Becoming a landlord can be tricky and there's much more to it than just cashing that rent check every month to pay the mortgage. Here are some of the more significant blunders hat new landlords typically make:
When the math is incorrectly calculated and the cost of maintaining the property is more than expected. At the least, the majority of expenses on the rental should be covered by the rent that you collect each month. If this is not the case, you will have to pay the rest yourself, and no landlord wants that.
The first thing that you should be doing is to calculate the costs per month on the home, over and above the mortgage. Include any maintenance costs, and your homeowners insurance rates. Now, take a look at what other homes in your area are renting for that are a similar size and construction type.
If you find out that the rent that you will be charging for the home do not cover the home's expenses, are you okay with this?
Some newer landlords don't use a lease agreement or they use one that is not sufficient, and this can cost them big time. There are certain legal ramifications to being a landlord, so ensure that you are fully protected.
Even if you are renting your home to your best friend you want to have a lease agreement in place.
Your agreement must cover everything that could possibly occur. Did you remember to include a security deposit clause? Did you remember to state the advance notice that your tenant must give you before moving out?
Not taking inventory/photos is a bad practice. You don't want to have an argument with the tenant as they are leaving about damage that they say was there before they moved in. However, it does happen. Protect yourself by doing a thorough inspection and taking plenty of pictures so that when you need to prove what the condition of the home was, you can.
Having insufficient insurance on a home happens all too often. You most likely have a standard homeowners insurance policy on your property which offers coverage for your personal possessions inside of your home in the event they are lost in a covered claim.
If you have switched your home to a rental unit, your home insurance needs to be updated to a dwelling or landlord policy that won't cover the contents of the home. If your renter's want to insure their personal possessions they are keeping inside the home they should purchase a renter's insurance policy.
You need to take the time to know who your tenants are. Of course you will want your property to be occupied by tenants, but don't be too quick to accept any tenant who shows up. Some people are good at appearing to be responsible people, but later they show their true colours.
You should have a rental application ready for the new tenants, and check their credit and employment history carefully. Previous landlords should be contacted in order to find out how the applicant behaves as a tenant. The person who is looking to rent your unit could turn out to be someone who is consistently late with their rent payments.
When the math is incorrectly calculated and the cost of maintaining the property is more than expected. At the least, the majority of expenses on the rental should be covered by the rent that you collect each month. If this is not the case, you will have to pay the rest yourself, and no landlord wants that.
The first thing that you should be doing is to calculate the costs per month on the home, over and above the mortgage. Include any maintenance costs, and your homeowners insurance rates. Now, take a look at what other homes in your area are renting for that are a similar size and construction type.
If you find out that the rent that you will be charging for the home do not cover the home's expenses, are you okay with this?
Some newer landlords don't use a lease agreement or they use one that is not sufficient, and this can cost them big time. There are certain legal ramifications to being a landlord, so ensure that you are fully protected.
Even if you are renting your home to your best friend you want to have a lease agreement in place.
Your agreement must cover everything that could possibly occur. Did you remember to include a security deposit clause? Did you remember to state the advance notice that your tenant must give you before moving out?
Not taking inventory/photos is a bad practice. You don't want to have an argument with the tenant as they are leaving about damage that they say was there before they moved in. However, it does happen. Protect yourself by doing a thorough inspection and taking plenty of pictures so that when you need to prove what the condition of the home was, you can.
Having insufficient insurance on a home happens all too often. You most likely have a standard homeowners insurance policy on your property which offers coverage for your personal possessions inside of your home in the event they are lost in a covered claim.
If you have switched your home to a rental unit, your home insurance needs to be updated to a dwelling or landlord policy that won't cover the contents of the home. If your renter's want to insure their personal possessions they are keeping inside the home they should purchase a renter's insurance policy.
You need to take the time to know who your tenants are. Of course you will want your property to be occupied by tenants, but don't be too quick to accept any tenant who shows up. Some people are good at appearing to be responsible people, but later they show their true colours.
You should have a rental application ready for the new tenants, and check their credit and employment history carefully. Previous landlords should be contacted in order to find out how the applicant behaves as a tenant. The person who is looking to rent your unit could turn out to be someone who is consistently late with their rent payments.
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