Landlords actually put a lot on the line when they rent their property out. Being a landlord isn’t exactly cheap, so it’s essential that you look out for your finances by mitigating risk. These are the risks you should prepare for. Not doing so can really harm your investment in the long run.
Broken promises
You may think the tenant seems trustworthy enough. You may think that the spoken word or even a handshake is enough to seal a deal. But this is a mistake. There should be a record of everything. Any terms you wanted agreed to must be in the tenancy contract. If you try to take action against a tenant based on something they said but didn’t agree to in writing? Then you could be looking at an expensive – and, ultimately, fruitless – legal battle.
Local housing code violations
It’s vital that you might sure your property doesn’t violate any local housing codes. If you buy a property then lease it out to a tenant without checking it properly, then it’s your bad! You could end up having to pay some egregious fines if you’re not careful. (You could also endanger the safety of the tenant, but this is a financial blog, so I thought I’d mention the money risks first!) House inspections aren’t just for tenants, you know. Make sure you get one performed as soon as possible. Really, you should get one done before you even buy a property!
High fees
If you don’t create the right sort of contract, you can end up paying some ridiculously high fees. You could end up paying for the property tax, insurance, and even the utilities if you don’t use the right sort of lease. Of course, you may be willing to pay your share of these costs. But a lot of landlords will want to increase their chances of a high and stable income. Triple net properties are known for their relatively low-risk when it comes to landlord fees and income.
Dangerous tenants
You don’t want to have to evict someone, right? So you should be doing your best to avoid getting into such a position in the first place. If you want to make sure your income from this endeavour remains steady, then you need to be careful about the tenants you work with. You should do all you can to research the prospective tenants. You can run a criminal record check or a credit check. You may even be able to ask their previous landlord for feedback, although such feedback isn’t always trustworthy.
Damage to the property
Even the best tenants might make a disastrous mistake and deal some damage to the property. Perhaps a disgruntled “bad tenant” may even take a chunk out of the place before you evict them. In any case, this is always a risk you should keep in mind. Properties rarely stay pristine for long. This is why you need to make sure you agree on a suitable security deposit before the tenancy begins. Don’t be tempted to entice potential tenants by charging too low a deposit!
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