Renting out your property might sound like a great idea, and it is. Inviting tenants to live in your home, especially if you are not using it, can be a great way to make some extra money and let someone else pay your mortgage.
The idea of enlisting and paying a property manager may at first seem contradictory to your idea of making money. If you only have one property and minimal outside commitments, then you might not have a problem managing your own property. However, there are some things most new landlords don’t consider before taking the leap.
1. A fair amount of legal knowledge is required.
Unless you come from a real estate background, there is going to be a huge learning curve with respect to housing laws and regulations. There is much more to renting out a property than finding a tenant and collecting rent. From complying with Fair Housing Laws during the tenant selection process, to writing a lease agreement that adequately protects your rights, to handling potential evictions, there are many aspects of landlording where knowing the law comes into play. Not to mention, these laws and regulations are always evolving, so you will need to stay on top of any changes that take place.
2. You are on call for maintenance emergencies 24/7.
Part of the landlord title means being able to put on a tool belt and take care of household issues and damages to your property. It is hard to predict exactly when your tenants might need a handyman to fix a leaky faucet or anything that compromises the livability of the home. If the task is much larger than you can handle, you will be responsible for hiring an outside contractor to take care of it.
3. Screening tenants is not as straightforward as it appears.
Choosing someone to live on your property is one of the most critical decisions you will make as a landlord. A tenant who does not take care of your property, or is slow to pay rent, can become an unnecessary burden and liability. Aside from an applicant’s ability to pay rent, there are a number of things to consider before allowing a person to sign a lease. It is essential to perform background and credit checks on all applicants. While this may sound simple enough, interpreting the results that come back may not be as straightforward as you think. You will also have to deal with the fact that you may spend a large amount of time screening applicants who are not qualified, not to mention the real probability of not finding any leads at all. You will need to be effective and creative with promoting vacancies.
4. Managing an ongoing relationship with your tenants requires more than knowing how to cash rent checks.
Even after putting in the time to find a good tenant, issues may still surface. You have to be prepared to be direct with your tenant about fixing the problem, while also doing what it takes to maintain a good rapport with them. This can be considerably more awkward than it sounds. If you are not firm enough, the tenant might not take the initiative to fix the problem. If you are too firm, you might have trouble keeping any tenants at all. It’s a delicate balance that takes a long time to master.
5. You’ll need to plan on spending a minimum of 10-15 hours per month managing your property.
Chances are you probably have a full-time job and various other obligations. Adding landlord duties can become a burden on your to-do list and create much unneeded stress. Between your personal life and the aforementioned commitments of renting your property (these are just a few landlord duties, the list goes on…), this can often be too much for one person to handle.
Professional property managers have a team that specializes in taking on all of these issues with tired and true methods that are effective and efficient. If managing your property is your main project and focus, it is possible that you can handle it on your own. For most people, though, rental properties are a side investment, and spending 10-15 hours a month keeping a rental property running detracts considerably from the return on that investment. For a small percentage of your monthly rent, you can delegate all the hassles that come with owning a rental property to an expert, and turn a tedious part-time job into a passive stream of income.
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