It’s long been touted that the secret to getting rich is to figure out how to make money even while you aren’t working. There are many ways to generate passive income, but by far one of the most tried and true is through rental income. While the initial investment is pretty high, since you need to actually have a property to rent out, it does pay for itself and more eventually.
For those who are lucky or hardworking enough to already have a place to rent out, this guide is for you. This applies to either long term rentals or even short term arrangement through apps like Airbnb. Either way, both of these methods will make you a tidy profit as long as you’re smart enough about it.
Know Your Property
The first step in negotiations of any kind is to know exactly what you’re offering is worth. Having your property assessed and checked for any needed maintenance is vital before you can even think of looking for prospective tenants. If you find any problems, no matter how minor, get them fixed immediately. Especially when it comes to problems that can lead to more problems if left unchecked.
If there’s a hole in your roof, don’t dawdle and let any water seeping in damage your interior. Call a reputable metal roofing company, buy material, and get your contractor to fix it right away. After all, you don’t know what kind of people your tenants will truly be, so make sure that any damage to the property you find once they leave is entirely due to the tenant’s negligence, not yours.
Hopefully, you’ll never have to experience this, but bad tenants are more common than you’d think. Some people just don’t have any kind of decency and damage property simply because it isn’t theirs. To ensure that you’ve got insurance in case you ever encounter these kinds of people, make sure to meticulously photograph every square inch of your property and include copies with your lessor-lessee agreement.
This way if you find any damage that isn’t due to simple wear and tear, you have proof that when you turned the property over to the tenant the property was in fact in good condition. Their signature on the agreement will prove that they knew what they got, and contract law will take care of the rest.
Don’t Be Stingy Where It Counts
While it might be tempting to just download that template for a lease agreement online, spend a little extra, and have an attorney draft one to your specifications. You can still keep a blank copy to use for future tenants, but going that extra mile to ensure that your property is safe will pay dividends if ever the time comes when you need to take action to protect your investment.
Likewise, don’t cheap out when doing repairs or replacing items that are going to be used in the house often. You get what you pay for, and not spending enough money when it matters can cost you a lot more in the long run. Play it safe, and get quality work done on your property.
Keep in Touch
Ensure that you don’t lose contact with your tenants. It’s easy to fall into the trap of getting too comfortable if the lease agreement is for the long term, especially if the property is far from where you’re actually living. But if you don’t keep a close enough eye on your property, it’s easy for things to get out of hand while you aren’t looking.
This isn’t to say that you need to constantly badger your tenants for updates, just send them emails every couple of months to ask how things are and ask if any repairs need to be done. Keep logs of all your communication with them and conduct visual inspections of the property at least once a year to make sure everything is still more or less in the same condition.
It’s always best to have a good working relationship with your tenant but be wary of becoming too familiar with them. It’s easy to overlook a friend when they miss paying you back that twenty bucks they owe you, but your relationship with your tenant is different since they are living on your property. Be civil and polite, but don’t let familiarity blind you to their behavior.
But of course, you still need to be compassionate. If your tenant is late on payments it’s okay to give them a bit of leeway as long as they’ve got a good excuse and can show you some proof at least. But if the delays are getting out of hand, then it’s time to be firm and have a discussion with your tenant about their plans moving forward and how they’ll be able to catch up on their account with you. Don’t be a pushover, know your worth, and don’t let anyone get used to not giving you what you’re owed.