5 Things You Need to Know Before You Become A Landlord
Renting out your property can be a great experience; however, there are several things you need to know before you get your first tenant.
One of the most rewarding decisions any real estate investor can make is to begin renting out properties. Acquiring tenants and receiving a monthly income from properties you own can be incredibly exciting and financially beneficial. However, before you start renting out properties, it is important to understand exactly what you’re getting into. Renting out a home or building is different from being a tenant yourself, and there are several things you need to take into consideration before you begin.
1. The responsibility and full-time job of being a landlord.
Landlords are responsible for managing and maintaining rented by tenants. . While your tenants may occupy the property, Landlords may need to complete routine property upkeep and maintenance, including mowing the lawn and landscaping the yard. Additionally, if there are problems or issues with the property, Landlords may be responsible for remedying those issues. For example, you may need to: (1) repair or replace any damage in the property that will make the property inhabitable like the heater, AC Unit, insulation system or pipes etc.; (2) solve termites, rats or snakes infestation; (3) help your tenants identify and contact a professional plumber, engineer, builder, painter. You could even be called in to help with a leaky faucet. While your tenants may be able to care for portions of the house themselves, Landlords are ultimately in charge of making sure that things get done or reimbursing the tenant for their repairing expenses
2. You’ll need the right insurance.
Before you can lease out a property, you will need to make sure you have the right insurance for the property. Landlord insurance is different from other regular insurances. Insurance is designed to make sure that both tenants and the property are protected in case something goes wrong e.g. kitchen fire. Read carefully the extent of the policy, most of them cover a variety of foreseeable damages caused by fire, smoke, explosions, lightning, among others. Earthquakes and water damages caused by floods are rarely included except you add an additional coverage. This consideration is very important if your property is located in a potentially flooded area or exposed to hurricanes. Also, Landlords should price insurance before renting out the property determine monthly insurance costs.
3. It’s important to be prepared financially.
There may be months when a tenant pays later than expected. But also, a tenant could unexpectedly move out and you might not find a new renter immediately. Although DE law requires a written notice in advance of such decision by the tenant, it is still uncertain when a new tenant will come. In some cases, as we have exposed in point 2, something could break and require repair within the home. Make sure you’re financially ready to handle the responsibility that comes from owning and managing a property.
4. Patience is important.
All landlords need to be patient. You need to be calm and collected when dealing with your tenants. You need to take the time to find the perfect tenants for your property which includes: online application forms, interviews, show up visits, and background checks. You’ll even need to be patient when you’re answering questions about the property with your tenants. Being a landlord is a hands-on job, which means you need to be comfortable communicating regularly with tenants.
5. Contracts are essential.
Finally, make sure you have all of the right contracts in place before you lease your property. Contracts should be in writing and an attorney should be consulted to draft a formal lease agreement detailing tease terms agreed to by the Landlord and Tenant upon execution of the contract. There are some lease terms that should be included in the contract. For example, both parties should include lease terms including but not limited to (1) the term of the lease; (2) the day rental payment is due; (3) the amount of rent due; (4) which party is responsible for utilities, maintenance, repairs, and utilities; (5) what happens in the instance of default; and (6) the amount of security deposit in case your furniture or the house is damaged more than by reasonable wear and tear.
Before you start renting out your property, consult with a real estate attorney who can help you draft the appropriate contracts and who can answer your questions about the legal process of getting started.