In terms of how to be a landlord, it’s not as simple as just owning a rental property – you need to have a solid plan, a clear understanding of your responsibilities, and the right approach to managing tenants. So, in this guide, we’ll get into the weeds of how to become a landlord, from finding qualified tenants to handling lease agreements and property upkeep. Read on to learn more.
Main Takeaways
As experts in Austin area property management, we can tell you that knowing how to be a landlord includes knowing how to maintain a safe, habitable living space, respond to tenant concerns, do property upkeep and repairs, and follow legal requirements. Also, being a landlord requires you to screen tenants, draft and enforce lease agreements, and make sure the property meets local housing codes. By staying proactive in your property management, you can keep tenants satisfied, maintain a steady income, and reduce your turnover. In the following sections, we’ll delve into many parts of what it means to become a landlord more deeply.
Landlord-Tenant Laws in Texas You Must Follow
When it comes to how to become a landlord, your #1 priority should be to know the law, inside and out. You will have to obey it in every step of your process. So, here are some of the top ones that you should be aware of:
Right to Habitable Housing
In Texas and elsewhere, landlords must keep their properties safe and habitable for tenants. For example, they need to make prompt repairs for property issues that materially impact a tenant’s physical health or safety, like black mold. If you fail to address these issues, you could face legal consequences.
Right to Quiet Enjoyment
According to federal law, tenants have the right to enjoy their rental without disruptions. Generally, a landlord cannot enter the property at unreasonable times (like the middle of the night) or without a good reason. You have to respect their privacy.
Security Deposit Regulations
Texas law lets landlords to set security deposit amounts without limits. However, they must return the deposit within 30 days after the tenant moves out or provides a forwarding address (whichever happens later). Furthermore, there are generally only two things you can make deductions on: unpaid rent or damages beyond normal wear and tear. And when you do make deductions, you have to have an itemized list of them. So, keep that in mind.
Notice Requirements
When you become a landlord, you must provide proper notice for various lease term changes, like terminating someone’s lease, or increasing their rent. The notice periods you need to give depend on what you’re giving notice for (and your lease’s terms). For instance, let’s say someone isn’t paying the rent, and you want to evict them. You can’t just boot them out without giving them a chance to fix the problem. Legally, you have to give them three days’ written notice to quit the violation or vacate first, unless your lease says otherwise.
Eviction Process
Speaking of evictions, they don’t just end at giving your tenant prior notice. There’s a whole legal process you have to follow throughout the entire eviction procedure. After the notice period, you have to file an eviction lawsuit in court, go through the court proceedings, and only have the person leave once you get a court order for it. You can’t do things like changing the locks or shutting off the utilities without express court permission.
Fair Housing Act
Landlords must comply with the federal and Texas Fair Housing Act, which prohibits discrimination based on race, color, national origin, religion, sex, familial status, or disability. You cannot treat people differently based on their protected classes in any aspect of the rental process. For instance, you cannot advertise that a property would be a great fit for families, because that is singling people out based on their familial status.
Repair Requests & Rent Withholding
Tenants can request repairs for conditions that materially affect their health or safety. If a landlord doesn’t address them within a reasonable time after their tenant tells them about the problems, tenants may have the right to make a recourse. More specifically, they may have the right to terminate the lease, do the repairs themselves and deduct the cost from rent, or seek judicial remedies. Needless to say, it’s critical that you get repairs done quickly.
Financial Preparation
To become a landlord, you first do to careful financial planning. You have to be able to cover your expenses, manage your cash flow, and maximize your long-term profitability. What’s more, your mortgage is far from the only big expense you’ll encounter. Being a landlord, you’ll also encounter:
- Down Payment & Closing Costs – Upfront expenses when purchasing the property, including loan fees, title insurance, and legal costs.
- Property Taxes & Insurance – Annual taxes based on property value and landlord insurance to cover damages or liability claims.
- Maintenance & Repairs – Ongoing costs for plumbing, electrical work, and general upkeep. A good rule of thumb is setting aside 10-15% of rental income for maintenance.
- Vacancy Costs – Lost rental income when the unit is unoccupied, plus potential marketing expenses to find new tenants.
How To Choose the Right Rental Property
Arguably, the biggest ingredient for your success as a landlord is having just the right rental property. It can make-or-break your investment. A prime property can attract qualified tenants, steady income, and increase the building’s value over time. However, a bad property can do the opposite.
Location is Everything
A good location = high demand and fewer vacancies. So, look for areas with strong job markets, high-quality schools, public transportation, and low crime rates. Also, if it’s near shopping, parks, and restaurants, it will be more appealing to tenants. You should stay on the lookout for properties that match these qualities.
Check Rental Demand
Some areas are actually oversaturated with rentals. Because of that, you should research your target market’s vacancy rates, rental prices, and tenant demand. If you deal with high competition or, conversely, low demand, it can be harder to keep your unit occupied.
Consider Your Property’s Condition
If you buy a home that’s in less-than-ideal condition, it may need costly repairs. Older properties tend to need more frequent maintenance. On the other hand, newer ones tend to have fewer issues. Inspect the home carefully for plumbing, electrical, and structural problems before you buy it.
Run the Numbers
As you know, a rental property should bring in more money than it costs. That’s why it’s so important to crunch the numbers. Compare the rent you expect to get with expenses like mortgage payments, property taxes, insurance, and maintenance. A common rule of thumb is the 1% rule, meaning the rent should be at least 1% of the purchase price for solid cash flow.
Know Local Rental Laws
Some areas have strict landlord regulations, such as eviction rules, rent control, and tenant rights laws. It’s essential for you to do your due diligence about these laws. So, make sure you understand local laws before investing to avoid legal headaches.
Property Maintenance & Repairs
Some repairs, like broken heating in winter or major plumbing failures, will require your immediate attention. As a general rule of thumb, you should set aside 10-15% of your rental income for unexpected expenses. This makes sure you’re financially prepared. If you invest in durable materials and schedule routine inspections, you can also minimize future repairs.
Simplify Being a Landlord with BMG
To become a landlord, you need time, effort, and careful attention to detail. From keeping up with maintenance to handling tenant concerns, the responsibilities can quickly become overwhelming. If you don’t have the right systems in place, small issues can turn into costly repairs, unhappy tenants, or even legal challenges.
That’s why, at Bay Property Management Group, we handle the day-to-day responsibilities of being a landlord for you. Our professional can maintain your property, handle repairs, and work with tenants to handle any concerns they might have. And that’s not all we do. We also can handle legal compliance, marketing, tenant screening, and more. Contact us today to learn how we can make your investment more passive.