The odds are that if you own a rental property, you acquired it deliberately as an investment after careful planning and research. But many owners of income properties did not choose to be landlords. Instead, these "accidental landlords" could be someone who ended up with two homes after getting married or inherited a house from a family member and decided to take advantage of a hot rental market.
Becoming an Accidental Landlord
Suppose you've become an accidental landlord; congratulations! Income property can be a highly profitable investment that offers long-term and immediate returns. But it's important to remember that regardless of how you ended up with your income property, it's vital that you manage your investment to ensure that it generates the best returns possible.
Seek Professional Help
I am not talking about seeing a psychiatrist (your friends may suggest this). But suppose you are about to become an accidental landlord. In that case, you must understand the process, including how to screen prospective tenants, prepare a lease, and understand tenants' rights about repairs, collections, and evictions. While this may seem overwhelming at first, professional help is available. For example, a Realtor experienced in procuring tenants, coupled with a competent property manager and real estate attorney, can minimize the stress of renting out your property, which is essential if you are out of town or plan to relocate.
Talk to Your Accountant
Often rent that a property will generate will not cover the total monthly overhead of owning the asset. Still, this negative cash flow may give you a valuable tax deduction. Also, as the value of your home rises (along with the rent), cash flow can go from negative to positive. Be sure to talk to your accountant to discuss the benefits of owning an income-producing property.
Update Your Insurance Policy
Updating your insurance should be one of the first things you do when becoming a landlord. Rental insurance is very different from homeowner's insurance, and you'll want to ensure that you consult your insurance carrier to tell them that the property has become a rental.
Screening is crucial when it comes to procuring a tenant. Tenant screening can be outsourced and should include credit, eviction, criminal background checks, nationwide eviction, sex offender, and criminal reports. The tenant typically pays for a screening report as part of the application process.
Run the Numbers
Do your research and find out the fair market rent for your property. You should also calculate your expenses, including maintenance, taxes, utilities (if applicable), vacancies, insurance, and property management fees, to name a few.
Assemble Your Team
A team of professionals can help minimize problems along the way. Be sure to select local real estate experts to fill your vacant rental and manage the process.
Eric Slifkin, a Broker Associate, founded the Slifkin Team at Keller Williams Realty. Eric and his team of experienced agents serve South Florida and the Treasure Coast, including Stuart, Port Saint Lucie, and the Palm Beaches.