If you’ve decided to set up your home as a rental property versus selling on the real estate market, you’re not alone. There are an estimated 23 million landlords in the United States, 20 million of whom are small landlords. So, if you’re considering setting up your home as a rental property, you’re joining a large force of small landlords.
Before you set up your first rental property, make sure you’re set up to succeed. (Note: You can also read our Top Ten Landlord Mistakes to avoid common new landlord pitfalls in the early stages of being a landlord.)
1. Set up a network
Before taking the leap, it might be worthwhile to reach out to experienced landlords, especially in your state, for advice. Depending on where you live, you can visit in-person landlord associations or networking events to get helpful feedback or advice about becoming a first-time landlord. If your in-person options are limited, there are plenty of online options for people seeking advice, such as r/Landlords (Reddit) and BiggerPockets. Additionally, you can (and should) create a professional LinkedIn profile (if you haven’t already) and connect with landlords on that social networking site as well.
2. Know the law of the land (literally and figuratively)
Importantly, setting up your first rental property comes with a lot of legal tape to wade through, and it’s important you understand your responsibilities, accountabilities, and liabilities. Remember to investigate from a local to a federal level. While you might be able to find several resources online, be careful of verifying sources. In the beginning, as you learn the ropes, it might be best to connect with a legal professional who can provide you with all the information you need from a trustworthy source.
3. Understand the financial risks
While many people become landlords as a means of passive income, financially, it’s critical to understand the investment you’re making. For example, when looking to set up your home as a rental property, look into how much you can reasonable rent the property for. When looking at your budget, factor in insurance costs, estimated maintenance costs, pest control prevention, or any other common landlord-related expenses.
Before taking the leap to set up your home as a rental property, make sure to set up a network and community that can help answer any questions that arise as you go through the process and thoroughly investigate the legal and financial aspects of being a landlord. Additionally, useful videos such as this one from Redfin Real Estate can guide you through other factors of setting up your first rental property: