Given the healthy rental market, there’s a lot of interest in rental investing, and many investors are looking to move money from the stock market to rental properties. Those new to real estate frequently buy one or two homes and self-manage to avoid the cost of professional management, but before taking the leap, check out this behind-the-scenes information.
- Know the law
- Massachusetts is very tenant friendly when it comes to the leasing of residential property. Landlords must follow the law, especially for rental applications, lease agreements, the handling of the security deposit, and eviction actions if necessary. It is best to consult a real estate agent, or real estate attorney before drafting any agreements with potential tenants.
- Patience is needed
- Landlord/Tenant relationships are relatively problem-free, however, some tenants can be very difficult. Tenants can complain all the time. It is ok to establish clear rules and instructions about what merits a complaint and when it's appropriate for them to call you.
- Budget for repairs
- You should anticipate repair issues to be more frequent compared to an owner-occupied home. Set aside a portion of your monthly income to help cover the costs of future repairs.
- Expect late payments
- Tenants not paying rent on time is more common than you might expect. Make sure the lease spells out when rent is due, how residents must pay it, what the deadlines and penalities are for late payment of rent, how you'll handle notices and eviction. Send late notices, attempt to collect late fees and make payment calls to keep your cash flow on track. The rules must be legal in your state, and both you and your tenants must follow them.
Once you’ve decided that rental property investment makes sense for you, weigh your options, be informed and prepared, and determine if you have the time and patience to take on the responsibilities of a landlord. If not, you can outsource the day-to-day details of your rental business to a property manager.