5 Things You Need To Know Before Moving Into The Rental Market
The rental market in the US is seeing a boom, with rents rising on average 7.8%. For prospective landlords, this can seem like an easy money-making venture. After all, once you have reliable tenants in, you simply need to cash the rent check each month, right? Not so much. Depending on the state you are buying property, there are some legal guidelines and responsibilities as a landlord.
Know the states rent rules
Before purchasing a rental property, it is essential to know the rules and regulations in your area and those at the federal level. Rent regulations vary widely from state to state, and while they do not apply to all areas of the country, they do cover the majority of it. For example, if you are in California, you must have a state-approved landlord tenant's association. An excellent place to start your research into the regulations in your area is with your local government website or through a state agency that specializes in landlord and tenant issues.
Make sure your property is habitable.
Every state has specific minimum requirements for dwellings within a particular area. These minimum requirements vary widely depending on local conditions, but all are designed to protect the people's health, safety, and well-being. If you are purchasing a home with existing tenants in place, you will want to make sure that the home meets the minimum requirements for habitability.
This includes adequate heat and hot water supplies, a safe and secure electrical system, and working plumbing and sewage systems. While no one would ever sue you for having a house in a flood zone, you could find yourself in hot water if your property fails to meet minimum safety standards.
Finding responsbile tenants
Ensuring you perform the necessary checks before signing a rental agreement is vital for finding the right tenants. You want to be confident that they will be able to afford the rent and make payments on time and keep the property in a good state of repair.
You can do this by requesting credit checks and references to ensure they will be suitable for your property. If you use a property management company, they can take on this process on your behalf.
You can meet the state security deposit and return rules.
Many states require landlords to hold a security deposit, sometimes called an "unpaid rent" or "damage deposit," to cover damages beyond normal wear and tear. While there is no legal minimum for how much a landlord should hold in a security deposit, some states have set guidelines for security deposits. Typically, landlords will be required to hold a security deposit equal to one month's rent, with the landlord having to return the total amount to the tenant within a specific time frame. If a tenant has not paid their rent on time or caused damage to the property, the landlord can keep all or part of the deposit as a penalty.
You can financially meet your mortgage payments and cover repairs.
While your rent from tenants will be used to cover the runnings costs associated with a buy-to-let property, you need to be able to afford the repayments and repairs without relying on this. If your property is vacant for any length of time, you will find it still be liable for payments. So while you can use rental income towards expenses, being able to afford your mortgage without this comfortably will help you out should you find yourself with no sitting tenants.
