In the current economic situation, more homeowners are turning into landlords.  This area of real estate had been the domain of real estate investors.  Now the regular folks are using rentals to level out their finances or lack thereof.  A word of caution: this is a business and to succeed you need to understand the business.

      Now before we go any furhter, my opinion on this subject is for any owner to use a real estate professional, either as a property manager or as an aide in securing a good tenant.  Now that in and of itself is an issue, finding a “good” tenant.  No matter how good someone looks on paper after a background check is done is no indication of how they will perform as a tenant.  And know this too: no one will take care of your property with as much care as you do.  Do not expect your property to look the same after one or more tenants have occupied the house.

      One of the most important issues is how to pick a tenant.  You cannot tell by looking at someone.  You cannot rely on someone else’s word.  You need to do a background check.  There are companies that perform this service or you can hire a real estate professional to act as your leasing agent.  Between you and your agent you can make a better judgement on prospective tenants.  Again, this is not a foolproof situation.  Anyone can make the wrong choice.

      All potential landlords need to have a copy of the local law regarding tenants rights, landlord rights and how the law in your jurisdiction handles disputes.  Again, using a real estate professional as a property manager makes this all so much easier on the property owner.

      One item often overlooked is insurance.  You must notify your insurance company the property is no longer owner-occupied and is now an income producing property.  A landlord policy is different from a home owner policy.  One is business and the other is personal.  Failure to have adequate coverage will place you at risk should something happen on the property, to the property or from a tenant’s actions.

      Another issue regarding this business of renting out property is taxes.  As a small business you are required to pay taxes quarterly.  Please check with your tax preparer for more information on what is required.

      Please do not rush into being a landlord without doing research on the subject.  You may find the water deeper than you thought!

      As always, call me at (210) 273-9082 with any questions, without obligation.

Disclaimer:  No legal or tax advice was intended in this informational article.  As always, check with an attorney or tax expert when dealing with individual issues regarding the law or state and local taxes.