Learn to buy, maintain, and manage rental properties
Whether it's a career choice or an additional source of income, becoming a landlord takes hard work, knowledge, and time.
The idea of moving rent as a passive source of income attracts many new landlords for this profession.
But experienced landlords know that this job requires an active approach. The more you work on maintaining properties, finding the right tenants and keeping an eye on all the details, the more successful you can be. How to start.
Check your eligibility to buy a rental apartment (July 31, 2021)
In this article (continue to …)
What you should know before you become a landlord
Becoming a landlord can be a great choice if you are looking to build wealth.
Owning investment properties creates passive income through rental payments. You can even use that money to pay off your mortgage so that the rental home can in some way pay for itself.
And with around a third of American households renting rather than owning, the rental market is already significant.
Before making a decision to buy an apartment for rent, however, it is important to understand what it means to be a landlord. For starters:
Make sure you are ready for the work that needs to be done. From promoting new tenants and entering into legal agreements, to collecting security deposits and taking care of incidentals, knowing what you are signing up for is important when you have a property that you want to rent out but don't want to deal with the day-to-day mundane chores , You Might Consider Using A Property Management As a landlord, you should find a property law attorney to help you deal with potential legal issues. There are a variety of federal and state laws related to letting, including issues such as discrimination, security deposits, late rent, leases and repairs "must be prepared to evict bad tenants"
In short, becoming a landlord is not as easy as buying a house and collecting rent every month. There is some serious work and consideration that goes into managing a rental property.
Once you think you are fit for the job, here's how you can start.
How to become a landlord
Being a landlord can have many faces.
As a property owner, you can be almost entirely on your own and let others do most of the work for you. Or you could be your own boss and grow your wealth significantly. You can even get rich over time.
To be successful, you must:
Fund your new rental homeWork hard (or pay someone else) Plan ahead even if you weren't planning on becoming a landlord Ask for help when you need itLearn and obey the laws surrounding leases
Let's take a closer look at what to do at each stage of the process.
1. How to finance new rental properties
Unless you already own a second home or apartment building, the first step in becoming a landlord is to buy a rental property.
There are a number of ways you can do this. If you are overflowing with cash, you can buy the house right away. But most prospective landlords purchase their investment property through a mortgage.
Most landlords take advantage of one of the following types of home loans:
Conventional Loans – Traditional loans work well when you are buying residential property for rent. Expect higher down payment and creditworthiness requirements, as well as higher mortgage rates, compared to loans that you could get at your primary residenceSecond mortgages on existing homes – Once you've paid off (or almost paid off) an existing mortgage, you can borrow against the equity of that home and use the funds to buy a new rental property. Many banks, credit unions, and mortgage lenders offer home equity loans and home equity lines (HELOCs). So look around for the best interest rate and termsCommercial Real Estate Loans – If you are investing in multiple houses or buying an entire apartment complex at the same time, you will likely need a commercial lender. You will need to provide your lender with details about your business plan
Some real estate developers use short-term financing to buy property, but these work best for buyers who want to "flip" the home by repairing it and selling it quickly.
Buying a rental property with an FHA or VA loan
Government-insured loan programs like FHA and VA loans exist to help people buy primary homes – not as investment properties or vacation homes.
However, it is possible to buy an apartment building with a government sponsored loan as long as you live in one of the units you funded. For example, you could buy a maisonette and live in one of the units while renting out the other.
You can even buy a property of up to four units with an FHA or VA loan. Here, too, you would have to live in one of the units on site.
FHA loans can make borrowing more affordable by lowering the loan and down payment requirements for home purchases.
Only service members, veterans, and surviving spouses can take advantage of the VA loan program. But for those who qualify, it is possible to buy a home of up to four units with no down payment.
Whichever type of loan you choose, make sure you look among several different lenders to find the lowest interest rate and the best terms.
The less interest you pay, the more net profit you will get from your rental property. So it pays to shop around for the best mortgage loan.
Find a mortgage for a rental home. Start here (July 31, 2021)
2. Hard Work: What a Landlord Does
Very few newbies find it easy to be a landlord. It's hard work.
Some first-time tenants experience real stress, especially when the markets and the economy are bad. Then tenants tend to default on their rent – and when the periods between tenancies can get frighteningly long.
If you've rented in the past, you may never have met your landlord. That's likely because your landlord has chosen to hire staff to manage and maintain the property.
On the other end of the spectrum, your landlord may have lived in one of the units in your building. So you may have seen her every day. And they could have done anything from collecting your rent to fixing your leaking faucet.
If you become a landlord yourself, you have to decide which variant of property management makes the most sense for you.
Main duties of a landlord
Whether landlords choose to do the job themselves or hire others to do it, they are all responsible for completing a long list of tasks.
Here is a brief overview of the landlord's workload:
Find the right tenants
Promotion of potential tenants – There are many ways to advertise and find new tenants. But today's online platforms that offer local classified ads, like Craigslist, often turn out to be inexpensiveShow prospective housing customers – This is primarily a sales opportunity that can help reduce dead time between leases. But it is also a way of weeding out obviously unsuitable prospective tenantsConclusion of legal agreements – You must present a signed, watertight rental or rental agreement (they mean the same thing) for each rental. You can have your lawyer draft it, or use a template from a reputable publisher or websiteReview of tenants – Various companies, some on the Internet, offer landlords credit checks and background checks
Management of your building and company
Collection of deposits and rent – It is your responsibility to ensure that tenants pay their rent on time and in full. Remember, this is the source of your cash flowEstablish and enforce rules Most successful landlords find it better to apply the rules strictly. And tenants like the knowledge that all tenants must adhere to the same regulationsAvoid the same living problems – These can appear in the advertising for and in the selection of prospective tenants as well as in the enforcement of the house rules. Make sure you understand how discrimination laws apply to you as a landlordProcessing of insurance and liability issues – Such as swimming pools, icy paths and keeping the house up to dateKeep books and track tax write-offs – Make sure you can claim any deductions available to you andTake care of repairs – There is always something. Well, almost always, since you want to keep your property in good conditionUnderstand and observe local landlord-tenant laws – The only thing worse than standing in court is losing in courtKeeping proper records for tax and legal purposes – Yes, there are property taxes, mortgage payments, and insurance premiums to be paid, but your income taxes will also be difficult. You either get really good at bookkeeping or hire an accountant
Of course, it makes sense to only take on those tasks for which you have sufficient skills and time to do. But every task you outsource costs you. And it reduces the profitability of your company.
3. Plan ahead
There are many different ways to purchase a rental property. Some landlords inherit their property, some go out and buy it, others become landlords almost by accident.
Those who happen to become landlords are often homeowners who may have had to move for work or family reasons but have not been able to sell their homes.
Perhaps they had "negative equity" (they owed more on their mortgage than the house was worth). Or maybe the local property market was down and no one was buying. In order to stay afloat, they rented out the original house.
No matter what inspired your journey into the rental business, you need to plan proactively to be successful.
To protect their investment, some landlords make their properties "tenant-proof". That can mean covering slightly damaged parquet floors with linoleum and inexpensive carpets. And it could involve removing some vulnerable features that could be misused, like a wood burning stove.
However, tenant security needs to be considered in the context of your marketing. If your plan is to attract high-end renters who will pay a premium, they will expect a touch of luxury. And they'll walk a mile from Lino.
If the people in your target market just want a roof over their heads, protecting the value of your wealth should be your priority.
4. Ask for professional help when you need it
Many new home owners think they can complete all 12 of the tasks on the list above. Of course, some succeed. But others just can't find enough hours a day, especially when they have another job.
Many landlords hire professionals to help with property management instead of doing everything on their own.
In fact, some choose to bring in full service property management companies to take care of everything. The level of property management costs will vary depending on your local market, the tasks you want to avoid, and whether you are renting for the short or long term.
In the US, long-term rental management ranges from around 8 to 15%. But managing short-term properties in vacation areas can cost up to 50%!
Every week (or more often) the place has to be cleaned, the bed linen changed, reservations made and the rent collected. And you will face the same maintenance tasks that are required for a long term rental.
Choose from the menu
Full-service property management is simply too expensive for many landlords. So you see the task list as a menu. And they choose the things that they are personally good at and outsource the others.
Those sent around the house handle all of the routine repair work. And those with real construction experience can provide virtually any manpower a home will ever need.
In the meantime, others may be good at administrative tasks, have great social skills, or have a penchant for marketing rental properties. It is important that you play to your strengths when choosing the tasks to be completed.
Do not take any risks
The golden rule is not to pretend you're good at things when you aren't. Don't feel bad about your limitations. Because we all have it.
Some people are hopeless in maintenance tasks; others could never bring themselves to read or write a legal document. Some are natural accountants and some are not. Some can charm anyone, while others have no chance of encountering an annoying tenant who is late with the rent or is in breach of a rental agreement.
So remember the old adage, "Don't trip over dollars to collect pennies." In other words, don't crash your business to save a few dollars. In particular, if you have any legal doubts, you should consult a lawyer.
Landlord on site vs. being remotely
Having one of the units in your own building gives you some real benefits. Nobody could keep a closer eye on your greatest asset than you. Your commute to work will be unbeatably short. Living on site could also offer you further financing options.
But being on the premises has distinct disadvantages. First of all, you need to maintain a certain emotional distance from your tenants. Make friends with them, and it can be difficult to resist their pleas to pay rent late, or ignore late fees. And they can pressure you to allow other rules.
In the meantime, being around you can be a double-edged sword. Do you really want people to knock on your door 24/7 to complain about minor issues?
One way to get around this is to not tell anyone that you own the building. Use a property manager to run the place. And make the deal a limited company (or similar vehicle) so your name doesn't appear on leases.
5. Common legal questions for landlords
Becoming a landlord brings with it many legal issues and risks. Hence, it is important to have a good real estate attorney
Over time, you will likely become more familiar with the laws that you must obey. And your fear will go away, as will your need to consult a lawyer.
Twenty-six states have enacted the Uniform Residential Landlord and Tenant Act as the basis for their local laws. If your rental property is in one of them, it may be easier to do your own legal research online.
Here are some of the most common legal questions you may face:
The Fair Housing Act of 1968 and the Fair Housing Act Amendments Act of 1988 are the two main federal laws that apply to landlords.
These prohibit landlords from discriminating on the basis of “race, skin color, national origin, religion, gender, marital status (including children under the age of 18 living with parents of legal guardians, pregnant women and persons who take custody of children under their age)” of 18) and handicap (disability). "
You cannot discriminate against any of these protected groups if you:
Advertising for tenants – Pay attention to the wording. Legal website Nolo says that even describing a home as being within a "safe Christian community" could be construed as discouraging applicants with other religious beliefsSelect tenant – This includes the false claim that an empty house is rented outEstablishing rents or deposits – Of course, these can vary over time. However, you are not allowed to create a pattern that uses rental rates to favor some tenants over othersEstablish and apply rules – The same rules must apply to all tenants and be enforced with the same rigorTermination of tenancies – Again, you must be impartial. And you need to be able to show that the rules have been applied evenly
While these federal laws provide a state-wide basis, many states, cities, and counties have other anti-discrimination laws that apply to landlords. For example, at least 22 states prohibit discrimination based on sexual orientation and gender identity.
Restrictions on deposits mostly result from state law. However, your city, county, or municipality may have additional regulations.
Because these state laws are so different, it's impossible to provide a useful guide here. In Alabama, for example, security deposits are limited to one month's rent, plus surcharges for special risks such as pets. However, Wyoming has no state-level caps.
Please refer to NOLO's list for a summary of your state's laws.
You are in luck if, as a landlord, you don't occasionally have problems with late rent. If you operate in the segment of the market where your tenants lead financially precarious lives, such a delay can be a persistent headache.
Many landlords recommend being strict about on-time payments. That doesn't mean you can't help people who have occasional, real, and serious problems. But you can get into real trouble if you are considered a pushover.
Make sure your rental agreements state the rental due date. If the due date is a weekend or public holiday, it is likely that it will be due the next business day. And you should be aware of acceptable payment methods: check, money order, cash, mobile payment apps, credit card, or any other method.
Consider adding penalties for late payments to your rental agreements; Late fees can give you leverage if a tenant starts giving you persistent problems.
Enforcement of rules
Collecting overdue rents can be time consuming. Most landlords start with reminder calls and escalate to emails and letters.
You may need to prove that you took reasonable steps to hunt your money. So keep a log of calls (including unanswered) and remaining voicemail messages, memos, and copies of emails and letters.
If none of these work, you will be served a notice. This gives the tenant a fixed date on which the rent must be brought up to date or the premises must be vacated. Make it clear that if the request is not complied with, you will apply to a court for an eviction notice.
Clearance and collection can be legal minefields. You might want a lawyer to hold your hand, at least the first few times. Alternatively, you can research the local laws (state, city, county, or city) that apply where your rental property is located.
In principle, landlords are obliged to keep an apartment habitable. And that includes:
Keep the structure intact, watertight, and safe to ensure that the plumbing and electrical systems are functional and safe
However, minor repairs and maintenance can be the subject of disputes.
For example, you are unlikely to be required to do purely cosmetic work, such as B. Repainting interiors or replacing stained carpets. And you may be able to clarify what is your responsibility and what is not in your rental agreement.
However, they may still be subject to local laws. And your tenant can report you to the local building or housing authority unless you keep the house according to regulations.
When you have good tenants, you want them to be happy too. The last thing you want is for them to move around for a can or two of paint. You'd probably have to paint anyway to get a new tenant.
Again, this is (or is not) covered by local laws. Most states do not allow a landlord to enter a home without notice from the renter.
So don't expect to get involved without prior permission. Do this if a law prohibits it, and your tenant could report you to the state agency enforcing fair living laws.
That's a loss to you: you may need a lawyer to defend you while the tenant doesn't need one as the state does the enforcement work.
When you become a landlord, you acquire all sorts of new legal obligations. And you need insurance to protect you from it.
But just like your home insurance, it's easy to get more landlord coverage than you need. So be careful not to pay too much for things that you don't need.
Get multiple offers. And use a cost-benefit analysis to decide which risks you want to bear yourself and which your insurer should assume.
You can also require renters to purchase tenant insurance that covers their property.
6. Marketing: How to Find Good Tenants
The best landlords are usually either trained or instinctive marketers. That is, they optimize the profitability of their products (investment properties) by analyzing their options.
So here are some excerpts from Marketing 101:
When professional marketers want to make plans, they often start with the "Marketing Mix" also known as the "Four Ps":
product – Do I have a marketable product? And if not, can I make it marketable? In other words, can I improve it to increase its profitability?price – What is the maximum I can do with my product without deterring too much demand?city square – For most marketers, this is about where the product is being sold. But for landlords, it is about the neighborhood, city, or county of the home and the impact it has on the tenants it attracts and the rent it can earnfinancial support – How much do I have to spend in advance on marketing to generate optimal demand? And where (with which media) should I spend it?
Landlords can benefit from thinking about their rental properties in these terms. And unlike most professional product managers, they can choose the products they want to market by carefully choosing the homes they buy.
Your target market is the group of people who will “buy” your product – or, in your case, able, willing and ready to rent the particular home.
Basically, that means knowing who wants to live in your property and who can afford the rent.
The more you research local demographics (broken down by age, gender, occupation, income, household size, etc.), the more precisely you are likely to understand your target markets. And the more profitable your purchase can turn out to be.
Most landlords rely on four types of media to market their properties:
Digital – Online sites that offer local classifieds can lead you directly to tech-savvy tenants (e.g. Craigslist).Direct mail – As your reputation as a landlord grows, you may receive inquiries when you don't have apartments available. Create an email list so you can contact potential tenants later. And remember, you never know when a unit might be availableadvertising – In some areas, local newspapers may still be the best way to attract renters, or flyers in local grocery stores, gyms, and other bulletin boards. And don't forget to put up a courtyard signPersonal sale – You probably won't go door to door for business. But unless you employ a property manager, you will likely be the one showing homes to potential tenants
With experience, you will find it easier to choose and use your most effective marketing methods.
For some marketers, every customer is a good customer. But that doesn't apply to landlords.
You need to weed out potential tenants who may not care about your property – or maybe even actively destroy it. And you need to stay away from those who may not pay their rent on time (or at all).
Even if you consider yourself a good character, you shouldn't rely solely on an interview. You need a lot more information.
But how do you do that? Well, while it's not a guarantee, past behavior is often the best indicator of future behavior. So do background checks.
Of course, if you have a property manager, that's his job. However, you may want to review the information gathered.
If you don't have a property manager, you'll need to do the checks yourself. Or you can choose an online service to do this for you.
Simply search online for “Tenant Background Checks” or “Tenant Screening”. But choose a service with lots of positive reviews from landlords.
A good one should reveal to an applicant:
Past criminal convictionsCurrent credit history and credit historyPast evictions based on public recordsPrevious addresses
In order to be able to carry out a background check, you need a signed declaration of consent from the applicant.
When you have many other, better potential renters, you can eliminate an applicant for a single spot on one of these records. But most of all, when you don't have alternatives, you might want to dig deeper.
Are you sure you want to punish someone for an eviction or crime that happened many years or even decades ago? Often times, bad credit emerged from a brief period of unemployment or illness that is now well behind the applicant. Are you going to shut her out for something that is not her fault?
Of course, your point is not to give you a second chance. But you will probably want to be sensible. You may want to talk to the applicant about anything that is bothering you.
Contacting previous landlords
The applicant's previous behavior as a tenant can tell you more than most other types of background checks. Ask for references from previous landlords and call them for a confidential conversation.
The time invested in selecting good tenants can mean the difference between a successful landlord and a constantly stressed landlord.
7. How to drive away bad tenants
The state where your rental property is located has its own eviction laws. And you have to pay close attention to them.
Even a small dispute over the wording or delivery of a notice of termination can allow a renter to drag the process out for weeks or even months as normal.
Eviction for no reason
Unless your investment property is located in a rent-controlled city, you can usually give the home a notice to a tenant who has a monthly lease. You will usually need to cancel either 30 or 60 days in advance, depending on local laws.
This is known as termination without giving a reason. So you don't need a reason. You may think you can find a tenant who pays a higher rent. Or maybe you want a home for a friend or relative. Or you have to move in yourself.
As long as you obey the law, you have the right to ask a monthly tenant to move out.
Räumung mit Grund
Natürlich möchten Sie wahrscheinlich vermeiden, dass jemand vertrieben wird. Und die meisten Vermieter versuchen, Probleme von Angesicht zu Angesicht mit lästigen Mietern zu lösen.
Wenn dies jedoch fehlschlägt, können Sie einen Langzeitmieter aus folgenden Gründen kündigen:
Nichtzahlung der Miete Verstoß gegen örtliche Vorschriften, die Dinge wie Lärmpegel und gesundheitliche Anforderungen betreffen. Verstoß gegen den Mietvertrag — Vielleicht hat der Mieter ein Haustier, hat die Wohnung untervermietet oder lässt zu viele Menschen dort wohnen. Diese Dinge müssen im Mietvertrag ausdrücklich verboten werden, um einen Räumungsgrund zu schaffen
Gehen Sie nicht allein auf die Glaubwürdigkeit Ihres Wortes vor Gericht. Sie benötigen umfassende Unterlagen, Fotos oder Zeugenbeweise, um Ihre Anschuldigungen zu beweisen.
Vollstreckung des Gerichtsbeschlusses
Sobald Sie die Räumungsanordnung eines Richters haben, sind Ihre Probleme fast vorbei. Aber nicht ganz.
Der sicherste Weg ist, die Anordnung von einem neutralen Strafverfolgungsbeamten ausführen zu lassen. Allein die Anwesenheit eines solchen Offiziers entschärft oft Spannungen. Und Sie haben einen zuverlässigen Zeugen, dass der Mieter und sein Besitz rechtmäßig entfernt wurden.
Hinweis zu Formularen für Vermieter
Viele Vermieter beauftragen einen Anwalt, um alle erforderlichen Formulare (wie Mietverträge oder Räumungsbefehle) zusammenzustellen. Aber nur wenige Anwälte kommen billig. Sie können sich also entscheiden, Vermieter zu werden, um auch Ihr eigener Amateuranwalt zu werden.
Das funktioniert nur, wenn Sie bereit sind, die Stunden für Ihre Hausaufgaben zu investieren. Sie müssen ein Experte für das Mietrecht in Ihrem Bundesstaat werden, einschließlich aller geltenden bundesstaatlichen oder lokalen Gesetze. Und das bedeutet, dass Sie die Art von Verstand brauchen, die sich wohl fühlt, sich solches Wissen anzueignen und zu nutzen.
Wenn Sie online nach den „besten Rechtsbüchern für Vermieter“ suchen, werden Sie viele Möglichkeiten finden. Stellen Sie nur sicher, dass die von Ihnen ausgewählten von seriösen Verlagen und von erfahrenen Anwälten stammen. Und dass sie Ihren Staat abdecken.
Zu den guten gehören Vorlagen, die Sie für alle Arten von Rechtsformen anpassen können, die Sie wahrscheinlich benötigen. Dazu könnten gehören:
Quittungs- und KautionsvereinbarungVermieter-Mieter-Checkliste EinzugsbriefMonat-zu-Monat-WohnmietvertragMonat-zu-Monat-Wohnmietvertrag (spanische Version)Befristeter WohnungsmietvertragBefristeter Wohnungsmietvertrag (spanische Version)Mitunterzeichner-Vereinbarung Gefahren durch Farbe und/oder bleihaltige Farbe
Diese Liste stammt aus einer Beschreibung von NOLOs „Every Landlord’s Legal Guide“. Aber Sie werden wahrscheinlich ähnliche Standardformulare in anderen Büchern finden.
Natürlich können Sie solche Formulare auch von verschiedenen Websites herunterladen. Manche bieten sie sogar kostenlos an. Oder Sie können für etwa 30 bis 50 US-Dollar ein umfassendes Paket erwerben, das Sie wiederholt verwenden können.
Lohnt es sich also, für etwas zu bezahlen, das Sie möglicherweise kostenlos finden können? Das ist ein Urteil, das nur Sie fällen können. Die bezahlten Websites können glaubwürdiger sein. Und das Geld, das Sie zahlen, kann bedeuten, dass der Verlag Ihnen eine Sorgfaltspflicht schuldet, die ihm einen Anreiz gibt, die Zuverlässigkeit seiner Produkte zu gewährleisten. Es liegt an Ihnen.
Letzte Gedanken zum Vermieter werden
Viele finden, dass es der beste Schritt ist, den sie je gemacht haben, Vermieter zu werden.
Je nachdem, wie praktisch Sie vorgehen möchten, kann der Besitz von Mietobjekten auch mit viel Arbeit verbunden sein. Die finanziellen und emotionalen Belohnungen können jedoch all das lohnenswert machen – und noch mehr.
Ihre Kreditaufnahme für jedes Haus verringert sich jeden Monat, während die Miete, die Sie einziehen können, in den meisten Jahren durchaus steigen kann. Es stimmt, dass der Besitz einer Mietwohnung selten schnell reich wird. Aber langsam reich zu werden, ist eine sehr attraktive Alternative.
Was ist der erste Schritt, um Vermieter zu werden? Kauf einer Mietwohnung. Bevor Sie also weitere Schritte unternehmen, sollten Sie Ihre Berechtigung bei einem Kreditgeber überprüfen. Wenn Sie bereit sind, loszulegen, können Sie dies hier tun.
Bestätigen Sie Ihren neuen Tarif (31. Juli 2021)