3 Things You Should Know Before Becoming a Landlord
Being a landlord is an excellent career choice or side job. It has a low barrier of entry, and you can do it from your own home. If you’re savvy at real estate, it can become a profitable venture for you.
However, you’re not guaranteed success just because you became a landlord. It will require time and effort on your part. You need a few select qualities to see it through.
“Success as a landlord relies in large part upon your emotional strength to deal with this type of income volatility,” Paula Pant of BiggerPockets explains. “It also depends on your ability to recognize that long-term big-ticket items, such as replacing a roof, are not necessarily a setback.”
Pant also names the importance of being decisive, patient, and optimistic. Along with having each of these essential traits to help you select great properties and work with your tenants, landlords should also be prepared to carry out three things.
You’ll want to screen your tenants.
Pant recommends learning how to tell when people are lying to you. You’ll hear a lot of excuses as a landlord and a lot of lies when you’re interviewing tenants.
“A sharp BS detector is a necessary quality for any aspiring landlord, but don’t worry: If you have a reputation for being gullible, you’ll quickly develop a B.S. detector after just a few months on the job,” she says.
It helps to get a tenant screening report free of charge, which will check a potential tenant’s criminal background, rent history, credit score, and other factors. Knowing you have a tenant with a good history can mean avoiding serious problems and lame excuses the entire time they live there.
You’ll need insurance for your property.
Every property you invest in will need insurance. Your lender will require that you have it, and many states require it by law. Insurance is one of the most important investments you make, so it’s important to be selective when taking out a policy.
Choosing the right insurance can be challenging if you’ve never been down this road before. Start by reading reviews. Search for phrases such as apartment building insurance in New Jersey, modifying that search term to meet your current state and needs. You should find plenty of results to comb through. Pay attention to both the positive and negative reviews to determine whether it’s the right fit for you.
You need to protect yourself from liability.
Hazards around your property and improper legal protection can lead to someone getting injured and your facing a lawsuit. Insurance will help with this, but it’s not the only thing to consider. Start by making sure your lease agreement is ironclad.
“It’s worthwhile to pay an attorney to look at the lease and provide feedback or suggest changes,” New York-based landlord and real estate broker John Nuzzolese told CBSNews. “Then you can use it over and over.” This lease agreement will have clauses in there that should protect you from a lot of liability issues.
He also recommends being strict with tenant responsibilities so that you don’t face the liability of losing out on rent.
“A lot of landlords are so afraid of having to take a tenant to court — and they don’t have an attorney — that they allow tenants to fall very far behind in rent,” he said. It’s not worth the liability to run away from legal issues.
Keeping your property clean and hazard-free will also protect you from a potential tenant lawsuit. Do your best to stay on top of the maintenance at all times to avoid accidents.