So, you’ve decided to rent your property out. If this is your first foray into the world of property management, there are some ins and outs to learn. While essentially, you just purchase a property and lease it out to tenants and collect rent, property management is a little more nuanced than that broad definition.
While property management may be the easiest way into the world of entrepreneurship, it could potentially be the most risky as well. You will be liable for property that you don’t live on, you will have to deal with tenants, and you will also owe it to yourself to make your property as profitable as possible.
There is no one-size-fits-all solution to property management, but there are some basics and general practices that will help you to avoid certain pitfalls. If you are a new landlord, don’t fly blind. Here are some guidelines to help you navigate property management and do so successfully.
Purchasing your first rental property
You have to be selective about what property you purchase for your first property management venture if you are not renting a property that you already own. Until you have a firm grasp of property management, it is best to start with a single family home. They are cheaper, and you only have to worry about maintaining one housing unit. Additionally, you only have to worry about one tenant or group of tenants instead of numerous tenants and rental agreements.
It is better to get your feet wet in a small pond before jumping into the ocean. If you do decide that you want to become a real estate mogul, managing one single family home will be a great proving ground for you. It will acclimate you to the responsibilities of making repairs, collecting rent, and managing the finances tied up in that property, including taxes.
If you don’t have the cash to buy a property outright, then you will have to sift through tenant credit check to see which one is right for you. You want to ensure that you get a mortgage that will allow you to make money off of your property rather than chain you down to a fruitless venture. Keep in mind when contemplating mortgage loans that you will need to consider your mortgage payments as an overhead cost of doing business. If your monthly mortgage payment doesn’t allow you to profit off of your property, then it is defeating the purpose of you renting out your property.
Also, you want your property to amaze prospective tenants. To do this, you have to think like a tenant. This shouldn’t be too hard to do since you likely have been a tenant before.
If you’re renting out a property that has been lived in previously, then you may want to do some bathroom and kitchen remodeling. These tend to be the two areas of the house that either draw or repel tenants. You want theses areas to be both stylish and functional.
Monetizing your property
The best business minds know that the key to maximizing profits, no matter the business venture, is to think outside of the box. You are not just a landlord who rents out your property to tenants who live there. You are a property manager who is open to all opportunities for growth.
Depending on the size of your property, it might be good for much more than just a space for renters to live. If you have property with an abundance of trees, you could sell the rights to your lumber to a local lumber company. If you have a green thumb and love to plant, you could use excess land to plant an organic garden. With the growing popularity of Farmer’s Markets and increasing health-consciousness, there is some serious coin to be made this way. Also, this is a great opportunity to make your property eligible for agriculture-based tax exemptions.
Dealing with tenants
How you deal with your tenants could be the foremost deciding factor in terms of your success as a landlord and property manager. You will want to screen prospective tenants to make sure that they are capable and responsible leasees. A simple tenant credit check will tell you most of what you need to know, especially when paired with a background check.
The thing that attracts most people to property management is the prospect of earning a profit without having to do much work. However, truth be told, there is much work that goes into successfully managing a property. The key thing is to do the work before buying and leasing out the property. If you do that, and remain diligent in maintaining your property, then you can enjoy passive income for a lifetime.