Rental Income Tips: Strategies for Accidental Landlords
Key Takeaways:
- Treat your rental like a business by following regulations, tracking finances, and setting rent based on market rates.
- Attract and retain quality tenants through effective screening, good maintenance, and clear communication.
- Strengthen financial stability with tax planning, budgeting, and a cash reserve for unexpected costs.
Have you recently become a landlord unexpectedly? Not everyone who is a landlord chose that as their life path. Some people become landlords accidentally; maybe they had to relocate but could not find a buyer for their home, or they inherited the property from a family member.
Like doing any new thing in life, the prospect of operating a rental property can seem daunting at first. But with time, it becomes easier as you learn to navigate the challenges of your new role. Hopefully, you won’t make any disastrous mistakes that will cripple you financially.
To help you avoid such life-shattering errors, this article by Limehouse Property Management addresses one of the biggest challenges faced by accidental landlords like yourself. Namely, how to generate enough income to cover the operating costs of your property, and still have some money left over as profits.
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10 Rental Income Tips for Accidental Landlords
1. Negotiating Legal and Regulatory Requirements
You may think that, as the owner of your rental property, you can do with it as you please. This is not true. The moment you designate a property as a rental, it becomes subject to a long list of regulations.
These regulations cover everything from property marketing to tenant screening, security deposits, notices, evictions, and more. Familiarizing yourself with these regulations is crucial so you can comply with them fully.
2. Treat Your Rental Like a Business
Think of yourself as an active investor. This means separating your personal finances from the business finances of your property. Create separate bank accounts and credit cards for the rental. Consider whether to hold the property in your name or in the name of your business.
Keep track of all income and expenses; these records can save or cost you money come tax season. Don’t rely on your basic homeowner’s insurance; buy landlord insurance and additional liability protections.
3. Deciding the Rental Rate
You cannot singlehandedly decide the rental rate for your property. Your rent amount will depend on the rental rate for similar homes in the area. To determine the right amount, run a rental analysis.
If you set the rent too high, you will price yourself out of the market. However, if the rent is set too low, you will be leaving money on the table. Find the sweet spot between too high and too low.
4. Finding and Keeping Tenants
Rental marketing and tenant retention are the heart and soul of income property profits. Marketing helps you find quality renters who will not default on the rent or trash your property.
Tenant retention strategies let you attract long-term renters. Because it costs less but pays you more to retain a tenant than it does to find a new one, you need to find ways to encourage your tenants to renew their leases.
5. Tenant Screening Matters
Don’t just focus on finding tenants; find quality tenants. Quality tenants are not late with the rent, and they won’t damage your property. To find these kinds of renters, you need top-notch tenant screening.
Effective tenant screening looks at a prospective renter’s income, credit history, employment, rental history, and other details that give you a glimpse into their level of trustworthiness. With a good tenant in place, the other aspects of managing the property become easier.
6. Prioritize Maintenance
Delayed or inadequate maintenance is the number one problem tenants have with their landlords.
You can avoid this problem by adopting a proactive maintenance strategy. This means inspecting the property periodically to find hidden maintenance issues and addressing them before they cause problems for your tenants.
Additionally, you need a system to help you respond to tenants’ maintenance requests on time. Never forget that delayed or badly done repairs only become costlier with time.
7. Make Your Rental Property Appealing
This does not mean splashing $10,000 on fancy upgrades. That’s what you would do as a homeowner, not as a landlord.
Making your rental property appealing is all about attention to detail. Something as simple as a fresh coat of paint, a new front entryway, switching carpets for vinyl plank flooring, etc., can make a huge impression on tenants, allowing you to increase your rent by a couple of hundred dollars.
8. Vacancies Cost More Than Repairs
You lose more money when your rental is vacant than you do by fixing the problems in the building. Unlike some landlords, do not obsess over how to cut repair costs while overlooking your vacancy rates.
How do you get your tenants to renew their leases? By making sure that from the outset, you choose good tenants. Secondly, keep tenants happy by attending to their needs and maintaining a good rapport.
9. Understand Taxes and Tax Benefits
Taxes are both an obligation and an opportunity to improve your rental income. Understanding how tax laws apply to your rental property will help you avoid problems with the authorities.
On the other hand, you need a good grasp of the different tax deductions that apply to your rental property. These deductions cover a host of rental expenses. They let you recoup a significant portion of your operational costs.
10. Maintain a Reserve
You need a cash reserve for times when things don’t go as planned. You still have to cover the mortgage & insurance, attend to sudden repairs, and handle other expenses in the property, even when you have extended vacancy periods or your tenant defaults on the rent.
Holding a cash reserve will help you get through these difficult times. You want to budget around 5% – 10% of your rental income for this purpose.
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Conclusion
As someone who became a landlord by accident, you may not have the time or inclination to do all of these. Is there a way to own your property while avoiding all this work? Yes, there is. It is possible when you hire a professional property management company like Limehouse Property Management for your rental property needs.
With a property manager, you can keep living your life knowing that your rental is in good hands. Hiring a property manager is the only way to transform a rental property into a source of passive income. Sometimes, it is the only way for accidental landlords to make their property profitable.