1) Prepare your property to rent

Start with a thorough inspection of the property from top to bottom to ensure everything is in working order. Below is a checklist to consider:

• Check all systems, such as plumbing, heating, A/C, electrical and HVAC, are in working order.
• Check the refrigerator, oven and dishwasher to ensure they’re in working order
• Inspect for the presence of leaks or mold
• Check for any structural damage or maintenance issues
• Check each electrical outlet to make sure they’re working
• Test smoke detectors and carbon monoxide detectors
• Thoroughly remove any pest infestations
• Confirm compliance with all local building codes

After inspections, take some time to make small changes to the property to improve it’s general appearance. These improvements can make a big impact on potential tenants.

• Paint the walls
• Update light fixtures
• Patch small holes and cracks
• Replace window treatments
• Repair or upgrade cabinet hardware

While these above changes are not required by law, they can help your property stand out to tenants. Lastly, before you start showing the property, give it a deep clean! This step can make a big impact, don’t skip it!

2) Set Your Rental Rate

Setting the best price for your property is key to renting it quickly and making a return on your investment. Pricing your property can feel intimidating for first time landlords, but using a comparable market analysis (CMA) can make it a lot easier. A CMA analyzes four main factors:

1. Rental properties with similar square footage, number of bedrooms, and amenities
2. The location of the property
3. The year it was built 
4. The overall condition

Analyzing properties in your area that have similar characteristics to your rental, will serve as a guide as you set the price for your property.  By comparing properties that are currently on the market, those that have recently been leased, and your property, you can get a clear picture of market. If you see a comparable property and it’s been on the market for over a month, this might be an example of a property that’s priced too high. Use this analysis to set a competitive rate and be willing to reevaluate if needed. 

3) Analyze Your Fixed and Variable Costs

Understanding the costs that are associated with owning and operating a rental property is important to creating a realistic and sustainable budget. Once you have created a budget for both fixed and variable expenses, you’ll want to build in a cushion for emergencies or unforeseen one time costs. The goal is to have a financially sustainable budget that also makes room to handle any “extras” with relative ease. 

Fixed Costs:

• If you have a mortgage on your property, the mortgage payments will likely be one of your largest fixed costs.
• Property taxes are based on the assessed value of the property. They are typically due twice a year and can increase year-over-year.
• Landlord insurance-essential for protecting your investment
• HOA dues if applicable
• Property management fees-usually a percentage of the monthly rent

Variable Costs:

• Maintenance and repair costs that fluctuate depending on a variety of factors
• Any applicable utilities that are your responsibility
• During periods of vacancy: mortgage payments, insurance, and utilities
• Legal fees for evictions and lease agreements 
• Administrative fees for advertising and tenant screening

4) Research and Buy Landlord Insurance

Purchasing landlord insurance is an important step for every first time landlord. Landlord insurance is designed specifically to help protect landlords—it protects the property, your personal property, loss of rental income, and against liability.

Spend some time researching insurance providers and policies to ensure you get a policy that gives you the coverage you need for your rental property. You’ll be glad you took the time to familiarize yourself with various policies and have good coverage in the long run!

5) Understand Landlord-Tenant Laws

There are a lot of laws and regulations that surround rental properties and landlord-tenant relationships in California. Not to mention, the laws are constantly changing and being updated. It can be overwhelming to stay on top of these laws and regulations. However, staying updated and compliant with landlord-tenant laws cannot be underestimated. Since California is a tenant-friendly state, it can be expensive and time-consuming to fall out of compliance, so stay up to date to avoid that hassle. Here’s a brief explanation of some applicable laws to pay attention to as you proceed with owning and leasing a rental property.

• Security deposits are governed by California law and states that landlords can only charge a maximum of one month’s rent as a security deposit.
• California’s rent control laws that limit rent increases on properties built before 2005 cannot exceed 5% + the percentage change in the cost of living over the previous year’s Consumer Price Index (CPI).
• Evictions are a very in-depth legal process. If you think you need to evict a tenant, consult with a real estate attorney to make sure you follow all applicable laws.
• California’s fair housing laws help ensure there’s no discrimination in the rental process. These laws work to ensure no one is discriminated against based on their race, religion, gender, disability, and more.

6) Market Your Property

Now that your property is rent-ready, you can start to market it and look for tenants. The most effective way to market your property is listing it on popular online rental websites like Zillow, Apartments.com, and Craigslist. Spend some time crafting the listing that includes a detailed accurate description, highlighting key features like amenities, location, and any unique selling points (ie close to public transportation or recent major updates).

Take some high-quality photos of your property. Including video and 3D tours  can be a helpful tool to give potential tenants a more thorough visual representation of what the property looks like. Effectively marketing your property is about creating a listing that stands out from the crowd and gets the attention of reliable tenants. Taking the time to do this step well will ensure a good match for owner and tenant! 

7) Screen Potential Tenants

The tenant screening process is essential to helping you choose responsible, reliable tenants who will pay rent on time and take care of your property. The screening process typically includes:

• Reviewing the tenant’s rental history.
• Checking credit scores.
• Verifying income.
• Conducting background checks for criminal history or past evictions.
• Contacting references from previous landlords to gauge their reliability and behavior as tenants.

With a thorough tenant screening process, you can decrease the risk of late payments, property damage, disputes, and evictions.

There are state laws that must be followed during the screening process. Landlords are required to get written consent from an applicant before running credit or background checks. Also, California’s Fair Housing Act prohibits landlords from discriminating against applicants based on race, gender, religion, sexual orientation, or other protected classes.

8) Create and Sign Your Lease Agreement

The purpose of a lease agreement is to protect the landlord and tenants. When written properly, a lease sets clear expectations and defines the terms of the rental arrangement, including rent payments, maintenance responsibilities, lease duration, and other important rules.

As a landlord if you enter into a “lease” without an actual written lease agreement, you can find yourself in legal disputes over everything from late fees and security deposits to handling property damage. A legally binding lease agreement will help to minimize misunderstandings and help provide a framework that you can use to resolve potential issues.

Working with a property management company like Plus Property Management can save time and ensure that the lease agreement meets all necessary requirements and protects your interests. Alternatively, you can work with a legal professional who specializes in landlord-tenant law.

9) Collect Rent

In your lease agreement, it should be noted when rent is due each month. It should also state how you accept rent payments—it can be helpful to offer various payment options for tenants. Whether you offer an online payment portal, checks, or some other form of accepting payment, this should all be clearly outlined in the lease agreement.

Late fees should also be outlined in the lease so that you avoid confusion and ensure both you and your tenants are on the same page. This will also help ensure that rent is paid on time.

10) Ongoing Management and Financial Reporting

Once you have tenants in your rental property, your focus shifts from actively seeking applicants to managing tenants. Having a system in place for handling tenant requests, staying informed about landlord-tenant laws, and managing issues before they escalate can help make the day-to-day management of your property more efficient.

You’ll also need to put yourself in the role of “accountant” to keep track of your rental income and expenses to stay compliant with IRS regulations. This can help you minimize your tax liability while ensuring you get the best possible return on investment.

If you’re looking for help creating a system to help manage your first investment property, contact us at Plus Property Management. We have our own systems in place that take the hassle out of ongoing property maintenance. We handle everything from routine upkeep to emergency repairs, ensuring your property stays in top shape without you lifting a finger. As our client, you would enjoy the added benefit of having your finances tracked with regular financial reports, so you always have a clear picture of how your rental property is doing.

Starting a new venture as a property investment owner and landlord, may seem like a lot of work at first, but with a great Property Management company to support and guide you, it can be it can be a smooth, rewarding experience that builds long-term financial stability and peace of mind.