It Doesn’t matter if you have a you have an extra room or entire House, or a multi-family residence — the only difference is scale--here are the Keys to make a Few Dollars.
I have always wondered if I could use Real Estate to make an extra buck on any level? With a lil persistence, it’s not as difficult as you may think to rent out some or all of your property, whether for extra cash or to subsidize a second mortgage.
Here’s how you set it off,...
Select the right tenants
Most single-family homeowners are happy with their seclusion. Noise is much less of an issue in a detached house versus an apartment complex, and you can avoid awkward hallway encounters with unfamiliar neighbors. So, when you make the decision to rent out your home, living with tenants takes some getting used.
“At first I thought it would be weird having a tenant upstairs, but we were very selective on whom we chose. [The] first tenants were two college gentlemen out on an internship for a semester. They were great and really kept quiet and were just all around good tenants,”
If you’re eager to make additional income, don’t allow finances to cloud your judgment when it comes to accepting an applicant. Quick money is great, but you might end up with late rental payments, property damages and legal fees if you fail to complete property owner due diligence. Always run a background check so you can assess credit history, accounts, late payments, and, if applicable, bankruptcies and foreclosures. Running credit checks costs money, but can be covered by charging the potential tenants an application fee — usually around $25.
Upgrade your interiors
Like any rental property, you have to stay competitive within the market, and dingy, dated interiors just won’t cut it these days.
“When we were living in house for four years we updated it so it was really move-in ready for the new people who moved in last August. I refinished those hardwood floors as well to protect them and even added Granite in the Kitchen,” says Clark
Fortunately, you can make small changes that have a big impact. Applying fresh coats of paint to walls and trim, removing dirty carpeting and cleaning windows instantly creates bright interiors. Keep decor basic by sticking to a neutral color palette and eliminating any overly unique artwork or furnishings.
For bathrooms and kitchens, simply changing out the hardware can have a big impact and doesn’t involve overspending. If necessary, invest in new appliances like refrigerators, dishwashers and laundry units. After sprucing up the unit, make sure to take high-quality listing photos to best showcase your investments and attract more applicants.
Price it right
Do your research before you list your rental. Zillow has a rental app,..moreover, rommates.com can give you an idea of what people are willing to spend. These days, you don’t have to be an industry professional to know the local real estate trends.
First, search comparable apartments and rental listings in your city to help you determine the “sweet spot” — the best price range to help pay the mortgage, and potentially make a profit, without overpricing your unit. Keep in mind, even if you aren’t necessarily lining your wallet, your mortgage is being all or somewhat funded by the rental income — so it’s a financial win in the end.
Follow the law
Attempting to rent out your home without documentation is illegal. And, to protect your assets and finances, it’s best that you draw up a formal lease agreement for each tenant.
“[By] working in finance and having an MBA I really knew what to look for in a contract and how to make it enforceable. It also doesn’t hurt to have a few attorneys as friends and relatives to look over our contracts. I think my wife and I have been pretty good judges of character, and the information that we ask on our rental application has really helped us narrow into a good tenant,” says Clark.
If you’re not lucky enough to be friends with an attorney, consult with an accountant to determine the tax codes for your rental, i.e. will you keep your Homestead Exemption. It’s either an investment property (“No Personal Use of Dwelling”) or vacation home (“Personal Use of Dwelling”). Also spend time researching local, state and federal housing laws before drafting any agreements.
Don’t underestimate the real estate investments you already own. You can use them for positive cash flow without selling — especially in a competitive rental market where the potential for profit is high.
As an individual landlord, as opposed to a property owner with apartment buildings and an on-site manger, you have unique challenges in maximizing the money you earn on your rental property. I work with and teach many small-scale landlords — plus I am one myself — and some common themes come up about how to make the most money with the least hassle. And all real estate has issues and hassles, so reducing them should be your top priority.
Aim for long-term tenants
First, treat your tenants like they are the most important people in your life. In fact, since they are likely paying for your retirement, they really are the most important people in your life. Acting and conducting yourself in a respectful manner will usually make your life a lot easier and your properties more profitable. It doesn’t work every time, but hopefully if you choose this strategy it will be successful.
Treating your tenants well helps you keep them in your property longer. Every time your rental unit turns over, even if you have a new tenant ready to move in the next day, you will probably spend a month’s worth of rent fixing and repairing normal wear-and-tear items, not to mention countless hours completing the whole leasing process — advertising, taking phone calls, interviewing, showing the property, getting credit reports, drafting the leases, discussing the lease, move in day, etc. It’s a lot of work.
So why not just try to keep your tenants as long as possible by treating them really well? And that starts by acting toward them the way you would like to be treated.
Remember the basics
Additionally, in order to keep tenants a long time, maintain your cash flow and avoid angry tenants or having to re-lease the unit:
Keep your properties well maintained and fix any issues in a reasonable period of time.
Don’t try to charge your tenants for items like plumbing or repairs — I’ve never had a tenant intentionally damage one of my properties — just pay for it.
Ask reasonable rents, maybe even a bit under market, so that you have a large pool of applicants and can select the best credit quality group that you think will be good tenants.
If there are problems, like a broken water pipe, deal fairly with your tenants and compensate them a reasonable amount if it ends up being a big hassle for them. That way they are happy, they stay and they keep paying rent. Keep Costs down by getting a Comprehensive Home Warrantee,..Home Service Club offers reasonable pricing. As a Non-Mechanical individual, I work with Sears Home Protect all the time.
If they pay on time, take care of your property and are good tenants, reward them with minimal rent increases.
Keeping these tips in mind should help you minimize vacancy and costs, plus have reasonable people in your property who will take care of it. And you’ll learn over time why treating your tenants well — the ones who are paying for your golden years — is just a good idea!