Congratulations! You have officially purchased a piece of rental property that is your very own. What comes next? You may have gotten so excited about purchasing investment property that you completely forgot about what you were going to do with it once it was yours. If that is the case for you, here are some of the steps that you will need to take after purchasing rental property to make sure that your investment grows successfully.
Determine the Costs That Are Associated With Maintaining Your Rental Property
Like any other investment, you are going to have to spend money to earn money. This is especially true when it comes to rental properties. When you first purchase your rental property, calculating how much your rental is going to cost you throughout the year is important. You need to estimate two types of costs when you are looking into the overall cost of your rental property.
The costs that fall into the first category, known as fixed expenses, are those that remain relatively consistent throughout the year. Some of the costs that fall into this category include those related to services like gardening, property insurance such as condo insurance in New Jersey, and any bills that occur on a monthly basis or on a regular schedule. These costs will be easy to estimate because you are already aware of when you will be paying and how much you will need to pay.
The second batch of costs that fall into the second category, known as variable expenses, are costs that may come up during the duration of your ownership of your rental property. Some costs that would fall into the variable expenses category include unplanned property damage, unplanned appliance repairs, and any other unforeseen expenses. These costs are much harder to estimate because of the fact that you have no idea if or when an accident will occur. It’s important, however, that you save up enough money to take care of these issues should they arise.
Once you have a better grasp on your overall property expenses, you will be able to then calculate the amount of money you will be receiving after you’ve paid out all of your expenses. You can also figure out the ROI, or return on investment, of your new rental property to see how much money you will be earning over time.
Begin Inspecting and Repairing Your Property
Depending on the quality of the property that you have purchased to rent out, you may have a lot of work or only a little bit of work to do before you can consider your property habitable for new tenants.
The most important thing to do when you first purchase your rental property is to pay someone to inspect it. If you haven’t already done so before purchasing your property, a professional inspection will reveal any major structural issues within the house as well as any problems you may have with the plumbing, the electricity, or with pests and vermin. If this inspection reveals any major issues, get those repaired immediately so that you can begin renting out your property as soon as possible.
Once you have repaired any major issues or if you have found that your property is already in great condition, you can then move onto all of the internal components of the house. Take a look at the appliances, the flooring, the walls, the ceilings, and any of the decorations that come with the house. Then, decide whether or not you want to clean, repair, or replace these different areas. Each option comes with its advantages and disadvantages. Make sure to do your research before you start making any interior renovations.
When everything is repaired and cleaned (and you have had your city give you a certificate of habitation, if required), you will be ready to move onto the final stage.
Prepare All of the Legal Paperwork for Your Rental Property
Now that you’ve calculated all of the expenses and prepared your house for new tenants, you will need to start drawing up the lease that you will give to tenants once you find an interested renter.
What are some of the most important aspects of a solid lease? Here are a few major points you will need to include in your lease:
- The amount of time that your tenants will be able to stay on your rental property. Most leases will only last a year but may go on longer if you prefer to offer your tenants a longer lease option. If you are only trying to rent your property on a month-to-month basis, you will be better off with a rental agreement.
- The exact amount of rent that will be paid each month and the terms and conditions regarding the payments. You should also include the consequences that will come when payments are not made on a timely manner or in the correct way.
- The names of all the tenants who are going to be living in the house. You should also outline your legal right to evict someone who is letting someone live with them who is not listed on the lease.
- An outline regarding any security deposits and fees that the tenant will have to pay and how the money provided will be used or returned.
- The responsibilities that your tenant will have while living on your rental property and the responsibilities that you will have as well, such as making repairs and taking care of maintenance.
- Any restrictions that you may choose to place on the tenant regarding the rental property. Some of the biggest restrictions may be having pets in the household or making renovations.
- Your rights to access your property and any other rights you have for as long as the tenant is renting the property.
- What will happen if a tenant is engaging in illegal activities. Should you encounter this type of behavior, be ready with legal systems already in place so that you do not have to go through a long process to evict your tenant.
Keep in mind that you will need to research laws and draw up a lease that is appropriate for your rental property. For example, a lease that you make for a house in New Jersey is going to be very different than a lease you would make if you owned a liquor store Lawrenceville, NJ. Depending on the property that you own, you will need to make sure that your conditions are legally sound to avoid producing a lease that could get you in trouble or make a rental situation a nightmare.
If you’ve followed all of these steps, you should be set to begin renting out your property to new tenants. Make sure that you go through each of your potential renters and get a tenant screening report before you choose anyone. Once you have an individual who is clean, respectful, and responsible, you are ready to officially become a landlord. Give them their lease, have them sign, and you are ready to go.