going to be occupied by someone you know personally.
Your agreement must cover everything that could possibly occur. Is a security deposit clause included? Does it say how much notice your tenant has to give you to terminate?
Another mistake landlords make is to not take an inventory which included photographs. You don't want to have an argument with the tenant as they are leaving about damage that they say was there before they moved in. However, it does happen. Go through the entire home and take a significant amount of photographs to protect yourself later if you need to prove that the damage after tenants move out was not there before they moved in.
It's surprising how often homes are not sufficiently insured. You probably have a policy on the home that provides protection for your personal possessions inside of the home, in a circumstance where your things are damaged or lost.
Upon turning your home into a rental you will want to update your policy to a landlord or dwelling policy which doesn't provide for the home's contents. If your tenants want to protect their personal property against loss or damages, they will need to purchase their own renter's insurance.
You need to take the time to know who your tenants are. Don't just accept new tenants because you want to rent the unit as quickly as possible to start collecting rent. The prospective tenants can appear to be kind and considerate, but turn out to be nothing of the sort.
Have your potential tenants fill out a rental application and make sure you do a thorough employment and credit check. Previous landlords should be contacted in order to find out how the applicant behaves as a tenant. If your prospective tenant has a history of being late on rent payments, this is something that you need to be aware of.
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