Buying your first investment property is an exciting way to supplement your income and generate wealth. But before you can start collecting those rent checks, you have to get your rental ready! From inspecting the property and handling maintenance issues to researching rental rates and learning how to be a landlord, there are many steps involved in preparing your property for tenants. Here are some important things to take care of as you get your rental up and running.
Make Essential Repairs
Before you rent out your property—and ideally before you buy it—make sure you get a home inspection done (usually costs between $300 and $450). A home inspector will alert you to potential problems, so you can tackle repairs before welcoming tenants into the home. As a landlord, you have to provide your renters with a safe and livable housing environment that is free from household dangers like lead, asbestos, mold, and structural issues.
Your tenants are also entitled to heat and hot water, so make sure your water heater is functioning properly. If your water heater is more than 10 years old, leaking, or producing discolored or cold water, it might be time for a replacement. The cost to install a new water heater will depend on a variety of factors, including the type and brand of the unit. For example, tankless water heaters typically cost between $1,000 and $3,000 with installation, according to HomeAdvisor. Remember to include room in your property purchase budget for these kinds of repairs!
Invest in a Few Upgrades
To make your rental property even more attractive to tenants, consider investing in a few in-demand upgrades. Certain modifications might even let you charge higher rental rates! Rentec Direct suggests minor upgrades that will produce a return on your investment, such as new cabinet hardware, sleek faucets, and modern light fixtures. Adding a washer and dryer to your property will cost a little more but could be worth it—especially if your target rental market includes families with children.
Set Realistic Rental Rates
The right rental rates will help you attract tenants to your property while maximizing your income. When setting your rent, The Balance Small Business recommends looking at other properties in your neighborhood that are similar in size to yours. You can find comparable properties by searching online, working with a local real estate agent, or visiting units in person and speaking to other landlords. Once you know what other landlords are charging for their rentals, come up with your own rates based on the desirability of your property. For example, if your unit has a great view, you may be able to charge slightly more for rent than your competitors. Just make sure you can charge enough rent to cover your monthly expenses and generate positive cash flow. Remember, your rental income will have to cover your mortgage payments in addition to other expenses like utilities, maintenance, and property management fees.
Screen Your Tenants Properly
Screening tenants is one of the most important elements of managing a rental property. If you fail to screen tenants properly, you could wind up facing late or missed rent payments, property damage, and costly evictions. Skipping the screening process is not worth the risk of nightmare tenants! Screening tenants involves several important steps, such as requesting a rental application, running a credit check, and contacting previous landlords.
Remember, you can always hire a property manager to handle the screening process for you. A property manager will take many of your other landlord responsibilities off your hands as well, including collecting rent, handling disputes, responding to maintenance issues, and ensuring your rental complies with federal and state laws.
While renting out an investment property may sound like an easy way to make money, a lot of work goes into making preparations and handling ongoing management responsibilities. Make sure you have the time—and motivation—to do everything properly. Taking shortcuts won’t get you anywhere! Keep these tips in mind as you gear up to be a first-time landlord, and you’ll increase your chances of success.