Becoming a landlord isn’t something you should do as a lark. It’s a serious decision that requires you to do a good amount of homework before jumping in with both feet. Some of the main points you should consider include the following:
- You’re going to need adequate landlord’s insurance. You may have regular residential insurance, but it won’t apply if you have tenants living there without the knowledge of your insurer. When purchasing a landlord insurance policy, you should pay attention to possible clauses that might obligate you to conduct regular inspections of the property during periods when it isn’t occupied.
Also, consider whether you need both building and content insurance. Building insurance on its own may not cover carpets, drapes and furniture if you’re renting a furnished apartment. In addition, you’ll want to make sure your policy covers you against damage or vandalism and – in case the place becomes uninhabitable due to a covered loss such as fire or flooding – loss of rent. Lastly, make sure you’re covered for liability in case a tenant is injured on your property.
- 2. You need to get permission from your lender before you can rent a mortgaged property. This applies even to something as seemingly trivial as renting out a single room in your home. You’re risking repossession if you don’t. You’re also leaving your tenant in a precarious position if the property goes into foreclosure, because the lender will have no legal obligation to honor the tenancy.
- 3. Keep in mind that you’re going to be responsible for maintenance and fixing things. So if you aren’t much of a handyman, you’re going to have to find an alternative. One possibility is to buy a home warranty which will cover appliances and major repairs. Another way to go is to hire a management company to deal with it, along with other bits of “dirty work” like collecting the rent.
- 4. Carefully consider reasonable ground rules. For instance, a lot of landlords recommend limiting the number of occupants that can reside on your property. The rule of thumb may be “the more the merrier” when it comes to social events, but in terms of leasing a residence, it’s “the more the scarier.” That is, more noise to bother neighbors, and greater likelihood of difficulties and problems in general.
- 5. Do some research and learn your state’s laws governing landlords and tenants. Just a few minutes online should reveal a lot of what you need to know.
- 6. You’ll need to do background checks on prospective tenants. The cost is minimal – maybe $20 to $30 – and well worth it. Experienced landlords say they mainly want to know if the prospective renter has a history of evictions.
There are those who know how to play the system. By making excuses for not paying the rent, and then, when the landlord’s patience runs out and he files for eviction, sitting tight while the case works its way through court, it’s possible to live rent free for several months.