To make steady income on a rental property investment, you need good, reliable renters who don't cause damage and pay on time. However, you also need a backup plan in case of problems, many of which don't even involve tenants.
Set aside an emergency fund. With a rental property, your tenants are depending on you. When the toilet is clogged or the refrigerator mysteriously stops keeping the food cold, you must pay to fix it or replace it immediately. Prepare for these issues in advance because they are bound to happen.
Brace for vacancies. Like the housing market, the rental market has its ups and downs, unless you live in a college town with a steady stream of students. As with repairs, you will need extra cash to tide you over when no one is living in one of your units.
Understand your market. Find out what comparable rental properties in your neighborhood are charging. If you charge too much, you may drive tenants away.
Charge enough to make money. Consider maintenance, insurance and utilities. Add a cushion for big repairs, and then make sure that your rent can pay for all of that. Factor in potential vacancies so you aren't left high and dry some months.
Always investigate tenants. Run a background check and a credit check, even if the potential tenants look like the Brady Bunch. You may need to pay a company to handle these investigations, but they can save you trouble. It isn't easy to evict a tenant, and you have to follow a long legal process to do so.
Make the rules clear. Draw up a lease that reflects the laws of your state, and run the lease by your lawyer. The lease should also spell out exactly what tenants can and cannot do so there is no miscommunication.
Cover yourself. Purchase adequate rental property insurance for your building. If you can require tenants to purchase their own renter's insurance, which they can usually do at a low cost, then you are even better protected.
Confirm the condition of the property. Ask tenants to fill out a form, do a walk-through with them and take photos before they move in so both of you know what the property looked like before they move in. That way, you both can accurately assess the damage when they move out. Get a security deposit in certified funds to cover any damage tenants leave behind.
Admit when you need a property manager. When you can't handle the amount of repairs or number of tenants anymore, plenty of companies are able to come on board to take care of your property. While rental property management can be expensive, it can pay off, especially if you get a reputation as a landlord who responds quickly to tenants.
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