Being a landlord can be a lucrative investment venture. The potential passive income you get can help you diversify your income streams.
Renting out a house does, however, come with its fair share of challenges. So, if this is your first time doing it in Phoenix, AZ, then it’s vital that you know certain things for your investment to thrive.
Below are some of the things you’ll need to do to get started as a landlord.
Know What You’re Getting Yourself Into
Being a landlord isn’t as easy as it sounds. It goes far beyond just finding a tenant and collecting rent checks every month.
Asking yourself the following questions can help you know whether or not you’re up to the task:
- Do you know how to determine a fair rent price?
- Are you aware of the various tenancy laws in Arizona?
- Will you be able to respond to tenant maintenance requests?
- Do you know how to find a good tenant?
If you answered ‘yes’ to these questions, then you’re probably good to go. However, if you answered ‘no’ or were hesitant, then hiring a professional property manager would be the best way to go about it.
Draft a Solid Lease Agreement
As a landlord, it’s also your responsibility to draft rules in regards to the tenancy. These rules will help not only protect you and your investment but will protect your tenant, as well.
For starters, a lease agreement states the rights and responsibilities of all parties involved in sighing the lease. It is also a legally binding document that stays active for the full duration of the leasing period.
A solid lease agreement contains the following clauses:
- Rules on rent: You should give your tenant precise details in regards to rent to avoid issues later on. Remember to state things like the dollar amount, when and where it’s due, and the consequences of late payments.
- A clause on a security deposit: As a Landlord in Arizona you are held to certain guidelines as to how you should handle a tenant’s security deposit. Among other things, you must charge the right amount. The deposit to charge must not exceed the rent of one- and a half months. So, if the rent amount is $1,000, the maximum you can charge as a deposit must not exceed $1,500.
- A clause on property maintenance: You should make it clear who is responsible for what to avoid misunderstandings. You could, for instance, make your tenant responsible for disposing of the garbage, maintaining plumbing fixtures, and keeping the unit clean.
A solid lease agreement also mentions rules regarding subletting and pet ownership. For instance whether or not you allow them and what rules pet owners must follow. The goal here is to be as clear as possible in regards to your expectations as a landlord.
Have the Right Insurance Coverage
Some landlords mistakenly assume that they can rely on their standard homeowner’s insurance to cover their rental units. You see, once you rent out your house, your liabilities will go up.
For example, suppose your tenant is hurt in your rental property and you’re found culpable. In such a case, you may be liable for paying the resulting legal fees and medical expenses. And that’s where landlords insurance comes in.
In addition, you may also want to require your tenants to have an insurance policy of their own. Remember, your landlord insurance and homeowners insurance doesn’t cover your tenants’ personal belongings.
Renters insurance can help protect your tenant’s belongings, and provide them with some form of liability protection.
Charge Your Tenants the Right Rent
You need to know how much rent to charge your tenants. But in doing so, you’ll want to set a price that isn’t too high or too low.
Undercharging your tenants will not enable you to maximize your income. Overcharging them, on the other hand, will make your property less appealing to a prospective tenant.
To find the perfect balance, you’ll need to conduct a comparative market analysis. The analysis will help you get insights into the prevailing rental rate for comparable properties.
Understand the Arizona Landlord-Tenant Laws
Once you become a landlord, you’ll need to familiarize yourself with all applicable landlord-tenant laws. Such laws include the security deposit laws, the Warranty of Habitability, and the Fair Housing Act, to name a few.
The Fair Housing Act, for instance, makes discrimination in housing-related matters illegal. As a landlord in Phoenix, you cannot discriminate against a tenant on the basis of their protected characteristics. Examples of protected characteristics include race, color, religion, disability, national origin, and familial status.
Hire a Property Management Company
Landlords have a ton of responsibilities, from filling vacancies to maintaining the unit and everything in between. So, if you haven’t done it before, hiring a professional property management company can help you navigate all the hassles involved.
An experienced property management company will help you, among other things, fill your vacancies quickly, rent to a great tenant, and ensure tenant issues are resolved quickly.
Renting out your house in Phoenix can be an excellent investment in your future. You may be able to diversify your investment portfolio, create wealth through property appreciation, and earn a recurring income for years to come.
But, renting out a property isn’t as simple as you may have thought. If you find it daunting or have questions, Taylor Street Property Management can help. Get in touch to learn more!