It is an exciting feeling to finally own a property and rent it out as an investment. You are excited that this is the beginning of greater investment opportunities in the real estate sector and an avenue to financial freedom. However, the rental business operates under specific laws and dynamics every landlord must know to avoid unsavory pitfalls.
A first-time landlord must understand the federal housing laws, state area laws, and local rental ordinances before listing their property and inviting tenant applications. Here’s a guide on what steps to follow as you rent out your first property.
Understand the relevant landlord-tenant laws
Understanding landlord-tenant laws are critical to getting your first rental property into the market successfully and without stress. You do not want to start your rental venture with discrimination lawsuits under the Fair Housing Act or prosecution by area authorities for flouting local ordinances. Perhaps you should consider engaging the services of a professional stress free Nashville property management company like Evernest, Browning-Gordon, Fyve, Renu or Apex to help with the first listing as you learn the process.
Tenant screening is a vital aspect of the rental process and must be done within the dictates of the law. Set your screening criteria and questionnaire in line with the Fair Housing Act to avoid discrimination complaints from unsuccessful applicants that could land you in costly litigation. The Fair Housing Act prohibits landlords from declining any tenant application based on race, color, gender, religion, disability, or family status, and whatever you do must comply.
Set a competitive rent price and list
To set a competitive rent price for your rental, carry out a comprehensive market survey in the area to find a median rate for your unit. However, the rent price you set should not be simply median without addressing your investment goals and possibly reducing profit margins. Your rent price should not also be too high as to take too long to find tenants or to keep leaving you with vacancies.
Once you set an optimum rent price, move to market your property with reputable rental listing sites. Before listing on online platforms, undertake a survey of the target tenant category depending on the type of property on offer and demographics in the area to design your messaging appropriately. Do not disregard the tested traditional rental marketing methods such as ads in the local paper, flyers on bulletin boards in the area, or the quintessential “For Rent” placard in the front yard.
Screen and process rental applications
Before you begin the screening process, set criteria that comply with the Fair Housing Act requirements in writing and ensure it is applied with consistency to all applicants. Start with preliminary screening in your rental ad by including expectations and caveats to qualification as a general guide for application. This initial information in the vacancy ad helps to narrow down the number of applicants to only those who meet your basic criteria.
Design a comprehensive application form to use for every applicant and ensure you collect similar data from all to remain compliant with Fair Housing laws. Follow up the information collected through the application forms by calling the prospective tenants for a verbal interview to clarify further what they disclosed on the forms.
Finally, set out to verify this information with relevant parties such as employers, previous landlords, credit reference bureaus, and the provided references before you select the most qualified.
Prepare the lease agreement
After you conclude the screening process and settle on the most qualified tenant, remember to send letters to the unsuccessful applicants explaining the reasons why they failed. As mentioned elsewhere in the article, ensure the screening process is strictly within the Fair Housing laws to protect yourself from costly litigation. Once past this huddle, prepare a legally-binding lease agreement for the new tenant to sign before move-in.
Spend all your resources on getting the lease agreement for your property as foolproof as possible to protect your investment. It is wise to have this vital document drawn by a property lawyer to ensure its compliance with housing laws and the protection of your interests. Unless expressly stipulated in the lease agreement, you cannot seek legal redress for any future infringement of your rights by the tenant.
Set up a maintenance program
Once the lease agreement is signed and the new tenant has moved in, your work as a landlord has just begun. There will be emerging tenant complaints and routine maintenance requests to attend to from time to time. Set up a maintenance program and a complaint resolution mechanism to handle these issues efficiently and ensure a better tenant experience for longer stays.
Equally vital, remember to keep a record of all transactions, maintenance, communication, rent payments, late rents, service and material receipts, taxes, inspection visits, and any other relevant data. Classify these records into six categories that include property records, owner files, tenant files, contractor files, financial transactions, and any other documents.