Guide to Becoming a Landlord: How to Become a Landlord 2021
Written ByBelong on Mar 24, 2021
Have you been thinking about a way to make extra income while making a difference? In your search for the perfect option, maybe you’ve thought about real estate investing or becoming a landlord. With hot real estate markets all across the country, it’s a great time to become a landlord in 2021. More than just owning property though, being a landlord is about creating the feeling of home for your residents. It’s about creating a comfortable place for them to belong.
You own a home.
We have someone to ❤️ it.
Why become a landlord?
- It’s very rewarding to offer a home where families can belong
- It’s a great way to generate income to make memories with your own loved ones
- You can get tax breaks by writing off your investment properties
What should you know about becoming a landlord?
- It requires a lot more work than you probably think. You’ll want to consider property management and property management fees .
- There are several legal boxes you’ll need to check. You’ll probably want to hire a real estate attorney.
- Evicting residents isn’t pleasant, but at time’s it’s necessary.
- Repairs will pop up often and they can be time-consuming and costly.
How to become a landlord
Becoming a landlord sounds easy. And while it’s very rewarding, when you really start to look at what it takes, you realize it’s not exactly a walk in the park. But don’t worry, we’ve laid out the general steps and things to consider so you know what you’re getting into and can make an informed decision. There’s plenty of upside, especially if you have property management services , but you should have a clear picture of what to expect before you jump into being a landlord.
Steps to becoming a landlord
- Buy an investment property
- Budget for unexpected costs
- Know the laws: Tenant-Landlord Law
- Find landlord insurance
- Get the home ready for move-in
- Figure out how much rent to charge
- Market your rental
- Pick good tenants
- Create a lease
- Maintain property
- Stay organized
Buy an investment property/rental property
Obviously, in order to become a landlord you need to first purchase an investment property. This is easier said than done, particularly if the real estate market is hot in your area. Check local classifieds and online listing sites and consider getting a real estate agent. If you’re lucky, you may even find a property that’s not listed but has a for sale by owner sign in the front yard. Be on the lookout for those. Also, be ready to make a down payment.
Once you invest in a property, it becomes much more than just a property—it becomes a home. And you become more than a landlord—you become a homeowner.
Budget for unexpected costs
When it comes to being a landlord, there is one thing you can always count on—unexpected expenses. Things will break down and there will be issues you need to resolve. It’s not a matter of if, but when. Dealing with these costs will be much easier if you plan on them and set aside a sum of money for when they do arise.
Know the laws: Tenant-landlord law
Landlord-tenant law combines elements of both real property law and contract law. In the past, the only law was that the landlord was obligated to grant the estate to the tenant. Now, there are many more elements including duty to deliver possession, covenant of quiet enjoyment, implied warranty of habitability, and the duty to provide essential services. Be sure you study up on the federal and local laws to ensure you’re compliant and won’t face legal action.
Find landlord insurance
Just like you have insurance on your home, you’ll want to insure your investment property—for it is a home after all. With people moving in and out of your rental home often, it’s important to make sure you’re covered. It’s best to get both property and liability protection and also consider insurance for vandalism and burglary. Some residents may get their own renters insurance, so be aware of that also.
Get the home ready for move-in
Not every home is move-in ready right after you purchase. In addition to making sure the home is clean and inviting, you should have an inspection to make sure everything is safe and that major home systems are in working order.
Figure out how much rent to charge
Look at the market. You’ll probably want to scour online listings. While charging lower rent may help you find residents more quickly, higher rent rates often draw better tenants with more steady income and higher credit scores. Be sure not to underprice your property.
Market your rental
The home is ready and the rent price is set. What’s next? Marketing it. If you don’t get the word out, it doesn’t matter how nice the place is. You need visibility. Post on local classifieds and try to get a listing on local real estate sites. Zillow and Craigslist are two good online outlets to keep in mind.
Pick good tenants
One of the oft overlooked, yet most critical, parts of being successful as a landlord is picking good tenants. Set strict, yet legal, requirements potential tenants must meet and then stick to them. Ask for enough information in the rental application that you can get a good idea of what to expect from the residents. Messy and irresponsible residents can damage your property, causing costly repairs, potential eviction, and more cleanup before you can rent to the next residents.
Create a lease
How do you create a lease? What will the security deposit be? In order to create a legally binding document you need to set out the terms of the lease and have the resident sign. Usually you can find a lease agreement template or form online. That said, speaking to a lawyer may help you ensure you have the right protections included in the lease so you don’t run into problems down the road.
Maintain the property
Your work’s not done once they sign the lease. In fact, it’s only just beginning. Does the property have a yard? How old is it? These are some factors to consider as they could determine how much time you’ll need to spend for upkeep. You may need to hire it out if the list of ongoing maintenance is extensive.
How will you track late payments? What about work orders from residents? Where will you keep important documents? Be sure to stay organized so nothing slips through the cracks. There is software that can help. Also, a property management company might be of assistance.
Get Your Home Renting Price Estimate from Belong
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Common Tasks of a Landlord
As a landlord, you have two main tasks, each of which can be broken down into several subtasks.
- Finding the right tenants
- Managing your building and business
Finding the right tenants
1. Marketing for new tenants
There are several ways to market for new tenants. First, start with a sign outside the home. Next, make sure you’ve placed an ad in local listings. If there are any colleges or universities nearby, try to get an ad placed with them also. You can even try Facebook groups for people looking for housing in the area. It can’t hurt to cast a wide net in order to get a large pool of applicants.
2. Touring home to prospective tenants
You’ll need to show people through the home before they buy it. Usually in-person tours are best. That said, it is possible to set up 3D or virtual tours if needed. This can be a great option, allowing you to show the home more easily and to mor prospective residents.
3. Signing all legal agreements
The rental lease agreement is the main legally binding document that’ll be signed. Within it, be sure to include the security deposit and terms, the length of the lease, the expectations, and the consequences of breaking the lease or damaging property.
4. Screening renters to avoid nightmare tenants
Take your time screening potential residents to avoid headaches down the line. It’s smart to do a background check and also run a credit check and call up past landlords. Job references are helpful also. Bosses can provide a good idea of the level of responsibility and reliability.
Managing your building and business
5. Collecting deposits and rent
Gathering funds monthly can be one of the biggest headaches. Instead of requiring a physical check, make your life easier by setting up an online method of bill pay. There are solutions for this.
6. Establishing and enforcing rules
If you don’t establish rules early on (particularly in the contract or lease agreement), you could be setting yourself up for trouble. Be sure to think through as many eventualities as possible and set rules in place to avoid costly repairs or accidents. Set upfront consequences for broken rules and have regular inspections to ensure they’re being followed.
7. Follow equal housing problems
Be sure you’re aware of equal and fair housing laws so you avoid problems in this area. The U.S. Department of Housing and Urban Development has specific rules per the Fair Housing Act that you must comply with. This booklet can help.
8. Managing insurance and liability issues
Be sure to have the right insurance in place and an insurance agent you can trust. You should consider property and casualty insurance, general liability insurance, flood insurance, and umbrella insurance. Be sure your insurance protects you against damage and vandalism, allegations of fraud, and loss of rental income.
9. Maintaining books and keeping track of tax write-offs
What should you keep track of as a landlord? In short, everything. This includes tenant leases, legal documents, permits, receipts for repairs and improvements, insurance policies, loan and mortgage documents, tax documents, and the property title and deed.
10. Handling repairs and maintenance
You can handle repairs and maintenance yourself, or you can hire it out. While tackling the maintenance yourself might seem like a good idea, it could be more costly in the long run, especially if you’re not handy. Also, some repairs could be more dangerous and require a professional like an electrician or plumber. It’s usually best to invest in outside help for repairs.
11. Observing local landlord-tenant laws
Laws can vary by locale, so in addition to federal laws, be sure you’re aware of the specific laws in your area. Whether it’s your first time owning a rental property or you have several years of experience, it’s wise to have a real estate attorney at your disposal so you know you’re protected.
12. Recording legal and tax documents
Again, keep everything if you can. But at the bare minimum, be sure to hold on to a record of rental income and expenses, and documentation to support this to the IRS if needed.
Belong Property Management Services
Feeling overwhelmed? We don’t blame you. There’s a lot to keep track of as a landlord, so getting into that business isn’t for the faint of heart. You could try to go it alone, hire a bad property management company , or you could let us help you navigate the unfamiliar waters. We not only offer homeowners property management , but we’ve also helped hundreds of landlords find success. We’re not a property manager, but rather a long-term rental platform dedicated to reinventing the home rental experience.
Rent sent on the 1st.
We'll initiate rent on the 1st of each month, no matter what.
A full year's rent.
The moment we find someone to love your home, we'll pay you the entire year's worth of income.
So if you’re ready to become a successful landlord (or better said—homeowner), but don’t want to deal with all the time-consuming nuts and bolts from tenant screening and property taxes to understanding the rental market and bookkeeping, let’s get started. We’ll help you with your long-term investment so you can make money and see monthly cash flow while still having time to make memories with those you love most.