There are many factors to consider when becoming a landlord and much of it is hard work, it's obviously not as simple as renting a unit and collecting rent. Typically, these are the more common mistakes that newer landlords will make:
Not doing all the math: Financially this decision needs to make sense. At the least, the majority of expenses on the rental should be covered by the rent that you collect each month. Otherwise, you are going to end up paying out of pocket- which is not ideal.
Begin with calculating the monthly costs on the home each month, which include your mortgage payment, but there is more to it than that. Your home insurance costs should be included, and any other costs to the rental due to maintenance. After that, you will need to look around and see what people are paying for rent in your neighborhood for rentals of a similar size and type of home.
If rent doesn't cover all of the home expenses, are you comfortable with the costs you will incur?
You need to use a lease agreement that is well constructed, as many landlords neglect to do this. There are certain legal ramifications to being a landlord, so ensure that you are fully protected.
If you rent the unit to someone you know and trust, don't make the mistake of forgoing a lease agreement.
Your agreement must cover everything that could possibly occur. Did you remember to include a security deposit clause? Did you include the amount of notice required by your tenant to terminate their rental?
Some landlords forget to take photographs or an inventory of the rental. You don't want to have an argument with the tenant as they are leaving about damage that they say was there before they moved in. Sadly, this does occur. Go through the entire home and take a significant amount of photographs to protect yourself later if you need to prove that the damage after tenants move out was not there before they moved in.
Having insufficient insurance on a home happens all too often. You probably have a policy on the home that provides protection for your personal possessions inside of the home, in a circumstance where your things are damaged or lost.
If you have switched your home to a rental unit, your home insurance needs to be updated to a dwelling or landlord policy that won't cover the contents of the home. If your tenants want to protect their personal property against loss or damages, they will need to purchase their own renter's insurance.
You need to take the time to know who your tenants are. Don't just accept new tenants because you want to rent the unit as quickly as possible to start collecting rent. The prospective tenants can appear to be kind and considerate, but turn out to be nothing of the sort.
If a tenant seems acceptable to you, get them to fill out your rental application form and then check their employment references and their credit history. Talk to the tenant's previous landlords so that you can ascertain how they will likely behave while living on your property. If your prospective tenant has a history of being late on rent payments, this is something that you need to be aware of.
Not doing all the math: Financially this decision needs to make sense. At the least, the majority of expenses on the rental should be covered by the rent that you collect each month. Otherwise, you are going to end up paying out of pocket- which is not ideal.
Begin with calculating the monthly costs on the home each month, which include your mortgage payment, but there is more to it than that. Your home insurance costs should be included, and any other costs to the rental due to maintenance. After that, you will need to look around and see what people are paying for rent in your neighborhood for rentals of a similar size and type of home.
If rent doesn't cover all of the home expenses, are you comfortable with the costs you will incur?
You need to use a lease agreement that is well constructed, as many landlords neglect to do this. There are certain legal ramifications to being a landlord, so ensure that you are fully protected.
If you rent the unit to someone you know and trust, don't make the mistake of forgoing a lease agreement.
Your agreement must cover everything that could possibly occur. Did you remember to include a security deposit clause? Did you include the amount of notice required by your tenant to terminate their rental?
Some landlords forget to take photographs or an inventory of the rental. You don't want to have an argument with the tenant as they are leaving about damage that they say was there before they moved in. Sadly, this does occur. Go through the entire home and take a significant amount of photographs to protect yourself later if you need to prove that the damage after tenants move out was not there before they moved in.
Having insufficient insurance on a home happens all too often. You probably have a policy on the home that provides protection for your personal possessions inside of the home, in a circumstance where your things are damaged or lost.
If you have switched your home to a rental unit, your home insurance needs to be updated to a dwelling or landlord policy that won't cover the contents of the home. If your tenants want to protect their personal property against loss or damages, they will need to purchase their own renter's insurance.
You need to take the time to know who your tenants are. Don't just accept new tenants because you want to rent the unit as quickly as possible to start collecting rent. The prospective tenants can appear to be kind and considerate, but turn out to be nothing of the sort.
If a tenant seems acceptable to you, get them to fill out your rental application form and then check their employment references and their credit history. Talk to the tenant's previous landlords so that you can ascertain how they will likely behave while living on your property. If your prospective tenant has a history of being late on rent payments, this is something that you need to be aware of.
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