As a landlord, you'll need to provide tenants with safe, habitable units while managing various aspects of rental operations. This includes setting rental amounts, creating leases, and ensuring compliance with local health and safety codes. This guide—based on information from Fannie Mae—will help you build a successful rental business.
A positive landlord-tenant relationship is key to your business’s success. Tenants are more likely to stay in your property if it’s clean, safe, and offered at a fair price. Your goal should be to provide an environment that meets these standards consistently.
Setting and Collecting Rent
Setting the right rental amount is a critical part of your operations. The rent should cover operating expenses, provide a reasonable return on investment, and remain competitive with other properties in the area. If your rent is too high compared to similar units nearby, it might be challenging to attract tenants.
When determining rent increases, it's essential to follow legal requirements regarding notice periods and any limitations set by state or local laws. A written notice, even if not required, can foster goodwill by giving tenants time to adjust to the new rate.
Collecting Security Deposits and Advance Rent
Security deposits and advance rent can provide financial protection if tenants cause damage or leave without notice. Regulations regarding the amount and handling of these deposits vary by location, so it’s important to familiarize yourself with local laws. Security deposits should be used for damages beyond normal wear and tear, and any unused portion must typically be returned to the tenant within a specified timeframe.
Establishing Payment Procedures
Clear payment procedures help minimize disputes. Specify in the lease which payment methods are acceptable, such as checks, money orders, or electronic transfers. Local laws may require you to issue receipts for rent payments, regardless of the method used.
Handling Late Payments and Bounced Checks
Late payments and bounced checks can disrupt your cash flow. Where permitted, you can charge reasonable late fees or penalties for insufficient funds. These fees should be clearly outlined in the lease to avoid misunderstandings. For repeated issues, consider requiring tenants to switch to more reliable payment methods.
Providing a Safe and Habitable Home
As a landlord, you must comply with housing, health, and safety codes. This includes maintaining electrical, plumbing, and heating systems, ensuring common areas are safe and clean, and providing necessary amenities like hot and cold water. Some jurisdictions have additional requirements, such as installing smoke detectors or removing lead paint.
Failing to maintain your property to legal standards can lead to fines, penalties, or legal action from tenants. Regular inspections and prompt repairs can help keep your property in compliance and your tenants satisfied.
Communicating Rental Policies Clearly
Establishing clear rental policies from the outset can prevent many common issues. These policies should be communicated both verbally and in writing, covering topics such as maintenance responsibilities, use of common areas, and procedures for reporting issues. Being transparent about your expectations helps build a positive relationship with tenants.
Drafting Leases and Rental Agreements
Written agreements are crucial in protecting both landlords and tenants. They outline the terms of tenancy, including rent amount, payment procedures, and conditions for deposit returns. While oral agreements can be legally binding, written contracts provide a clear record that can prevent disputes.
When drafting leases, it's important to include all essential details, such as the start and end dates of the tenancy, rent amount, and any rules regarding pets, maintenance, or property use. Consulting with an attorney or using templates from reputable sources can ensure that your lease complies with local laws and thoroughly covers your needs.
Enforcing Rules and Handling Tenant Issues
Consistency is key in enforcing rental policies. Clearly state your rules in the lease and remind tenants as needed. For issues like late payments or property damage, follow the procedures outlined in your agreement and local laws. Open communication can often resolve minor disputes before they escalate.
As you continue managing your rental property, you might find yourself juggling multiple responsibilities. If overseeing every detail feels overwhelming, it might be time to consider bringing in a property manager.