5 Strategies to Prevent Financial Loss as an Unintentional Landlord
Are you an unintentional landlord? This term refers to individuals who unexpectedly find themselves renting out a property, often due to life circumstances such as moving to a new location or inheriting a home.
Becoming a landlord can be an intimidating endeavor, particularly if you had no prior plans of entering the real estate rental market.
Many unintentional landlords underestimate the challenges of managing a rental property and may make costly mistakes in tenant selection. However, there are steps you can take to streamline the process and mitigate potential risks.
Here are five valuable tips for unintentional landlords:
- Establish Realistic Rental Rates Setting an appropriate and competitive rental price for your property is crucial. Conduct thorough research to determine the going rates for similar properties in your area and set your rental price accordingly. Overpricing your rental can lead to prolonged vacancies, ultimately resulting in financial losses. It’s essential to attract a pool of potential tenants, rather than being limited to those willing to pay an inflated price. Keep in mind that tenants willing to pay more may have underlying issues such as poor credit history or eviction records. According to a recent Zillow survey, the average U.S. rental property remains vacant for approximately 25 days before finding a tenant.
- Conduct Rigorous Tenant Screening Selecting the right tenant is paramount to avoid complications like missed rent payments or property damage. Conduct thorough tenant screening by performing background and credit checks, verifying employment, and checking references. According to the National Association of Realtors, non-payment of rent is the most common reason for evictions. Relying solely on your intuition to choose tenants can be risky, as some individuals are skilled at deception and manipulation.
- Prioritize Property Maintenance Regular maintenance is essential to prevent larger and costlier repairs in the future. Stay proactive in maintaining your property, including tasks like HVAC system upkeep, landscaping, and plumbing checks. Neglecting a minor issue, such as a leaky pipe, can lead to extensive water damage repairs. Additionally, a poorly maintained property may deter potential tenants or attract undesirable ones. According to HomeAdvisor, the average cost of repairing water damage is approximately $2,700.
- Familiarize Yourself with Landlord-Tenant Laws Each state has its own set of landlord-tenant laws governing aspects such as security deposits and eviction procedures. It’s imperative to acquaint yourself with these regulations to ensure compliance. Ignorance of the law is not an acceptable defense, so understanding your rights and responsibilities as a landlord is essential. Keep in mind that these laws can change over time, with some states implementing stricter regulations for landlords.
- Consider Hiring a Property Management Company If property management is not your primary occupation, you may want to contemplate enlisting the services of a property management company to handle day-to-day tasks related to your rental property. Property management firms can assist with tenant screening, maintenance, rent collection, and more. According to the National Association of Residential Property Managers, the average property management fee typically equates to around 10% of the monthly rent.
In Conclusion Becoming an unintentional landlord does not have to be a stressful experience. In fact, it can significantly contribute to your financial well-being. By implementing these five expert strategies for successful property management, you can ensure that your rental property is a profitable venture. If you’re interested in further real estate investment advice, consider subscribing to the InvestFourMore email list. Subscribers receive a complimentary book covering real estate wealth-building strategies, along with exclusive discounts on coaching courses and numerous additional real estate investment tips.