Purchasing a rental property is a big decision, but it can be highly profitable with the right planning. If you’ve recently bought property or are thinking of doing so, there are several things to consider in order to make it a successful venture.
From figuring out whether you’ll rent seasonally or all year to cleaning and setting up the property for renters, there’s a long list of decisions to make before you can get started. Of course, you’ll also want to read up on the legalities involved so you can protect yourself from the very beginning. Here are a few things to think about when you’re ready to get started.
Who will your tenants be?
There are several ways to offer up a rental property on the market, so it’s important to think about what each one will entail before you make a decision. If you live in an area with lots of shopping, attractions, and good weather, turning your property into a temporary rental is one option. This involves a bit more work on your part, however, as you’ll need to furnish the home and clean/replenish it after each customer leaves. The upside to this option is that you can potentially have dozens of renters per year, which will bring in quite a bit of income.
You can also look for long-term renters. This option requires more paperwork, but it’s the one that will provide a more steady income for you throughout the year. Look for tools online that will help you advertise your property, and find resources to help you conduct background checks on potential renters as part of the application process. And make sure to visit PM Made Easy for customizable and professional property management forms, letters, and documents to help streamline your operations.
Protect yourself and your property
A background check is only one step in ensuring that you and your property will be protected. You can also invest in landlord insurance and write up a rental agreement that states the rules of the land. This is especially important for temporary renters who aren’t necessarily invested in making sure they leave the property the same way they found it. Many property owners build a security or cleaning deposit into the rental agreement to ensure that any damage or large messes will be taken care of.
In addition to insurance, it’s wise to set up an LLC to help protect your assets in the event of a dispute. Plus, you are running a business, and there are certain tax perks that will prove beneficial. When registering for an LLC you’ll also need to submit an EIN application to get your employer identification number, which serves as your tax ID number. This ensures you keep your business and personal finances separate, and it enables you to open a bank account and eventually hire staff.
No matter what type of rental property you own, you’ll need to maintain it. Cleaning is one aspect, especially for short-term rentals; make a list of chores for both the interior and exterior by season. These might include changing out the HVAC filter, washing the windows, and cleaning the gutters. Not only will this help make the property more attractive, it will also prevent costly issues down the road.
Maintenance is about more than cleaning, however. You should also think about taking security precautions–such as setting up exterior surveillance cameras and adding flood lights around the property–to give you and your renters peace of mind.
Set aside some funds
Even if your property is on the newer side, you could find yourself with a nasty surprise in the form of damage due to a natural disaster or a burst pipe. Sometimes, no matter how well you maintain a property, these things happen. That’s why it’s a good idea to set aside a portion of your rental income to cover the cost of major repairs so you won’t have to go out of pocket. Having a little cushion will help to reduce the stress of these situations when they occur.
Buying a rental property is a major decision, but with the right moves, you can make it a successful one. Look for resources online and get support from PM Made Easy!
Contributor – Lucy Reed created Gig Mine to help others dig up sharing economy opportunities in a user’s area, all in a single location, so users don’t have to jump between multiple sites. It’s the new and improved way to get a gig job!