Owning a home or apartments that you rent out can be a great way to earn some extra money. Many landlords have been able to supplement or even replace their income with the money they make off of their rental properties. However, there are also countless people who have ended up losing money from rental properties because they weren’t prepared to handle the financial responsibilities and risks. The following are some of the top tips for gaining income from your rental properties successfully along with some advice for how to get started as a landlord.
Start With A Solid Property
The first thing you can do to get more income from your rental property is to get a great property from the get-go. That means having a property fully inspected before buying and factoring in expenses that may come up in the future, such as roof repairs, a new water heater and more. You can also look for properties where you can easily upgrade to a few of the unit features in order to collect more rent. These are essential factors you need to consider to make sure you get a good price for the property. A solid property with nice features means you can charge tenants appropriately and earn more in the long run.
Make Money Two Ways
There are two ways to gain income from rental properties. Obviously, the first is through rental payments from your tenants. Don’t overlook your expenses when figuring out how much rent to charge your tenants. It’s critical to factor in mortgage payments, property taxes, maintenance costs and any included services, such as utilities.
The second method for gaining income from rental properties is to own a property that will appreciate in value over the years. This takes planning when you make your initial investment. Do your research to help determine how the market trends could potentially increase the value of the property over time before you purchase a property.
Get Good Tenants
Running a credit check is the bare minimum you need to do when renting your property. It’s all too common for landlords to make the mistake of renting to people without taking this important step. A credit check allows you to check a prospective tenant’s income, employment and credit history, all of which are important for making sure you get your rent payments on time every month. Beyond that, every rental property owner should ask for references, preferably from previous landlords. Follow up on these and find out what type of tenants they have been in the past.
Figure Out The Taxes
You can end up losing a lot of your profits if you make a mistake on your taxes, so it’s important to find out what you need to report once you become a rental property owner. Any income you make from the property needs to be included on your tax return. That income is taxable, so you need to figure that into your decisions as a landlord. Additionally, you need to track all the expenses related to the property, including your mortgage payments. You may be able to write off some of the initial losses as a new rental property owner, but only if you fall below a certain income level (generally $100,000 whether you’re married or single). If you’re a new rental property owner, speak with a tax professional about how you need to file your taxes.
Plan For The Unexpected
There are lots of ways you’ll need to protect yourself as a landlord. One of the most important ways you can do this is to make sure your rental property meets all government and local codes and regulations. You also need to follow the laws regarding what you’re required to and prohibited from doing as a landlord. For example, there are varying local laws about housing discrimination, security deposits and other rental property issues. Making sure you comply with all of these guidelines will help protect you from a potential lawsuit.
Owning rental property can be a great investment that pays off for years and years. However, it’s not something you should enter into lightly. Consider getting a lawyer who is familiar with housing laws who can help you navigate the many detailed and sometimes confusing codes regarding rental properties.
(Also read: The Risks Of Buying And Flipping Houses.)