Ready to move into a bigger house and rent out the one you’re in? Got the itch to be a landlord?
If you’re ready to become a rental property owner and (landlord), take the time to crunch the numbers to be sure you can actually afford the responsibility of two mortgages. Here are some smart tips to help you make your calculations.
- Determine the rental amount – Obviously you must take in more rent every month than you pay out in expenses, but at the same time, you have to be competitive. Once you’ve arrived at the rental amount, estimate the potential cash flow by subtracting the expenses you have such as, mortgage, condo fees, insurance, property taxes, utilities, etc.
- Managing vacancies – Generating a monthly income is the goal, but the economy or local job market can make it difficult. Renovations are another reason why your rental may be vacant for a short time. If you have three or more months of financial reserves to cover unexpected costs or a lack of tenants, you’ll be okay.
- Pre-approved comes first. Before you start shopping for a new property where you’ll be living, be sure to get an upfront and underwritten pre-approval from a lender. Unlike a pre-qualification, a pre-approval spells out exactly how much you can borrow so you’re not shopping for homes out of your price range. On top of that, it also tells a seller that you’re a serious buyer and can be used as a negotiating tool.
Becoming a Landlord is a Big Decision
It’s important to understand what mean to be a landlord. There are plenty of challenges as well as rewards. Here are some tips to help you cover the key bases.
- Understand the law – Rental laws vary from state to state.Texas landlord laws are spelled out fairly easily. As the landlord, you must maintain a safe and habitable property, but there are also things like security deposits, property access, and end-of-lease notifications that are also important. There are also federal housing safety and anti-discrimination laws you should be familiar with.
- Properly screened tenants – You’re essentially inviting people to live in your home, so you want quality tenants you can trust. Tenants should complete a real rental application at the very start and be sure you ask for personal and employment references.
- A lease agreement – A lease agreement that is signed by both the owner and the tenant is the best way to set and manage expectations with your tenants, as well as protect yourself in legal matters. Although there are lots of examples online, it’s best to have your attorney look it over.
- A property manager saves time – If you’re a first-time landlord, you may not yet appreciate the full value of a good property manager. You might be gung-ho to be a do-it-yourself landlord. Time will tell about this decision. If you do decide that being a full time landlord is too time consuming, consider the value of a professional property manager like Cousin James Management. These pros can screen tenants, execute leases, manage your maintenance, and even collect your rental checks each month.
- Online rental pay – Paying rent online is a popular practice these days. Automatic payments are manageable and eliminate problems such as slow mail, late payments, and paperwork. Tenants prefer this method of payment, too.
- Record keeping (ugh) – As a landlord, record keeping is mandatory. You must keep up with records of deposits, paid rent, maintenance receipts, and all landlord-tenant communications, whether in writing or digitally. You’ll need these things for tax purposes, too. Any legal issues that crop up can be tracked and assessed with good record keeping.
We invite you to contact Cousin James Management with any questions you may have about property management. We’ve been in this business for more than 25 years and understand the ins and outs of what it takes to manage and maintain property. Give us a call and let’s chat.