With all of the real estate shows on television these days it’s no secret there’s money to be made in real estate investing. Even so, being a landlord has its ups and downs. Finding, acquiring, and managing rental properties is not always as glamorous as it seems on HGTV. It’s easy to get caught up in the excitement and gloss over the fine details. If you are considering entering the rental property business in Dallas Fort Worth, there are a few things you should know to avoid making costly mistakes.
Check out these tips for entering the rental property business including; becoming a landlord, buying your first rental property, screening tenants, and managing tenants once you are officially a landlord.
Tips for Entering the Rental Property Business – Dallas Fort Worth
Buying Your First Rental…
- Get Your Finances in Order – Unless you already own a Dallas Fort Worth house that you are considering renting out, you are going to need to qualify for a mortgage loan to buy rental property. If so, you will need to take a long hard look at your credit score. It may be beneficial to pay off outstanding debts and resolve negative collections prior to filling out the loan application. You don’t want to waste time looking at rental properties unless you are certain that you will be able to qualify for financing.
- Set Your Limits – What can you afford to spend on a rental property? If you already own the house, can you afford to cover the mortgage if a tenant fails to pay or if the property remains vacant for an extended period of time? Don’t compromise here. Struggling to make your mortgage payments will take the joy out of owning a home.
- Research – Talk to other investors and read up on being a landlord in the Dallas Fort Worth area. There are also many good sources online for information regarding local rental rates and market trends.
- Take Notes – Be sure to take detailed notes when you visit potential rental properties. It may be helpful to draw out a chart to compare bedrooms, bathrooms, price per square foot, and other features that would make the property more or less desirable to renters. If you already own the potential rental property, research local properties for rent to see how your house compares.
- Research the School District – School ratings are ranked as one of the most important factors that a renter or buyer will consider before choosing a home to lease or purchase. Unless you are planning to rent out a one-bedroom house, you probably need to do some research on the school district before you commit to buying. If you are already stuck with a house in a bad school district, chances are that it will take longer to rent out. Be prepared to cover the expenses in between tenants.
- Buy Below Market Value – To maximize the possibility of earning a profit in the rental property business, you should aim to purchase the property below market value. Purchasing at a discount will give you wiggle room to budget for expenses such as; repairs, maintenance, damaging tenants, evictions, homeowner’s insurance, and any surprises that may come up along the way.
- Calculate a Property’s ROI – Before deciding which home to purchase for your rental business, you should estimate the cost to maintain the property. Choosing homes with lower property taxes, maintenance expenses, etc. will help you maintain a positive Return on Investment (ROI).
NOTE: If you already own a Dallas Fort Worth house that you are considering renting out, use your actual expenses to estimate the rental rates you would have to charge tenants to be profitable.
The Formula for ROI
NOTE: In order to accurately predict ROI you will need to gather information on yearly property taxes, lawn care expenses (many landlords take care of maintaining landscaping to avoid property damage), estimated monthly repair expenses (based on the age of the home), etc.
Rental Property Business – Tips for Screening Tenants
- Advertise – Before you can begin screening tenants you will need to find tenants. Utilize the most popular rental listing sites, and be sure to add excellent photos and descriptions of your rental property. Some landlords list Dallas Fort Worth homes for rent on Craigslist, while others claim to find more “desirable” tenants on sites like Zillow. As the landlord, the decision on where anyhow to market your rentals will be up to you.
- Provide Application Forms – Hopefully, you will get tenants who want to apply on the spot. Make it easy on them by having application forms readily available.
- Background Check – Running a background check on prospective tenants is crucial. There are many fee-based services that can assist with this.
- Credit Check – Look for past evictions and other patterns of defaulting on payments.
- References – Thoroughly check all references provided.
- Sign an Agreement – If things go bad with your rental tenant you will want to have a well-written lease agreement. Often, lease agreements templates found online leave a lot of room for interpretation. Given the risk, it may be wise to pay an attorney to draft a lease agreement that includes the process for conflict resolution.
- Conduct an Inspection – Both you and the tenant should inspect the property (together if possible.)
- Clean & Repair the Property – Any repairs noticed during the inspection should be made before the tenant moves into the home. As the landlord, you will still be required to make necessary repairs while the tenant is living in your rental property.
- Change Locks – To reduce your liability and keep everyone secure, you should change the locks with each new tenant.
- Final Steps – Collect deposits, rent, and provide keys.
Rental Property Business Dallas Fort Worth – Landlord Tips
- Tenant File – Create a tenant file with all the pertinent information. Keep track of all repairs made, tenant issues, late payments, etc.
- Calendar – Keep track of important dates, lease terms, maintenance schedule. If you own many properties, property management software will help to keep you organized.
- Stay on Top of Things – Keep the house in good shape and exercise a proper maintenance schedule.
- Master Vendor List – You will inevitably have to pay repair costs and maintenance fees. Work with vendors you trust for maintenance, plumbing, HVAC repair, etc. Keep their contact info readily available. Remember, a water leak can do thousands of dollars worth of damage within minutes. It may also be wise to keep emergency numbers listed for your tenants to call if repairs need to be made immediately.
Hopefully, these tips will help you decide if you really want to enter the rental property business in Dallas Fort Worth.
Not sold on becoming a landlord?
If you are not committed to the idea of being a landlord and would like to explore your options, we are ready to make a fair cash offer for your Dallas Fort Worth house. We are experienced real estate investors in the DFW area and know how to make the home selling process hassle-free.