As you begin to think about real estate investment opportunities, you have a lot of considerations to make. Being a landlord can be daunting. It is not only about finding the ideal property, but also about matching that property up with the right clients, with the right property management company, and so on. You then need to ensure you are maintaining that property so its value continues to appreciate, not depreciate, as time goes by.
Table of Contents
- Choosing the Right Entity for Your Property Management Business
- Finding and Keeping the Good Tenants
- Property Managers Provide Immense Protection
- Custom Lease Agreements Can Help Set You Up For Success
- Insurance Needs of a Real Estate Investment Professional
- Damage Done to the Property By Tenants
- Doing Routine Inspections to Avoid Major Pitfalls
- Always Prepare for the Need for Maintenance
- Should You Do Upgrades?
- Understanding the Tie Between the Tenants and the Lease
- Tenants May Vanish Without Cleaning Up Their Belongings
- Enforcement of the Lease Agreement
Choosing the Right Entity for Your Property Management Business
The business make-up or entity of your business is going to be the foundation all your investments build off of over time. You want to get off on the right foot when it comes to setting up your entity, or business, in the right category. The steps that you take here require legal and financial advice from experts based on your aspirations for the business and how you intend to run it over time.
Finding and Keeping the Good Tenants
You may run into situations where you have amazing tenants that care for your property, pay on time, and are respectful to the other tenants that live there. These are the tenants you build great relationships with over the years and want to care for yourself. You want to find these tenants and do your best to keep them around. Property managers can help sort the best tenants from the applications that you receive.
Property Managers Provide Immense Protection
One of the first things you want to be thinking about as you enter the real estate investment space is the necessity of a property manager. Property management companies can help you with everything from custom lease agreements, to the protection of your property, inspections, repairs, maintenance, and more. All these are critical components if you want to have top-tier rental property protection.
What property management professionals do is help you with the day-to-day and provide expert guidance on the local, state, and federal laws you need to be following as a landlord, all so that you can continue your focus on the next investment opportunity on the market.
Custom Lease Agreements Can Help Set You Up For Success
Where a lot of trouble comes into play for new landlords is when they buy a property, and begin to set up leases with lease templates they pull straight from the internet. These lease templates lack any customization, any specific language, and likely do not take into account criteria for the actual local and state location where the property resides. You need to be working to create top-notch, specific, enforceable custom lease agreements to use with your tenants.
Insurance Needs of a Real Estate Investment Professional
Another critical area you need to consider as you enter the real estate investment space is the necessity of insurance. Landlords need to be sure they have insurance coverage to protect their assets; their real estate property or properties. There is a lot of risk exposure when it comes to being a landlord anywhere in the United States. You need to take care of your property, protect yourself from potentially negative tenants, all with a focus on getting the return on investment you seek. Having the right insurance can protect you to make all this a much easier reality.
Damage Done to the Property By Tenants
In the same spirit of insurance, you also want to be preparing for the instance where a tenant may do egregious damage to your property. What is it that you can do about such an occurrence and how do you handle these types of situations? Damage done to your property by tenants is something you may be able to get coverage from via the security deposit, with eviction being an option as well. A lot of this will depend on the language in your hopefully custom lease agreement, as we mentioned earlier. Documentation and potentially even a date in court can help you further recover the losses.
Doing Routine Inspections to Avoid Major Pitfalls
Ignorance is the worst mindset you can have when it comes to your real estate investment. You want to be on top of the property at all times, in part by performing routine inspections of the property at least twice annually. When you do these in set intervals you will be able to monitor for wear and tear on critical components of the property, as well as do maintenance tasks that come out of your pre-defined budget (more on that in the next section). The more you are able to stay ahead of repair needs the better the state of your property will be for you and your tenants.
Always Prepare for the Need for Maintenance
It is crucial that you understand how to budget your finances when it comes to managing a rental property. Budgeting of finances is going to require that you think about everything from the need for additions and renovations to simple maintenance and repairs.
The best thing that you can do as the owner of an investment property is to be proactive when it comes to maintenance. Setting funds aside in the budget for maintenance of your property can help to protect it from the need for expensive and major repairs over time. You want to get ahead of the game and a maintenance budget helps you achieve that.
Should You Do Upgrades?
Along the same lines as the maintenance budget, you also want to have some funds in your budget to assist with upgrades as well. You want to be able to do upgrades to your real estate investment property to help to continue to increase its value. If you want your rent to hold and even appreciate over time, you need to upgrade the space. A lack of upgrades is going to make it more difficult to keep good tenants and drive your rent prices in line with market increases as time goes by.
Understanding the Tie Between the Tenants and the Lease
The lease agreement is the binding contract between you as the landlord and the tenants inside of the space you own. That lease agreement is critical as it is going to be naming the individuals on the lease agreement, who have a right to stay inside the property. There may be times when you run into situations where there are more tenants in the space than are on the lease itself. What do you do in these situations? This is where a property management company can come in handy, to help you handle these delicate situations.
Tenants May Vanish Without Cleaning Up Their Belongings
You are going to experience a slew of different situations as the landlord of a rental property. One of these experiences at some point will likely be a tenant that ends up vanishing. He or she, or multiple individuals, may get up and leave without a trace, without leaving any contact information. It could be that they even leave behind whatever personal belongings they had with them. What do you do in these scenarios? How do you take care of their belongings in a reasonable way? The lease agreement is going to dictate a lot of this, as well as local, state, and federal laws. A property management company is best to help you navigate such an instance, but you still want to prepare for when it comes.
Enforcement of the Lease Agreement
You always want to refer to your lease agreement when it comes to tenants. Whether it is that the tenants are having others live in the space not on the lease agreement or they are not paying in a timely manner, you first need to consult your lease to follow the terms you’ve outlined there. Whatever the situation may be, the custom lease agreement should be able to provide you with the details necessary to dictate what you legally have the ability to do and enforce.