You have a great investment property, you’ve taken photos and written up a compelling listing description, and now you’re ready to open your doors to renters and collect a steady stream of rental income. The devil is in the details, however, and your next steps might determine whether your experience as a landlord will be profitable and trouble-free — or an expensive headache.
These 5 essential steps can help you maximize your rental success.
1. Price your rental correctly
Aim too high and your property may sit vacant; ask too little and you leave money on the table. Research your local market (Zillow provides local rental market reports for metros in all 50 states, updated monthly) contact US and we will be happy to do some research for you, or look at comparable rentals in your neighborhood.
If you’re in an especially competitive market, you may be able to fetch a price on the higher end of the rent range. The Zillow Rent Index (ZRI) offers insight into the temperature of your market. You can see the rate of rental growth in the past year and the forecast for the year to come. Higher rates of growth suggest more competition and steeper rents.
2. Create a rock-solid lease agreement
Your rental lease agreement is like an instruction manual for your tenants, and it should include every one of your policies, in detail. You can find generic rental agreements available online and through your local rental association, but keep in mind that many states have rules about what can and can’t be included in the lease, so be sure to check the requirements for your area. If you use a ready-made form or create your own, you will want to customize it to meet your needs.
Clarify any ambiguous policies — if you say “no smoking,” for example, does that mean smoking is allowed outside or not anywhere on the property? Be as detailed as possible so nothing is open to interpretation, and then review the lease with your new tenant in person to ensure they understand your rules and expectations.
3. Screen tenants carefully
Tenant screening can make the difference between a harmonious or challenging relationship with your tenant. While you may occasionally end up with a problem renter despite thorough screening, your chances of finding someone who will take good care of your property and pay rent on time are greatly increased if you do your homework.
Screening should include, at a minimum, pulling a tenant’s credit report, verifying employment and confirming their rental history through landlord reference checks. You can decide if you also want to perform a criminal background check. Just be sure to apply the same screening criteria to all prospective renters to avoid fair housing violations.
4. Document the condition of the home
You might have an amicable relationship with your tenant until the very end of their lease — when they deny causing damages you discover during the move-out walkthrough. Documentation is your best defense: Immediately prior to move-in, go through the entire unit, inside and out, with your tenant. Use a move-in/move-out checklist to note the condition of every room, the appliances, paint, carpets, windows and so forth. Point out each item as you check it off to be sure the tenant takes note and agrees with your assessment, then have them sign the document.
Take photos of the unit and consider recording a video of your walkthrough to back up your checklist. At move-out, this documentation should leave little room for your tenant to dispute damages that were not present when their tenancy began.
5. Stick to your policies
You can have a solid lease, but it’s not very useful if you don’t enforce it. If you say you’ll charge a late fee when rent isn’t paid on time, charge the fee. If the lease only names one occupant and your tenant’s unemployed friend is permanently crashing on their couch, insist that they leave or sign a new lease naming both occupants — perhaps at a higher rental rate.
Treat your rental like a business and hold your renters accountable, and you’re likely to have better, more reliable tenants. And for those renters who don’t respect your policies, enforcing penalties can either encourage them to clean up their act — or make them uncomfortable enough that they choose not to renew.