If you’re thinking of renting your property for some extra cash, you’re not alone. More than a third of all American households currently rent out at least a part of their home or a second property, which is higher than any point in the last 50 years.
With the continued popularity of short-term rental platforms like Airbnb and Vacasa, many turn to renting as a serious source of income or even a full-time job. But renting comes with its own unique challenges and decisions. Will you rent long-term or short-term? Do you know the local housing laws and legislation? Will you be around to make the necessary repairs?
“Learn every aspect of what goes into a successful investment property — your buy price, rehab costs, nearby comps and value, ongoing maintenance costs, taxes and insurance, financing options, tax benefits, the whole nine yards,” real estate entrepreneur and Hard Money Bankers founder Chris Haddon told Inman.
Here are some expert tips for turning your rental property into a success:
Do Your Research:
Before you put anything up for rent, you should already be an expert on the house and its surrounding neighborhood. Familiarize yourself with local tenant laws and market conditions. If you’re managing the property yourself, learn how to be good a landlord by knowing the history of the house, who lived in it, what repairs were made and how it can be impacted by natural disasters.
It’s also important not to assume that you know everything just because you happen to live in or own property in the same city or neighborhood, real estate investment expert Jake Harris said. Things like rent prices and market conditions change constantly and need to be monitored.
“What are properties like yours renting out for monthly, what finishes and amenities do they offer?” Harris told Inman. “Once you know what the market conditions are, then you have a better understanding of what steps you need to take to prepare your property.”
You’ll also need to become an expert on local housing laws. Some cities do not allow short-term rentals at all, while others, like New York, require hosts to be present in the property for the duration of the short stay. Not knowing how to properly handle the many situations that will arise with your rental property could cost you dearly in legal fees and stress later on.
“Don’t buy a property far away,” Haddon said. “Not for the first 5+ rentals you buy.”
Put Yourself In Your Tenant’s Shoes:
We’ve all heard the stories about the terrible landlords — not repairing broken appliances, showing up without notice in the middle of the night or yelling and getting frustrated for no reason. While funny, these stories all point to a lack of understanding of the tenant’s needs and wishes. Try to picture how you’d want to be treated when you’re renting (you either have or will at some point!) and establish a mutually-convenient arrangement from there.
“I try to put myself in the mindset of the renter,” Harris said. “What I would expect as a renter is having a safe, clean, fully functioning property at a normal price point.”
Treat It Like A Business:
It doesn’t matter whether you have hundreds of investment properties or are only renting out your basement suite over the summer. Approach what you need to do as any job — do your research, invest time and money and be prepared to do the work all along the way. Repairs, disagreements and problems with non-payment of rent will inevitably come up, but things will go much easier if you see them as bumps in a more substantial business plan.
“I am a believer that knowing the direction you want to go is more important that just doing something to do it,” Harris said.
While we’d like to invest money into a house and watch the money roll in, showing up, responding to tenant requests promptly, knowing what’s going on with the property, keeping track of who’s coming and going, is the key ingredient to successful renting. There is a difference between being there and micromanaging your tenants, but putting in the necessary time (or hiring someone else to do it) is what it takes to keep things moving smoothly.
If you’re going into it for the long run, both Harris and Haddon advise trying to self-manage at least one or two rental properties. Once you get a sense of how the rental process works, you can hire a management company to do it for you.
“Be very hands-on,” Haddon advises.