Post from MilitaryByOwner
When service members join the military, they’re probably not planning a side hustle as a landlord and property manager. But the military and landlord lifestyles often collide if you stay in the service long enough. Sometimes becoming a landlord is intentional. Other times it's a last-resort situation. Either way, you’ll start as a newbie and have to learn the ropes.
The best way to successfully take on landlord life, and also avoid costly mistakes, is to immerse yourself in resources that guide you through the process. Find an experienced landlord to mentor you through the challenges or dive into expert online information that will lead you step by step.
These six steps will help you get ready for your first set of tenants.
1. Choose a Property Management Style
You’ll need to weigh the pros and cons of taking on property management tasks in addition to landlord duties. New landlords commonly underestimate the time it takes to manage a home someone else lives in, especially if you live far away.
DIY Property Management
If you’re handy, don’t have a lot of temporary duty travel (TDY) or deployment time ahead, or see retirement in your near future, becoming your own property manager could boost your rental income savings. But there’s a good chance you’ll lose some freedom. Toilet clogs, broken appliances, and zapped air-conditioning units have a pesky way of showing up at the most inconvenient times.
If you’re unfamiliar with fixing various household problems, you should spend time collecting vetted and trusted neighborhood service providers to call at a moment’s notice. Research companies for an electrician, HVAC (heating, ventilation, and air conditioning) contractor, plumber, and handy person. When you call to discuss pricing, ask about maintenance plans and costs to have the company on call as needed, similar to a retainer fee.
You might consider investigating a home warranty. The right policy could save you thousands, but the wrong one will let you down when you need it most.
Hire a Property Manager
New landlords sometimes think hiring a property manager (PM) is an easy solution. Sometimes it is, but expect to pay about 10% (and more for the best in the business) of the monthly rent for their help. Successful rental properties thrive under constant, clear communication. So, if you choose a PM, interview not just for their experience but for compatibility and similar attitudes about the tenant/landlord relationship. As the homeowner, you can’t count on a set-and-forget strategy. Regular check-ins with your PM to ward off problems are a must.
2. Prepare Your Rental Business
You might not initially think of a rental property as a business, but it absolutely is a business that needs management, including legal and tax responsibilities, bookkeeping, marketing, and tenant management.
Although paying the mortgage is probably the first goal, don’t ignore the other costs needed to operate a rental property in the black. You’ll likely need to charge more for rent than you first thought. Will that number price you out of your local renter’s market? If you’re unsure of a reasonable rent rate, consider hiring a real estate agent for a consultation to help you calculate the numbers.
Factor in these often overlooked costs:
- Conversion from homeowner’s insurance to rental property insurance
- Home repairs to meet safety regulations (broken items, carbon monoxide and smoke detectors)
- Aesthetic improvements to draw the best tenants for the most money
- Tenant background and credit screening
- Home warranty
- Marketing and advertising
- Regular maintenance
- Property taxes
3. Understand Legal Obligations and Lease Terms
Part of landlordship is learning to uphold laws that keep you and your tenants safe and happy. Not only are you required to abide by federal Fair Housing laws that protect tenants from discrimination based on race, color, religion, national origin, sex, disability, and familial status, but your state also has specific tenant/landlord laws.
The lease you choose is essential, so don’t be lured by random lease templates online. They might not adequately protect you or your tenant. MilitaryByOwner has partnered with US Legal Forms to help you find state-specific tenant/landlord forms, including rental lease agreements. You can also check your base’s legal services to see if they provide lease language. Finally, remember that a lease is negotiable. You and your tenant can customize it to cover topics such as subleasing, pets, rent date and amount due, and, of course, a military clause if needed.
4. Prepare the House and Create a Maintenance Schedule
If you plan to market your property for top dollar, prepare to woo a savvy pool of military renters. Many are experienced and know the telltale signs of problematic property. Unless you lower your price point, you won’t get away with leaving things like a leaky faucet, broken fence, or a front door that needs a series of jiggles to lock. Fix and repair items that are safety hazards first, then focus on the updates renters will be happy to pay for, such as new paint and a bathroom or kitchen refresh.
To keep the house in tip-top shape and avoid as many pop-up issues as possible, create and follow a home maintenance plan that protects your investment. Use a comprehensive checklist that includes yearly service visits for major systems such as the HVAC and seasonal tasks such as gutter cleaning and winterizing a sprinkler system.
5. Craft a Foolproof “For Rent” Listing
There are plenty of ways to advertise your home online, but they won’t resonate with renters unless you create an irresistible listing with loads of clear, well lit pictures. Include basic information such as the number of bedrooms and bathrooms. Renters are also looking for details including:
- Rent per month
- Pet policy
- Square footage
- Fenced yard
- Distance to base, shopping, local schools
- Names of zoned schools
- Public transportation access
- ZIP code and neighborhood name
- Special features: pool, chef’s kitchen, workshop space, recreational vehicle parking
6. Complete Tenant Screening
Interviewing tenants is an integral part of the screening process, and a 20-minute conversation doesn’t cover everything you need to know. Most landlords require at least one screening process, such as a credit or background check. Others want more. A property manager generally handles the leg work, but if you’re screening alone, a paid service such as SmartMove for Landlords provides credit, criminal, income, and eviction history reports.
If you were on the fence about becoming a landlord, hopefully you now have a better idea of what lies ahead. Rest assured, plenty of military members are renting their homes successfully, but it isn’t a quick and easy way to make money. You’ll need to invest time, money, and patience to see rewards.
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