9 Things Every Landlord Should Know
Are you considering becoming a landlord? While the prospect can be enticing, it's essential to recognize the responsibilities that come with it. From navigating legal obligations to fostering positive tenant relationships, there's much to consider for a thriving landlord-tenant dynamic. Here are the top nine things every landlord should know:
Know fair housing laws
This is a big one that can cost you a lot, and for whatever reason, many investors do not take the time to educate themselves on fair housing laws, which can lead to serious implications if found guilty of discrimination. Between the federal Fair Housing Act which protects various classes (race, sex, familial status, etc) and local protected classes (varies), you cannot use one of these reasons as a basis for refusing someone housing. Some exceptions remain, like if you’re living in a building with less than 4-units, but we’re personally not the discriminating type.
Price your property competitively
One of the biggest mistakes we see landlords make is pricing their properties too high in an effort to get the most amount of rent per month. Why is this a mistake? The lack of interest alone is a surefire way towards a vacancy. The best way to get a quality tenant & fill a vacancy is to price the property at market value which will bring the most traffic to your rental. More traffic means more qualified candidates, and more competition usually leads to the highest rental amount per month.
Invest in insurance
This goes without saying, but you’ll need insurance — specifically, landlord insurance. This specialized coverage shields you from potential financial setbacks stemming from property damage or liability concerns. It's crucial to secure adequate coverage to safeguard against various risks, including potential lawsuits from tenants & fire damage, which really can happen to anyone.
Know when to hire professionals
Some things are better left to the professionals. While it can be cost effective to DIY every maintenance issue or repair, not every landlord is handy or equipped to handle the various requests that come their way. A lot of the time it’s worth it to pay more to have a professional quickly fix a problem rather than further frustrating a tenant with poor craftsmanship.
Budget for repairs & expenses
Things break & leaks happen. It’s just apart of ownership. To best prepare for the natural aging of your property, budget at least 1% of the purchase price annually towards fixing items in your investment property, whether that be towards fixing a toilet to replacing a HVAC unit. With what's left over, put that money towards saving for bigger ticket items like roof maintenance or tuck pointing. Also, don’t forget turnover costs like cleaning fees or a new coat of paint. Renters expect a fresh home.
Properly screen tenants
Avoid future complications by conducting comprehensive tenant screenings. For all of our landlords, we run credit checks & eviction checks. Our application is also able to verify the prospective tenant's employment. We even encourage clients to follow up with current landlords & sometimes even their previous landlord. Why? Because evicting someone, especially in Chicago, is not an easy process, so make sure you’re 100% on board with whomever you’re renting to.
Document everything
Protect yourself from disputes by documenting the property's condition before and after each tenancy. Detailed records, including photos and videos, serve as valuable evidence in case of damage claims or disputes. While normal wear and tear is expected, it’s best to have a visual reference to what the property looked like prior to your current tenant. We’ve seen tenants try to get away with severe damage or attempt to swap things out for their own, but having that documented evidence can save you a lot of hassle & protect you in the long run.
Plan for vacancies
Vacancies will likely happen. Depending on the time of the year and inventory, it can sometimes be difficult to rent out your investment property, so plan accordingly to minimize financial setbacks. Also, budget for potential gaps between tenants & implement strategies to expedite the turnover process, such as efficient cleaning and maintenance protocols.
Stay tax compliant
As a landlord, you’re going to have to file taxes reporting your additional income. We encourage you to reach out to an accountant or tax professional who’s well-versed in property investments. Be sure to stay organized with all of your files & receipts related to your investment, and consult with your tax professional to optimize deductions & ensure compliance with state and federal tax laws.