How To Be a Part-time Landlord
You'd think that the phrase "part-time landlord" would be an impossibility. Any real estate investment has to be a full-time job, right? But it can be done. How? Let's look at some of the work involved — it's important to know what you're signing up for:
- Finding a property is of critical importance. Make sure any work on it aligns with your ability to fix it yourself or pay to have someone else do it.
- Preparing the unit and every time a tenant departs, these items need to be visited and revisited: carpet, paint, window screens, deck stain and lawn maintenance.
- Advertising for new tenants and then showing the home to prospective tenants.
- Completing legal agreements.
- Collecting deposits.
- Taking care of utilities.
- Hassles, which can include broken pipes, clogged drains, broken garage doors, pets and roommate issues.
- Vetting renters to avoid deadbeats and vandals. To do this, use credit and background checks.
- Setting and enforcing rules.
- Managing equal housing rules.
- Dealing with insurance and liability issues, including those of swimming pools, icy paths and keeping the place up to code. You'll need landlord insurance — your regular homeowner's policy won't be sufficient.
- Understanding and observing local landlord-tenant laws.
- Keeping proper records for tax and legal purposes.
With the rise of Airbnb allowing you to rent out a room in your home, many are considering becoming a landlord in a bid to earn extra income. If you have the space or a second home, and local laws allow it, it seems like an advantageous situation.
There are benefits and risks to becoming a part-time landlord. Maintenance and upkeep have to be taken into account, but becoming a landlord can be a great choice for generating wealth. However, in order for this to happen, you'll need some support. Here are a few ways to get support for your new venture:
- Turn to property management companies to do a lot of legwork for you — from locating a property to refurbishing it — for a fee, of course. The management company can handle the day-to-day tasks.
- Find a real estate attorney to help you navigate potential issues that you may encounter. You have to be up on such issues as discrimination, safety deposits, late rent, lease agreements and repairs.
- Consider the legal issues. You can make the business into a limited liability company, so your name doesn't appear on leases. Twenty-one states have adopted the Uniform Residential Landlord and Tenant Act as the basis for their local laws. Restrictions on security deposits are mostly derived from state law.
Time invested in picking good tenants can be the difference between becoming a landlord who's successful and one who's constantly stressed. You may be tempted to take shortcuts in screening tenants, but there's plenty that can go wrong.
To avoid such headaches, be clear about acceptable payment methods for rent: check, money order, cash, credit card or whatever. Consider including penalties for late payments in your leases — they'll provide you with leverage if a renter gives you continuing problems.
The result of a bad tenant has a huge ripple effect on your time and money. You have to go through the removal process, fill the space again and make sure your property's ready for the next tenant.
Even interest rates can affect your business. When they fall, it's often cheaper to buy than rent, so demand for your unit(s) may drop. Lowering the rent to remain competitive can put a cramp in your ability to make a buck. Researching locations and tenants are essential.