Becoming a landlord is a big responsibility, but not everyone chooses it on purpose. Some people are called accidental landlords, meaning they've stumbled into the role. Accidental landlords are people who, for various reasons, end up renting out their property without planning to.
If you've accidentally become a landlord, there are key factors to consider for success. This article covers three essential points that you need to think about.
1. Financial and Legal Implications
First, know the financial and legal implications of being an accidental landlord. Understand local, state, and federal laws governing local real estate, landlord-tenant relationships, and tax obligations.
You'll need a comprehensive, legally binding lease agreement with your tenant. It should include crucial details like rent due date and security deposit policies. Familiarize yourself with fair housing laws, and don't discriminate against potential tenants based on protected characteristics.
Ensure tenants are law-abiding by conducting a thorough screening process. This involves checking their criminal record and eviction history. Review your homeowner's insurance policy, as you may need to update due to being a landlord. Following these steps protects your property from legal liabilities and damages.
Financially, conduct thorough accounting on your rental income and its tax implications. This could affect your overall tax liability, so you may need to report rental income on your tax returns. Keep meticulous records of property-related expenses. For example, maintenance costs and repairs, as they may be tax deductible.
Be aware of rent control regulations in some municipalities. They might limit how much you can increase rent each year. Understanding the legal and financial aspects of being a landlord helps avoid legal trouble and ensures a smooth rental process.
2. Property Maintenance
You'll need to maintain the property and fix repairs quickly. Ignoring these areas can lead to unhappy tenants and even legal issues. Regular inspections help catch maintenance issues before they get worse.
Preventative maintenance is usually cheaper than emergency repairs. Keep the property in top condition by tackling electrical, HVAC, or plumbing problems before they turn into an emergency situation. You should also Maintain curb appeal with exterior landscaping too.
Be prepared for emergency repair requests. For essential systems like heating and cooling, quick fixes are crucial. Build a network of reliable contractors for fast repair responses.
3. Set Boundaries
As an accidental landlord, you need to set clear expectations with your tenants. A comprehensive lease agreement can help with that. It should outline the rules and responsibilities of both parties.
The lease should cover the rent amount, due dates, and security deposit details. Maintenance and repair responsibilities need to be clear, too. Tenants might handle small tasks like changing light bulbs, but landlords should handle sensitive systems like plumbing.
Help is at Hand for Accidental Landlords
Becoming an accidental landlord is challenging but doable. Just take the right steps. It's crucial to grasp the legal and financial aspects of your new gig. Plus, properly maintaining the property and setting clear boundaries with tenants is critical.
While you never planned to be a landlord, with good preparation, you can have a rewarding and profitable experience. If you want some help from a property management company with extensive experience in helping accidental landlords, contact 1st Rate Property Management today.