Related: Why Positive Cash Flow Properties Are So Important For Investors
So, let’s take a look at the 4 most important things you should take care of before being ready to rent out for income property:
1. Looking Into Hiring a Professional Property Management Company
Hiring a professional property management company will give you peace of mind when renting out a house. Although using the services of these companies will cost you, the expenditure is well worth it. This is especially true if you are a real estate investor who is busy with other commitments or often out of town. Professional property management companies handle all the details and do everything from collecting rent from the tenants, through handling any repair or maintenance issues, to helping you advertise your rental property to avoid vacancies. If you an experienced or overly busy real estate investor and/or landlord who is not sure about how to tackle damages and repairs or how to deal with tenants, a management company is the way to go.
Candice Estey Swanson from the National Association of Residential Property Managers says that if you decide to hire a property manager, you should make sure to find a licensed professional. Do your research. Be sure to look up reviews of different management companies in your area to ensure you hire the best professional property management company for your needs and for your budget!
Related: Professional Property Management: Yes or No? Why or Why Not?
2. Choosing Tenants Wisely
You have to know what kind of people you are renting out a house to. Like any other major decision you plan to take in real estate investing, you must study the local rental market. Depending on your location, you are likely to get many tenants offering to rent out a house. How do you choose? There are many factors to take into consideration. This includes running a criminal background check. Before renting out a house, you should have the potential tenant fill out paperwork which includes job information as well as credit information. In addition, you should run a credit history check of the clients. You also need to ask for recommendations from previous/current employers and previous landlords. You should make sure that the tenant has a reliable source of income and will be able to pay on time.
Before advertising your property, think about what kind of tenants would be suitable for renting out a house to in your particular case. Would you prefer a young couple without children? Would you have a no pets rule? Would you consider an older couple? After all, it is your property. The decision remains up to you. Nonetheless, make sure not to bridge any anti-discriminatory regulations in your particular location.
3. Understanding Lease Agreements
Making sure you have everything in writing before renting out a house is extremely important. Anything you would like to agree on with a future tenant should be included in the lease agreement or contract. For example, the security deposits and the duration of the lease must be included on the agreement. In addition, you should outline the responsibilities of the tenant and your responsibilities as landlord. If you would like to include any penalties for late rent or any other penalties for damaged property, now is the time to do so. Lease agreements are legally binding contracts between the tenant and the landlord.
Because these contracts are legally binding, make sure to write everything out clearly and concisely. It is actually advisable to seek the help of a real estate lawyer as long as you don’t have any particular knowledge of laws and regulations. You should include every small detail in your lease agreement. This will save you any headaches in the future and will work in your favor if any problems arise when renting out a house.
Related: What’s the big deal about a sublet agreement?
4. Properly Insuring Your Rental Property
It is crucial to make sure you have the right insurance when renting out a house. You want to protect your property and make sure it is in good shape for years to come. Your insurance plan would depend on the type of rental strategy (traditional or Airbnb) you will be choosing when renting out a house. These policies differ between short-term rentals and long-term rentals.
If you are planning on a short-term rental, check out your insurance options. Remember that many times personal belongings are not covered; however, depending on where you market your rental, Airbnb has a “host guarantee” where the company promises to pay $1 million to a host for property damage caused by a guest. But this isn’t always a guarantee. In each case make sure to read the fine print, or ask any questions when you need to.
If you are planning on a long-term rental, a landlord or rental dwelling policy is usually needed. These policies cost 25% more than a standard homeowners policy in order to cover for the higher risk associated with rental properties rather than personal homes. These policies may protect your income property from any natural disasters and also may include provision for any personal coverage.
Before you decide to rent out a house, make sure you take all the proper steps. Look into hiring a professional property management company for all your rental needs, choose your tenants wisely, understand any lease agreements that you draft, and don’t forget to properly insure your rental property. But even before that, Mashvisor will help you narrow down your search of the perfect rental property for your, by offering you access to thousands of investment properties available across the country at the click of a button.