The United States is currently booming with real estate investments. It can be a lucrative avenue of growing your capital wealth; however, it is not always an easy task, especially if you have not dealt with real estate before.
If it’s your first time in the rental industry, there’s a good chance of making a mistake. Since some of these mistakes could be very costly, it is essential to do thorough research to get all the necessary information about the rental property. Below are several key elements to consider before acquiring any rental property and avoiding nightmare tenants.
Location of Property
The location should be a top priority in any real estate investment regardless of whether you want to buy a home or a rental unit. Before settling on the location, ask yourself the following questions.
• Is it a good neighborhood?
• Are the surrounding properties well maintained?
• What are competing properties charging?
• Can you make a good profit from the amount you will charge?
• What is the property tax history?
• Is the property value increasing or decreasing?
Unexpected Expenses
There will always be unexpected expenses regardless of the amount of money you are investing in. Ensure that you have budgeted for the hidden expenses such as repairs, taxes and liens. Also consider the history of the region regarding flooding, hail storm claims, and any other disastrous weather-related issues. Be sure to acquire insurance coverage for them.
Taking the Responsibilities of a Landlord
Ask yourself whether you are prepared to take on the role of a landlord. Evaluate your time and capacity to handle matters that come with being a landlord. Be ready to start paying taxes, repairing roofs, performing regular maintenance, replacing heaters, looking for new tenants, and other tasks that come along with rental properties. You can do all these tasks by yourself if you have enough time, but you can also opt to hire a company to manage your property, which is an additional expense to consider.
Property Wear and Tear
Your property will occasionally experience wear and tear regardless of how well you performed a tenant screening or how peaceful or responsible your tenants are. You should make a budget for regular renovations to ensure they are always in good condition.
To avoid incurring expenses caused by careless tenants, establish an agreement that clearly outlines your responsibilities and theirs. For example, it is your responsibility to replace a malfunctioning AC unit, while on the other hand, it is the responsibility of the tenants to replace the AC filters each month.
Vacancies Mean Loss of Rental Revenue
Ensure that you establish a contingency plan to cater for the time your property remains unoccupied. Each day your property is vacant, revenue is lost unless you come up with a plan of action. Further, expenses may be incurred until a new tenant is found. You may hire a property management service so that they can fill the vacancy, place an advertisement while looking for another tenant, or make a personal initiative to cover the mortgage as you identify a suitable tenant.
Provide an Online Payment Method
An online payment method makes it easy for tenants to pay their rent. It also ensures that you only collect the right amount from each tenant as well as keep proper records. Allowing for regular, instant rent payment through an online option will also prevent you from falling behind on your own bills if you’re dependent on rental income.
Another advantage of using an online portal is that tenants may also use it to make their requests such as those regarding property maintenance. By doing so, you can respond promptly and keep your property in the proper condition, therefore keeping tenants happier and occupying your property.
Avoid the Nightmare Tenants
Even though it is not good for your property to remain empty, the worst thing you can do is to accommodate the wrong tenants. A wrong tenant could be one who does not pay rent, or one who commits crimes on the property. It’s wise to use a tenant screening service to check the tenants’ background, eviction records, and credit history.
Keep in mind, it is essential to properly screen tenants to prevent stress and financial losses. You want to protect your investment, so finding the right tenant is imperative. Your first landlord duty should be to develop a thorough tenant-screening process., This should include an application process, background and credit checks. Never skip over this part and rush to get someone in the property so that you can start to receive rent.
Unfortunately, many of the horror stories that landlords share about nightmare tenants are true – but you can prevent falling victim to these nightmare tenants with a credible tenant screening service. Be sure that the tenant screening service you use will check for the following:
Credit Check. As the foremost item in tenant screening, this check supplies the applicant’s credit score, and recommends whether to accept or decline the application. The useful credit summary gives details on multiple types of credit such as installment, mortgage, revolving, closed with balance, and open accounts.
Criminal Record Check. It is vital to check the applicant’s criminal record with the help of a tenant screening service that is though rough. Only convictions will show, traffic violations will not be shown, and some information may be hidden due to local or state laws.
Bankruptcy Report. A public record search will help you find any past bankruptcies in the applicant’s history, highlighting any previous debt problems that resulted in this drastic step.
Foreclosures Check. Foreclosure is another key indicator of credit worthiness, especially useful to a landlord since it deals with property mortgage obligations.
Employment Record. This verifies previous employment dates, identity and substantiate references.
Aliases Report. What other names might have been used over the years? This report collects them and the places they were used, to complete the identity picture.
Past Address History. can also provide the applicant’s past address history, for an even more comprehensive picture. This investigates locations associated with current and previous homes, current and previous rentals, and current and past employers.
Eviction Records. A reputable tenant screening service will provide as a safeguard for landlords, eviction verification report.
Medical Collections. Another metric to assess past credit history and is a check for any medical bills submitted to collections.
Key Takeaway
Taking these steps will help prevent unexpected surprises, making property management less of an obstacle course. It will help you become a more proactive landlord and maximize your potential for rental income with each property you acquire.
