If you are considering making moves in the real estate market, especially with rental properties, there are a few things that you need to consider. We have been managing properties for over 20 years in western North Carolina, and we know a thing or two. In this blog, we will dive deep into the best practices, as well as a few of the pitfalls that you may experience as a first-time landlord. 

1. Where To Start

Becoming a landlord can be very exciting, but it is also a great responsibility that not everyone has what it takes to do, especially if you do not know where to start. Getting a grasp on local rules and regulations around rentals while also having an understanding of how to market your property will pay (literal) dividends over time. 

First off, it is important to know that you will never be the perfect landlord. No one is. We have worked with real estate investors for over 20 years now, and for the most part, no one knows everything. 

Moving the ego out of the way is a great first step in becoming a high quality landlord. Knowing that there are always things to learn and ways to improve is paramount.

Picking a Property

When it comes time to pick a property, there are several factors to consider. For one, location is everything. Just like in retail, finding a property in a desirable location is crucial. Look for properties that are in high-demand areas. Also, make sure to get a rental property inspection before you make any decisions.

Prospective tenants will be looking for proximity to good schools, universities, employment centers, and amenities such as shopping centers, parks, and public transportation. A desirable location will increase the likelihood of finding reliable tenants and ensures demand long term.

Once you have picked a prime area, work with your property manager to conduct thorough market research to understand what the rental demand and rates are for the desired area. If you can't hit your target return on investment due to the cost of the property vs. local rental rates, then you may need to consider looking elsewhere.

Many naive real estate investors will purchase homes that need a little work before they are liveable so that they can cut costs on their initial investment. While this may work out sometimes, the potential for a fixer-upper to cost way more than they are worth to get up to spec is a possibility. These rehabilitation costs can quickly cut into ROI, causing you to profit less on your investment.

Understanding ROI

As with any other business, it is critical to concentrate on strategies that quickly recoup your initial investment so that you can start making money on your rental property. Renting out a home that barely breaks even or loses money every year is not worth all of the effort that goes into purchasing, marketing, and managing the property daily. 

Knowing how to calculate your ROI and understand the cash flow surrounding your rental property is critical because it may help you decide what to charge and whether or not to invest in other properties to expand your portfolio. 

Consider the following factors while calculating your ROI:

• Down payment, closing charges, and early repairs are all examples of beginning investments.
• HOA dues, management fees, and maintenance are examples of operating expenses.
• Property taxes and insurance premiums.
• Mortgage, interest, fees, and so on.
• The rental income and the occupancy rate.

Simply apply the formula ROI = Annual Returns / Cost of Investment to calculate your ROI. Your annual return formula = Rental Income - Operating Expenses. By having a grasp on your operating expenses and cost of investment, you can further dial in your rental rates to be competitive in the current market while covering your costs. 

Shore Up Your Business

Something that is often left out when considering real estate investment is all of the back-end business dealings that must go on. Your real estate business must be set up legally as an entity, whether it be through a sole proprietorship or as a Limited Liability Corporation. Work with a lawyer to get your business established, and hire a landlord-tenant attorney that can help you with your leases. 

2. You Own a Property, Now What?

Once you have a property secured and understand the business side of things, it is time to get marketing that property and secure your first tenant. Now is the time to dial in your rental price and call up that lawyer you hired to ensure that your residential lease is ready to go. 

Marketing Your Property

When it comes to renting out your property, effective marketing plays a crucial role in attracting quality tenants and minimizing vacancies. To ensure success in marketing your rental property, consider implementing the following strategies:

• High-Quality Photos: This is probably the best marketing strategy to start with when seeking out renters. Work with a professional real estate photographer to capture high-quality photos that showcase the key features and unique selling points of your rental property.
• Well-Written Listing: Write a compelling and detailed listing describing all of the amenities, location advantages, and any upgrades or renovations to the home. Be honest and transparent about the property’s condition, along with any rules and lease terms.
• Publish Listings to Online Platforms: There are plenty of online listing platforms available to reach your audience. Websites like Zillow, Trulia, Apartments.com, and Craigslist are all effective channels for advertising rental property. 
• Social Media: Social media marketing is on the rise, and leveraging the power of social media is a great way to promote your rental property. 
• Local Advertising Outlets: Don’t shy away from using traditional advertising methods. Putting up for rent signs in front of your property and advertising in local newspapers, community bulletin boards, and neighborhood newsletters are great ways to target local audiences who may be seeking rental properties in a specific area.
• Word of Mouth: Some say that word of mouth is the greatest form of marketing. “Having a guy” is typically preferred over jumping through the hoops of social media or other types of advertising. Tap into your personal and professional network for tenant referrals, and spread the word about your rental to your friends, family, and colleagues. You never know who needs a place to live until you ask!

Follow the Laws

When it comes to renting out a property, there are several laws that you will need to be aware of. Most important of all is the Fair Housing Act, which was put in place to protect potential tenants from unfair discrimination. This act protects tenants from being discriminated against based on the following:

• Race
• National Origin or Ethnicity
• Gender
• Age
• Family Status
• Religion
• Mental or Physical Disability.

In addition to the Fair Housing Act, there are other Renter’s Rights that are in the same series of federal, state, and local laws that protect tenants. Your lawyer will be able to help you navigate these rules, so make sure to ask questions when setting up your rental business.

3. Leasing Your Property

Now that you have acquired a tenant, it is time to get to familiarize them with the property, rules, and the lease itself. They need to understand that the lease is legally binding and that if they do not comply with the lease, they can be evicted. Not that this is ever an ideal situation, but sometimes being a landlord is tough. 

Once they have signed the lease, go through the property with them and take notes on the condition of the home. Photos are also helpful. Next, collect your security deposit and any rent that is due at commencement, and establish a process for receiving rent.

Eviction

From time to time, you may run into the unfortunate issue of a tenant who does not abide by the rental agreement or has trouble making payments. While it is never an ideal situation, sometimes tenant eviction is a must to keep your rental business healthy and profitable.

Eviction can be an expensive thing to deal with and can sometimes end up in an expensive legal battle, which is why it is important to have a well-vetted tenant before a lease is signed. However, every now and then, a bad apple can slip through, or simply an unfortunate circumstance.

The four main reasons that you may evict a tenant are:

• Failure To Pay Rent - This is self-explanatory. In your lease,  you and your tenant have agreed on a proper value that must be collected at a set time. If a tenant refuses to pay rent, then they are breaching the lease by failing to pay.
• Violation of Lease - In a lease, there can be several “house rules” to ensure that your property is protected from damage. If a tenant does not follow the rules, they are violating their lease.
• Conducting Illegal Activity - If your tenants are conducting illegal activity on your property, you can file eviction papers. 
• Lease Is Not Renewed - At the end of a rental period, your tenants may have the option to renew their lease for another set amount of time. If they do not renew their lease, they can be evicted.

Hire a Property Management Firm

If all of this sounds like a lot (which it clearly is), then don’t fear. Owning a rental property is not as stressful as it seems, and can add quite a bit of cash flow to your bottom line when done well. The best way to ensure that your rental business is healthy is by hiring a professional property management company. 

Property managers will take care of many things, including:

• Marketing Your Property
• Collecting Rent
• Providing Lease Agreements
• Handling Maintenance Requests
• Tenant Screening
• And More

If you are ready to hire a business to handle all of your rental management needs, Asheville Phoenix Properties is here to assist you. We have over two decades of real estate management experience and know-how to assist owners and tenants by handling all aspects of a rental property.

Contact Asheville Phoenix Properties today if you want to spend less time worrying about your rental properties. Our team will set to work marketing your property, locating excellent renters, and managing it for the duration of the lease.