Buying a property and renting it out is a great way to make money. But many landlords don’t do what they need to, to maximize profit margins.
Although it’s a passive income, that doesn’t mean you can just get tenants and not pay attention to the finer details. If you’re not careful with where you spend your money or who you rent out to, it could result in a huge financial loss.
Here are six things you can do to make the most of your rental business.
Purchase the Right Insurance
It’s crucial to have a few layers of security to protect yourself in case something goes wrong. Getting landlord liability insurance will safeguard your profit and savings from going down the gutter by the cost of a lawsuit.
In the event of a lawsuit, your insurance will cover the attorney expenses as well. You can check what your policies are by calling your insurance provider.
Make Use of Tax Breaks
Many rental property owners don’t realize how useful their tax breaks can be for maximizing rental income. You have to be aware of what constitutes an authorized expense for tax deductions.
Landlords are eligible for several kinds of tax breaks for the upkeep of their property, repayment of debts, etc. Some of the more common ones include:
- Rental property depreciation
- Mortgage interest deduction
- Property taxes
- Repairs and improvements
Get a Written Lease Agreement
To prevent costly legal disputes early on, put the terms of your rental agreement with your tenants in writing. It’s an effective way to define the obligations and rights of each party.
Oral agreements should never be made, even for leases of less than a year, since they come with additional risk. The agreement should include the rent amount, date of the agreement, rental conditions, etc.
Choose a Property Management Company
Handling one rental property alone isn’t very difficult, but if you’re planning on making money with several rental properties, picking a property management company is necessary.
Property management experts can help you save time and money, by handling your marketing, maintenance, and vacancies efficiently with Centralized Leasing. They can help you optimize rental income and minimize risk.
Screen Your Residents Thoroughly
No landlord wants the hassle and stress of having a tenant that doesn’t pay their rent on time. To avoid tenants that give you trouble, conduct a thorough screening of them.
Contact the tenant’s current employer to verify their income. Talk with previous landlords to ask about their character and behavior.
Treat it Like a Proper Business
It’s easy to forget that having a rental property is a business too. That’s why it’s important to protect your business by keeping digital copies of important files, understanding state laws, and communicating with tenants in a professional manner.
Likewise, you should answer calls, emails, and maintenance requests in a timely manner. You’ll be able to make more profit by having a good reputation and satisfied tenants.