Investment Property 101

  • Katie Conroy
  • 05/15/22

 How to Prepare Your Investment Property for Renters

Whether you just bought an investment property or you’re still searching for the perfect home, congratulations! Investing in your first rental property is a big step toward earning passive income and enjoying financial independence. With hard work and smart planning, you’re bound to enjoy success. But before you can hand over the keys to tenants and start collecting rent, you have to tackle some important preparations. Here are some ways to get your rental move-in ready!

Boost Your Property’s Appeal

To make your rental property more appealing to tenants, you may have to make a few upgrades. For example, Landlordology recommends impactful upgrades like replacing carpet with hard flooring (typically costs $12 - $20 per square foot), installing a washer and dryer, and painting. A fresh coat of paint—inside and out—can go a long way to refresh an older home and make your property appear clean and inviting.

Painting a rental’s interior is a relatively cheap upgrade, but your exterior paint job could get pricey. Be sure to research the costs for these upgrades to budget your funds realistically. The cost to paint your home’s exterior will depend on the exterior siding material and the overall size of the building. For example, HomeAdvisor reports that painting wood and vinyl costs about $1 to $2 less per square foot than stucco or brick.

Set Your Rental Rates

When setting rates for your rental, you have to be careful. The right price will attract renters and generate income, but charging too much or too little could lead to costly vacancies and negative cash flow. The Balance Small Business recommends evaluating your competitors to help determining your rental rates. Find out what other properties in your immediate area are charging for rent, focusing on those that are similar to yours. Then, adjust your pricing to reflect the desirability of your property. Thanks to the upgrades you made, you might be able to charge more for rent than your competitors—without scaring away tenants!

Search for Great Tenants

One of your most important responsibilities as a new property manager is finding tenants. Dealing with bad tenants can cost you a lot of time and money, so it’s better to spend extra time hunting down high-quality renters. Start advertising your property by writing up a rental ad, taking great pictures, and posting your rental on various listing websites.

Meet with your prospective tenants and collect rental applications as you begin receiving responses. This is your chance to screen your top candidates by performing criminal background checks, verifying employment and income, running credit checks, and calling up previous landlords. While you’re probably eager to get tenants into your rental, don’t rush this process!

Write a Lease Agreement

You will have a much easier time managing and maintaining your property if you and your tenants sign a lease agreement. A lease agreement will ensure everyone is on the same page regarding the rental terms, including any restrictions you would like to enforce and penalties or fees that would apply if your tenants leave before their lease ends.

A lease also protects your tenants' rights, so make sure you’re following federal and state rental laws. For example, many states limit the maximum amount you can charge for a security deposit. Depending on your region, you may also have to follow subletting, waste disposal, and property maintenance regulations.

Purchasing and managing an investment property is no walk in the park. Before making upgrades, setting rental rates, and welcoming tenants into your home, you need to research. Meticulous planning and rigorous tenant screening are essential! While your to-do list may look a little overwhelming right now, all your hard work can pay off.

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