These days, more and more homeowners unexpectedly rent out their properties due to the unpredictable nature of the real estate industry.
For instance, you may find it challenging to afford upgrading or downsizing your home due to high interest rates. Or you might want to relocate to a place with lower taxes. You might also find yourself planning for a relocation because of a new job opportunity or being given a house as an inheritance. Whatever is preventing you from selling right now, being an accidental landlord might be a viable option to think about.
Accidental landlords happen not because you plan to become one but because of unexpected events or life changes you did not anticipate.
Fortunately, the percentage of households occupied by tenants in California gives an edge to rental property owners. According to the US Census, the Californian household rate for renters is 44%, which is much higher than the national average of 35%.
However, this trump card won't completely save you from the ordeals of being an accidental landlord.
Sudden management of a rental property can bring many challenges. This involves finding tenants, keeping up with maintenance, dealing with legal complexities, determining landlord insurance, and handling other problems that may come up when managing an investment property.
To help you navigate the world of landlording, we have gathered some advice on overcoming accidental landlord challenges.
1. Evaluate and Assess Your Rental Properties
As accidental landlords, the first thing you have to do is assess the state of your property and, if needed, make repairs or renovations to attract and keep tenants while preserving the property's worth. Many accidental landlords fail to do this step because they don't know what parts of the property to check.
Things to Check in Your Rental Property
Keep the common areas (hallways and stairways) safe and clean.
The building's elevators, electrical, plumbing, HVAC, and ventilation systems must operate safely.
Exterminate rats and other pests.
Properly manage known environmental contaminants, such as lead paint dust, asbestos, and mold.
Ensure the flooring, staircases, walls, and roofing structures are all safe and secure.
Secure locks and bolts on your property.
2. Streamline Your Processes
As a landlord, you may streamline your day-to-day operations by automating essential tasks. For instance, you can automate rent collection so you always receive your rental income on time.
3. Keep Your Communication Channels Open
Respond to your tenants and deal with their problems or concerns quickly and professionally. Getting along with them can make renting more manageable and lower the chance of conflicts.
4. Change Your Property Insurance
If you want to rent your home for over six months, the Insurance Information Institute (III) says you'll probably need owner or rental property insurance. Usually, regular homes have the HO-3 insurance. But, if you find yourself becoming an accidental landlord, make sure to change your insurance policy.
To protect your capital, you must file a DP3 insurance or the dwelling or landlord insurance policies. This policy will keep you from legal trouble if your tenant's things get lost, stolen, or destroyed.
5. Learn About Your Legal Duties and Responsibilities
Understanding landlord-tenant laws in your area and the Fair Housing Laws will be helpful. You must also stay updated with the current trends in the rental market and good practices in property management.
Fortunately, this information can easily be accessed online through the American Apartment Owners Association (AAOA). Remember that the rules governing tenants differ from one state to the next.
6. Join a Landlord Community and Share Experiences
Explore and try to meet other landlords to get opportunities to talk about the ups and downs of having a rental property investment. You may find a community of real estate professionals online or in your area willing to share information, provide guidance, and work together.
7. Accidental Landlords Must Have Emergency Funds
As an accidental landlord, major maintenance costs or eviction are the most stressful events you may encounter. In this situation, having a separate account for emergency funds is helpful to save up for these kinds of expenses since they can add up quickly.
8. Set Clear Terms on Your Lease Agreement
Writing a lease agreement is complicated since you have to tackle specific terms and conditions for your rental property. It's essential to clarify to your tenants their responsibilities and duties while renting your property to avoid any problems in the future.
9. Partner With a Reliable Property Maintenance Company
General repairs and maintenance should be a part of your operational budget. You must also ensure that everything is fixed and maintained professionally and promptly. Since this might be challenging, it would be valuable if you could have a property manager who can oversee the maintenance of your rental property.
10. Market Your Property and Screen Prospective Tenants
As an accidental landlord, you must always be prepared for vacancies by investing in marketing strategies. You can do this by hiring a professional property manager to help you increase your online advertising exposure.
Moreover, choosing and screening tenants wisely can also help you get long-term renters for your rental property. Ensure you follow the necessary tenant screening process through expert property management.
11. Document Your Expenses
One of the backbones of your rental property business is rental property accounting. Expenses like mortgage payments, insurance, tax implications, and repairs can quickly add up, so it's an excellent idea to use a spreadsheet or a property management tool online to keep track of everything.
12. Think Like a Landlord Instead of a Homeowner
Condition your mind that you are now a landlord who runs a rental property business and not just a homeowner. Changing your mindset prepares you to manage your property and adhere to the proper health and safety regulations. Adopt a creative mindset and be ready to make choices to help your business make the most money and last the longest.
13. Acquire Financial Knowledge
Unexpectedly renting out your primary residence means you must familiarize yourself with all the financial reporting obligations that come with it. This involves but is not limited to your property taxes, mortgage interest, rental prices, capital gains, security deposits, and tax benefits.
14. Plan for the Future and Become a Confident Investor
Although you started as an accidental landlord, it's always best to think about what you want to achieve for your business in the future. When you partner with a professional property management company like HBR Rentals, we will help you become a confident investor through Surevestor.
By investing only less than a dollar every day, you can have peace of mind and be protected from certain tenant-related risks.
Build a Team of Experts with HBR Rentals!
Overcoming the challenges of being an accidental landlord is not an easy path to take, especially if you have no experience in managing any form of business before. You must surround yourself with professionals who can help you navigate the complicated world of landlording.
Hiring a trusted property management company like HBR Rentals can help you in your real estate investment journey through our set of professional teams, from our reliable accountants to our team of expert legal counsel.
Contact us now and let us help you manage your rental property business!
