Becoming a landlord can happen by choice (as an investor) or by chance (not intentionally), but either way it’s important to know what you’re getting yourself into. We’ve compiled a list of tips to help you handle the responsibility of being a first-time landlord without all the headaches.
1. Know the Regulations
Before you rent your property, you need to know local, state, and Federal occupancy, safety and rental property regulations. In DC, this includes lead testing requirements, housing codes and fair housing laws, application and screening laws, and regulations regarding rent-control and security deposits. It’s a lot to know and understand but being aware of and educating yourself on these regulations will ensure you don’t inadvertently break a law or overlook a requirement that could land you in hot water with your tenant and potentially lead to a legal battle.
2. Treat Your Property as a Business
First and foremost, having a rental property is a business. Because it is someone’s home, it is natural to let emotions drive decisions. Decide what your goals are and how to achieve them. Second, make sure you get a business license for your property, including a certificate of occupancy if it is more than one unit. And make sure to renew it before it expires. This will ensure your rental is operating legally. When you approach a rental property as the business that it is, your planning and decisions will be focused on building long-term wealth.
3. Create a Plan and Budget
Once you know you’re all in, it’s time to create a plan for your property and develop a budget to make it happen. You may need to consult with contractors and a real estate agent or property manager to determine the best approach for converting your property to a rental. It may need more than just a coat of paint and some minor repairs. You will need an operating budget to make sure the monthly cash flow is what you need it to be and have a reserve fund for expenses.
4. Understand Your Target Market
If you are renting out your property, you’ll want to know as much as possible about the rental market in that neighborhood and in DC in general. This will help both when planning the layout and design of your rental as well as when deciding what features to include as you make repairs and finalize updates. Different neighborhoods and different types of renters may be looking for different features and amenities.
One way to get a clear picture of the rental market is to check rental websites like Trulia, Apartments.com and Zillow for similar properties (or properties with features similar to those your rental will have when it is completed).
Some things to make note of include:
- Size of nearby rentals, including square footage, number of bedrooms and bathrooms, and the size of kitchen and living areas.
- Availability of parking (on-street parking, parking pads, garages, etc.)
- Additional storage and closet space
- Access to a yard, deck or other outdoor living space
- Proximity to public transportation, major roads and highways, retail and restaurants
5. Price Your Property Right
Once you have planned your property and its amenities and you’ve done your research to know more about how similar properties in your area stack up, you can price your rental competitively. And pricing your property well is essential to finding your ideal tenants quickly. If you list your rental and it doesn’t get the attention you want, it could be an indication that the price is too high. If you aren’t confident to accurately price your property, it may be a good time to check in with a real estate professional or property management company for help.
6. Build a Team of Professional Advisors
A business requires a supporting cast, and a rental property is no different. It’s important to connect with, and even hire, a team of professionals who can advise and assist you when necessary. While it could take some additional investment, having those professionals waiting in the wings will be worth it when you need them.
Real Estate Professional
A Realtor or other real estate professional such as a property manager with experience in your neighborhood will know the rental market better and can help listing your property at a competitive rate, with descriptions and professional photos that will draw in potential tenants for showings. They know the market well and can be a valuable resource during the listing and renting process to minimize the time needed to find tenants.
An accountant can provide advice on how to handle the financial side of your rental business, such as allowable deductions, how depreciation works to your advantage, and the impact of the rental results on your overall financial plan.
Lawyers are invaluable for assisting with everything from leases and other legal documents. In DC, be sure to find one that specializes in the landlord tenant laws. Because DC is a tenant-friendly jurisdiction, it is important that your attorney is aware of the nuances of these laws and is familiar with the judges and case law of the Landlord & Tenant Branch of the DC Superior Court. Let’s hope you don’t have tenant complaints and legal issues that require a lawyer, but if you do, you want to be prepared.
Contractors are excellent resources to have on call for emergency repairs, regular and seasonal maintenance, as well as things like lawn care and landscaping, if necessary. Consider handymen for the minor repairs as they can often do a lot of different work that does not require a tradesman, who are far more expensive. Make sure whomever you hire is licensed and insured to protect you against liability. Having someone dependable on-call to do electrical, plumbing, HVAC, construction and roofing work can save a lot of time (and potential damage) and will get the job done quickly for your renter.
If all of this seems overwhelming, or if you simply don’t have the time to manage it all on your own, search out a licensed property manager with a good reputation (www.NARPM.org). A good property manager takes the stress out of being a landlord, as they handle all contact with your tenant, from showings and rental applications to ensuring any issues with the property or the tenants are managed quickly and minimal need for your time.
Becoming a landlord is a big responsibility and can be a large investment of time and financial resources. But when you are willing to do your research you’re armed with the right information, and have the right professionals on stand-by, you’ll be collecting rental income from your new rental property in no time.
Want more information on becoming a landlord? Keep an eye out for our next post, where we’ll share more helpful tips for first-timers! Looking for more hands-on help? Contact us at Columbia Property Management for a free consultation to see how we can make renting your property stress-free.