If you’re considering making the leap to do-it-yourself (DIY) property management, rental market conditions have almost never been better. Ninety-one percent of the largest US cities have seen rent increases in the last twelve months and rental rates are also at 50-year highs, with nearly 37 percent of households renting.
While the demand for properties is definitely in your favor, there are some important factors to keep in mind before listing a property or preparing a lease. To maximize profit on your rental property, first-time landlords should approach the process with a business mindset.
1. Perform Preventative Maintenance
It’s wise to invest in professional deep-cleaning and fresh paint before listing a property. “‘Rent ready’ means the property has been cleaned, repaired, or remodeled and that it’s in rentable condition for new tenants,” says realtor Tony Sena. While presenting a property in the best possible condition can help you attract quality tenants, maintenance efforts shouldn’t stop once the lease is signed.
While it’s critical to follow applicable tenant privacy laws, commit to regularly inspecting and proactively servicing the plumbing, paint, and HVAC. Preventative maintenance is the best safeguard against costly repairs.
2. Set Competitive Pricing
Establishing fair pricing for your rental is protection against lost profits. Overpriced rent can lead to costly vacancies, while undercharging means you’re leaving potential profit on the table. To establish a price for your rental which is fair, utilize a variety of resources to understand your competition:
- Research rental listings online to determine pricing in your neighborhood
- Investigate the condition and amenities of competitive rentals
- Evaluate local real estate market data to understand supply and demand
- Consider creating a pricing strategy based on lease duration
- Calculate the monthly financial impact of a vacant rental property
To get all the information about how to price your rental in one place, Rentler offers custom Rentability Reports that give you insights into similar listings, market saturation, vacancy rates, and trends for your area.
3. Screen Tenants
Carefully screening prospective tenants is among the most effective tools to minimize risks of property damage and unpaid rent. “When you’re choosing tenants for your rental property, you have to be careful about gathering all the necessary information and verifying everything that you find on the application,” says broker Anne McCawley.
Set clear criteria in accordance with Fair Housing Laws to find the right fit based on prospective tenant’s criminal history, credit score, income, and rental references. Criteria to consider and include in your listing can include:
- Sufficient household income, generally three times the monthly rent
- Consistent employment history
- Strong landlord references and stable rental history
- No prior criminal convictions
- A healthy credit score
4. Follow Fair Housing Laws
As a first-time landlord, it’s imperative to educate yourself thoroughly on all applicable laws at the Federal, State, and City level. In addition to the Fair Housing Act, property managers are subject to state and local mandates which dictate screening, inspections, tenant privacy, evictions, and other key activities. Civil penalties can cost $19,787 for first-time Fair Housing violations. To make sure you’re following all the rules, check out these state law guides.
5. Make it Easy to Pay Rent
Being able to pay rent online is a good way to ensure that you get paid on time. Make sure you’re using a secure online service to collect rent. An online payment portal for bank, debit, and credit card payments is convenient for users, especially when online portals allow tenants to split rent among roommates. Online payments protect profit by allowing you to send tenant reminders and assess late fees. Plus, it helps make your rental more valuable by offering credit reporting that can help build your tenant’s credit.
6. Keep Effective Records
Adopt a method of record-keeping for your rental property, and use it consistently. Careful records can maximize your deductions when tax time rolls around, and protect you in case of an audit. Track money invested into your business, profits, and legal documents. It also helps to track any maintenance requests to make sure that you’re staying on top of it- plus you have a record when it comes time to return a deposit.
Managing your own rental property can optimize the profitability potential of your investment…if you do it right. Preparing a home for listing requires much more than deep-cleaning and renovations. Approaching your business with a practical mindset and utilizing digital tools for screening and collecting rent can help minimize rental risks and make sure your cash flow stays positive.