9 Things Every Landlord Should Know
As appealing as it may seem, being a landlord does have its responsibilities. Between all of the laws and minimizing the potential of any disputes, there’s a lot to account for to ensure a happy landlord-tenant relationship. What are the top 9 things we think every landlord should know?
Know Fair Housing Laws
This is a big one that can cost you a lot, and for whatever reason, many investors do not take the time to educate themselves on fair housing laws, which can lead to serious implications if found guilty of discrimination. Between the federal Fair Housing Act which protects various classes (race, sex, familial status, etc) and local protected classes (varies), you cannot use one of these reasons as a basis for refusing someone housing. Some exceptions remain, like if you’re living in a building with less than 4-units (hello, house hackers), but we’re personally not the discriminating type.
Price Your Property Competitively
One of the biggest mistakes I see landlords make is pricing their properties too high in an effort to get the most amount of rent per month. Why is this a mistake? Because it usually doesn’t work. The lack of interest alone is a surefire way towards a vacancy. The best way to get a quality tenant & fill a vacancy is to price the property at market value which will bring the most traffic to your rental. More traffic means more qualified candidates, and more competition usually leads to the highest rental amount per month anyways.
This goes without saying, but you need insurance. Not only will your lender require it for your mortgage, but also, it’s in your best interest to pay that additional monthly fee, which is relatively inexpensive by the way. When getting insurance, it’s also important to get enough coverage. A solid insurance package can protect you from things like damage from a fire to potential lawsuits from tenants. In all honesty, I’ve seen landlords who haven’t gotten enough coverage after things like leaks and a fire…it’s tough on them to say the least.
Know When to Hire a Professional
Some things are better left to the professionals. While it can be cost effective to DIY every maintenance issue or repair, not every landlord is handy or equipped to handle the various requests that come their way. A lot of the time it’s worth it to pay more to have a professional quickly fix a problem rather than further frustrating a tenant by taking forever to try to figure it out yourself.
Budget for Repairs & Expenses
Things break and leaks happen. It’s just apart of ownership. To best prepare for the natural aging of your property, budget at least 1% of the purchase price annually towards fixing items in your investment property, whether that be towards fixing a toilet to replacing a HVAC unit. With what's left over, put that money towards saving for bigger ticket items like roof maintenance or tuck pointing. Also, don’t forget turnover costs like cleaning fees or a new coat of paint. Renters expect a fresh home.
Properly Screen Tenants
Do not be lax on this. Just because you’re vibing with someone does not mean that they’d make a good tenant, and for any of you house hackers…you might be living with this person! Do your homework. At the bare minimum for all of my landlords, I make sure we’re running credit checks, eviction checks and background checks. Then, I’m verifying the prospective tenant's employment & following up with current landlords and sometimes even their previous landlord. Why? Because evicting someone, especially in Chicago, is not an easy process, so make sure you’re 100% on board with whomever you’re renting to.
Take Photos of Everything
Before and after every move-in & move-out, make sure to take photos (& even videos) of the condition of your property. While normal wear and tear is expected, it’s best to have a visual reference to what the property looked like prior to your current tenant. I’ve seen tenants try to get away with severe damage or attempt to swap things out for their own, but having that documented evidence can save you a lot of hassle and protect you in the long run.
Plan for Vacancies
Vacancies will likely happen. Depending on the time of the year and inventory, it can sometimes be difficult to rent out your investment property. Plus between a move out, cleaning, painting, etc before the next tenant, it’s almost impossible to not have some sort of gap between tenants. In that case, you need to budget and have a plan in place should you go have to go without a renter for a few months.
Don’t Forget About Taxes
As a landlord, you’re going to have to file taxes reporting your additional income. We encourage you to reach out to an accountant or tax professional who’s well-versed in filing taxes for landlords to learn the best methods for paying yourself while also ensuring you’re properly paying your state and federal taxes. Make sure to be honest in reporting your total income, and also make sure to stay organized with all of your files and receipts related to your investment. At the end of the year, you can usually write off your expenses.
What other topics would you like us to dive into? Landlords, what pieces of advice helped you? Tell us in the comments below!