Becoming a landlord can be a rewarding endeavor, but it also comes with responsibilities and potential challenges. Here are several factors you should consider before becoming a landlord:
- Financial Readiness: Assess your financial situation to ensure you can afford to invest in a property. Consider the initial purchase cost, mortgage payments (if applicable), property taxes, insurance, maintenance costs, and potential vacancies.
- Local Laws and Regulations: Familiarize yourself with landlord-tenant laws in your area. These laws govern rental agreements, security deposits, eviction procedures, property maintenance standards, and tenant rights. Non-compliance can lead to legal issues.
- Property Management: Decide whether you will manage the property yourself or hire a property management company. Managing yourself saves money but requires time and effort, while hiring a company incurs costs but offers convenience.
- Property Location and Type: Research the local rental market to understand property demand, rental rates, and tenant preferences. The location and type of property (e.g., single-family home, apartment, commercial space) will affect your investment returns and management requirements.
- Tenant Screening: Develop criteria for tenant selection, including credit checks, rental history, income verification, and references. Finding reliable tenants reduces the risk of late payments, property damage, and eviction proceedings.
- Maintenance and Repairs: Budget for ongoing maintenance and repairs. Landlords are responsible for ensuring the property is habitable and addressing maintenance issues promptly. Neglecting maintenance can lead to tenant dissatisfaction and property depreciation.
- Financial Stability of Rental Income: Consider the stability of rental income. Vacancies, late payments, and unexpected expenses can impact cash flow. Establish an emergency fund to cover unexpected costs or periods of vacancy.
- Insurance and Liability: Obtain landlord insurance to protect your property from damage, liability claims, and loss of rental income. Consider additional coverage depending on property type and location.
- Tax Implications: Understand tax implications related to rental income, property depreciation, and deductible expenses. Consult with a tax advisor to optimize tax benefits and comply with tax laws.
- Long-Term Goals: Clarify your long-term goals for the property investment. Are you aiming for rental income, property appreciation, or a combination? Develop a strategy aligned with your financial objectives.
- Tenant Relationships: Establish clear communication with tenants and manage tenant relationships professionally. Address concerns promptly, respect tenant rights, and enforce lease agreements consistently.
- Exit Strategy: Plan for contingencies such as selling the property, refinancing, or changing rental strategies. Flexibility allows you to adapt to changing market conditions or personal circumstances.
By carefully considering these factors and conducting thorough research, you can make informed decisions and increase your chances of success as a landlord.
Here are the necessary steps to becoming a legal landlord in Philadelphia:
- You must first file for a Tax Account Number
- Then, you can apply for your Commercial Activity License
- Once you get that straightened out, you can apply for your Rental License
- Then, you must get a certificate of rental suitability and legally this must be presented to renters prior to them occupying the home.
- Lastly, as of 2021, there are new lead requirements in Philadelphia:
- If your property was built before 1978, you must have a lead test done in your home and get your home registered as “lead safe.” Here is my recommendation for lead testing servces: www.leadtestingservicesphila.com.
- If your property was built after 1978, you can complete this exemption form.
If you choose to work with our realtor team, we will:
- Take photos and market your property on our email listserv (10k+ subscribers) as well as instagram and facebook pages.
- Field all inquires and schedule/conduct tours
- Collect rental applications, IDs, and paystubs from all applicants
- Assist in tenant analysis
- Draft lease and necessary addendums and ensure they are executed by all parties
- Ensure initial first, last, and security deposit are paid and help coordinate key handover
Traditionally, this will cost the equivalent of one month’s rent if we list it on the MLS and the broker fee is split between my team and the agent that represents the tenants (if they have one). This is collected from the first, last, and security deposit once we secure a tenant and a lease is signed. If you aren’t sure of the rental listing price, we can also advise on the best price and timing to list so that you can ensure the least amount of vacancy.
If you’d like to go with a property management company to handle tenant repairs or inquiries during their stay, please reach out to us for our latest property manager recommendations, based upon your specific geographic location.
