Investing in real estate is one of the best ways to build your wealth. If you manage your property effectively and efficiently it can be a great source of income while your wealth grows. 90 per cent of millionaires all over the world made their wealth in real estate. Most individuals who decide to invest in real estate know that owning rental property offers one of the best opportunities to establish a steady cash flow and obtain long-term appreciation.
Real estate investments tend to retain their value and appreciation over time. Owning a rental property is one of the ways to build a lucrative passive source of income and presents an opportunity to invest in your long-term financial goals. The big question is how to go from deciding to buy a rental property to renting your unit and managing the day-to-day activities of being a landlord. For any property owner, it is important to master the art of being a successful landlord.
Here are some simple steps to help you become a successful landlord:
Commit to it like serious business
Landlording entails protecting and growing a real estate investment through the careful placement and oversight of tenants. Successful landlords take their real estate as a serious investment and not a dormant source of monthly income. A successful landlord protects the investment from failure and helps it to grow increasing its value with each passing year. Just like any other business, you should take your role as a landlord seriously.
It is important to develop a system that runs smoothly and can be a reliable process even in your absence. The system should ensure that your property is well maintained and gains profit. Landlording is for those willing to work hard, think creatively and also accomplish different tasks. It is key to improve your business operations in both small and large ways. Landlording also involves proper accounting and bookkeeping of all the expenses and income. This ensures that you always have a positive cash flow. It involves dealing with tenants firmly and outsourcing any services you are not particularly skilled at.
Research and prepare to be a successful landlord
It is important to inspect the neighbourhood thoroughly and get to know your tenant’s future neighbours. Good relations with your neighbours creates a good atmosphere for your tenants when you plan to rent out a property. This will ensure you keep track of any information concerning the unlawful or unjustified use of your rental property by any tenant. It is essential to prepare your rental property and ensure it is in the best condition to attract good quality tenants. As a landlord, you must research and assess the demanded rent as per the local market and ask accordingly.
Acquire good property
Acquiring a desirable property determines your future success as a landlord. You will be more successful if you decide to invest in established neighbourhoods. It is important to look at the vacancy rates when scouting a neighbourhood. High vacancy rates mean that the neighbourhood is not desirable to tenants. Regions with poor water access, frequent power blackouts, high insecurity and no reliable access to public transport also tend to be undesirable. This will minimize your chances of earning profit from investing in rental properties.
Screen potential tenants
As soon as your rental property is ready, interested tenants will begin to contact you. It is critical to evaluate each tenant carefully before reaching a final agreement. You should do your due diligence on potential tenants before granting them access to your property. Performing a thorough check of each qualified applicant’s history is critical to securing reliable tenants who will take care of your property and pay the rent on time. It is advisable to document the pre-qualifications for tenants and it should form the basis of your tenant screening process. You should also prepare a list of questions before meeting with the prospective tenants. This will assist you in having a better understanding of their credibility and suitability.
Use the right forms
It is important to protect your investment and your sanity by signing a written lease with all tenants. The contract should clearly outline the terms of the agreement. Have your tenants sign a lease that spells out all the important information of the process such as the names of all the tenants occupying the unit, address of the unit, name of the landlord, length of lease term, rental rate, the due date of rent, acceptable forms of payment and late fees. Avoid oral agreements at all costs.
Understand the law
It is advisable to have a good understanding of the landlord-tenant laws and regulations. According to the Registered Land Act, it is the landlord’s responsibility to keep the property habitable in Kenya. As mandated by the Transfer of Property Act, a property owner is also required to reveal any defects in a property before renting it out to a tenant. It is advisable to seek the services of a qualified lawyer to help you to understand the law and provide you with the knowledge to meet your obligations as a landlord, keeping in mind your tenant’s rights.
Renewals and evictions
Renewals are the easiest way to maintain a steady income flow from your rental property. The cost of searching for and signing new tenants significantly outweighs most cost costs you might incur to keep good tenants. Consider replacing and maintaining appliances to ensure a suitable living condition for tenants. Eviction proceedings can be time-consuming and expensive, you have to follow the right eviction procedures. The Distress of Rent Act gives property owners the right to seize property from tenants during evictions and also protects the tenants.
You can also hire a property manager to help you handle contracts, collect rent, advertise vacant units and screen potential, tenants. A property manager will manage and be responsible for your rental units. It is important to understand that being a landlord requires a lot of work. If you are persistent and committed it can be rewarding and profitable.