Experienced landlords know that there is a lot to be considered for this type of venture, and it's not just about collecting the rent payments. 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. At the least, the majority of expenses on the rental should be covered by the rent that you collect each month. If this is not the case, you will have to pay the rest yourself, and no landlord wants that.
The first thing that you should be doing is to calculate the costs per month on the home, over and above the mortgage. 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 rent doesn't cover all of the home expenses, are you comfortable with the costs you will incur?
Some newer landlords don't use a lease agreement or they use one that is not sufficient, and this can cost them big time. When it comes to the legal side of things you have to make sure you are protected.
Even if you are renting your home to your best friend you want to have a lease agreement in place.
The agreement you make out should include all of the variables that are possible when renting. Did you remember to include a security deposit clause? Does it say how much notice your tenant has to give you to terminate?
Not taking inventory/photos is a bad practice. The last thing you want to hear after a tenant moves out is, "That hole was there when I moved in!". Sadly, this does occur. Be sure that you get numerous high quality photos of the home during a intensive inspection, just in case you must provide proof of the condition of the rental before the tenants took possession.
It's surprising how often homes are not sufficiently insured. The likelihood is that you have a basic home insurance policy on the property that covers your possessions inside the home from loss or damages.
Before you switch your property into a rental, it's essential to update your home insurance policy to a landlord or dwelling version that doesn't protect the contents inside the unit. The tenants who are residing on your property must purchase their own renter's insurance if they want their possessions to be protected.
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. Even the nicest looking people can be less than desirable tenants.
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. You might just find out that your tenant-to-be has a bad habit of paying rent late regularly.
Not doing all the math: Financially this decision needs to make sense. At the least, the majority of expenses on the rental should be covered by the rent that you collect each month. If this is not the case, you will have to pay the rest yourself, and no landlord wants that.
The first thing that you should be doing is to calculate the costs per month on the home, over and above the mortgage. 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 rent doesn't cover all of the home expenses, are you comfortable with the costs you will incur?
Some newer landlords don't use a lease agreement or they use one that is not sufficient, and this can cost them big time. When it comes to the legal side of things you have to make sure you are protected.
Even if you are renting your home to your best friend you want to have a lease agreement in place.
The agreement you make out should include all of the variables that are possible when renting. Did you remember to include a security deposit clause? Does it say how much notice your tenant has to give you to terminate?
Not taking inventory/photos is a bad practice. The last thing you want to hear after a tenant moves out is, "That hole was there when I moved in!". Sadly, this does occur. Be sure that you get numerous high quality photos of the home during a intensive inspection, just in case you must provide proof of the condition of the rental before the tenants took possession.
It's surprising how often homes are not sufficiently insured. The likelihood is that you have a basic home insurance policy on the property that covers your possessions inside the home from loss or damages.
Before you switch your property into a rental, it's essential to update your home insurance policy to a landlord or dwelling version that doesn't protect the contents inside the unit. The tenants who are residing on your property must purchase their own renter's insurance if they want their possessions to be protected.
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. Even the nicest looking people can be less than desirable tenants.
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. You might just find out that your tenant-to-be has a bad habit of paying rent late regularly.
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