If you have finally realized your dream of becoming a landlord, whether to one tenant or one hundred, congratulations. As English philosopher and economist John Stuart Mill said, "Landlords grow rich in their sleep." But being a landlord involves some work beyond buying a property and renting it out. Here are five things you should do immediately as a lessor when you have purchased real estate.
1. Set up a tenant screening process and use it religiously.
You may be tempted to find tenants through a friend-of-a-friend type of situation. But you could get burned this way and wind up being out rent money and the cost of an eviction if the tenant doesn't work out.
Instead, set up a screening process for your tenants and utilize it consistently. Things to check include
- employment status and income
- no history of evictions
- good references from previous landlords
- clean background check
- solid credit check
If you don't have the time to do this yourself, you can hire an agency to do it for you.
2. Check your umbrella insurance policy.
You may (hopefully) have an umbrella insurance policy for your personal residence, but what about your new rental property? If you don't have one, you should talk to your insurance agent about getting one. This can protect you if, for example, a tenant's dog bites someone on your property, or someone falls on your icy front steps, and the victim decides to sue. While you're at it, make sure all your other insurance policies are adequate for your property too.
3. Start an emergency fund.
Do you have enough money to cover the cost of a new furnace or new roof for your building? Many new landlords are stretched thin financially. Don't be caught off guard in an emergency. Start an emergency fund now.
4. Evaluate your building's security.
You never know who has keys to your building, so it's wise to re-key the locks when you take ownership. Make sure your tenants' doors and window locks function properly and that any alarm systems are in good shape. Check outside and common area lighting, and trim hedges around the building to minimize places where intruders can hide.
5. Hire a property services company.
While you're taking care of your hedges, why not give your landscaping a fresh new face? You can hire a property services company, such as Seabreeze Property Services, to do a "spring cleanup" at big seasonal changes, so your property always looks its best. There are numerous reasons to use professionals for this service:
- They have the tools and the knowledge to do major landscaping cleanups.
- Your property will look great if you ever have it appraised to use the equity.
- You will be able to focus your time on other landlord tasks.
- The property will be protected from things that could eventually cost you money, like not repairing pavement or keeping the gutters clean.
Being a new landlord is exciting. Follow the steps above, and it can be as profitable as it is fun.