Financial experts will tell you there’s no better time to become a landlord than now when money is so very cheap.
Let’s say you decide to bite the bullet and enter the world of real estate investing. You’ve crunched the numbers and all looks good until you find out how much the insurance will be on your new investment. Or perhaps, down the road, a tenant skips out and leaves you without the much-needed rental income for a few months.
It’s often the extras that get inexperienced investors. Be mindful of property taxes, maintenance costs, insurance and other surprises. Landlords should think ahead and prepare for these unpleasant inevitabilities.
Here are some tips on how to manage the pitfalls of rental properties:
• It’s a smart landlord who puts aside two month’s rent for the yearly maintenance of their property.
• Know that tenants tend to move on average about once a year so you could be faced with no income for a period of time. You’ll also need to allocate funds for that eventuality.
• Try not to subsidize the cost of your investment with your savings or outside income. Ideally, the mortgage payment, maintenance costs and property taxes should be covered by the rental income.
• Do your due diligence when screening potential tenants. There’s no room for sloppy screenings. Get a credit check, landlord check and consider getting a criminal check as well. To suss out whether a renter is serious or not, consider charging them a $20 fee for the credit check. You’ll find out soon enough how serious they are.
• If you’re suspicious that the renter has lied and given you a friend’s phone number instead of a previous landlord’s, call the number and ask if they have any properties or apartments for rent. That ought to trip up anyone who isn’t a legitimate landlord.
• Be a stickler when it comes to drawing up contracts with tenants. Will you charge late fees when a tenant is late paying their rent? Do you want your tenants to be responsible for taking their garbage to the curb side? Should you inform tenants of the need to obtain contents insurance? Contracts help prepare for any and all inevitabilities and help avoid future conflicts, misunderstandings and possible court action.
• Be prompt about responding to tenant concerns and building maintenance issues. Treating a property as if you are living in it will pay off in the long term. You’ll be rewarded with superior tenants who are far less transient and not penalized by potentially costly court-ordered repairs.
Rob Golfi of The Golfi Team is a Sales Representative with Re/Max Escarpment Realty Inc, your real estate expert servicing the Hamilton, Stoney Creek, Grimsby and surrounding areas. You can contact Rob at email@example.com