A passive income is considered, by some, to be the best type of income. This presumes that you have a source for said income, some sort of capital that can be rented or further invested without your active participation. Real estate is the perfect option when it comes to this, as virtually any property in an urban environment in the USA can be rented within a moment’s notice, and for good money too.
But it’s not as easy as that. Even a passive income coming from renting out apartments requires at least a little bit of hustle. Chores, security, deposits… When you put down everything, it is not so much of a passive income, but knowing these 6 important things about the business can help you manage it with ease.
Renting is a Business
The approach to renting out any property, not only an apartment, is to do it professionally as if you’re running a business. In a way, you are running a business, with real estate as your working horse. The income you earn will be taxed, and you will have to uphold a certain standard that is both required by law but also required by the market itself.
Running a business requires you also to come to terms with the legal aspects of it, as well as keeping all the related finances tidy and organized.
Professional Property Management
To boost things up, you can always find a helping hand to cover for you while you concentrate on other aspects of your life.
States like Nevada, which have a relatively high tourist influx, also have professional property management companies that take care of business. For example, Henderson management & real estate offers a very wide range of services, covering things from rent gathering to security issues with tenants. All such companies request a certain fixed price for their part, but in the long run, leave you with more free time and fewer worries.
Request a Background Check
It may seem offensive at first, having someone ask if you have a criminal background, but this is increasingly becoming standard procedure not only for renting but also for employing and making business deals in general. After all, you wouldn’t want someone to make a theaves den out of your apartment, would you?
The procedure is very straightforward, you have to notify the applicant that you will be conducting a background check, and then you have to choose a registered Consumer Reporting Agency that will do the paperwork for you.
Insist on a Written Agreement
Putting down on paper how the whole deal is supposed to go is one of the smartest things you can do before you rent out your first apartment. Contracts should be made not only between the tenant and the owner but also between any sides involved, such as a property management company, or a cleaning service. If you are very serious about it you could contact a lawyer to write down the contract for you and make sure everything is spotless.
Other than that – simply having it written down and signed is already enough, as it will stop potential misuse from either side. The agreement should clearly state what are the rights and obligations on every side, things such as a deadline for paying rent, what happens if something needs to be fixed, whether or not smoking is allowed inside, etc. A copy of this should always be available in case someone “forgets” what they’re due.
Collect Rent Regularly
This shouldn’t come as a surprise, but not collecting rent regularly usually leads to collecting less rent overall. If there is no deadline there is no incentive to pay. A monthly rent makes organizing finances on both sides easier, secures a steady cash flow, and keeps you in touch with your tenants.
The whole process is made a lot easier in recent times by being able to collect rent online, without the need to go to any and every apartment you own. The traditional way has its merits, but a busy modern lifestyle frequently leaves us with little time to spare on such chores.
Hold on to Good Tenants
Everyone loves when they stumble across a good customer. They know what they want, they’re willing to pay, don’t make a fuss, everything goes as planned. The same thing goes for tenants – if you have the luck of finding someone pleasant to be around, doesn’t make a mess of the apartment, pay their rent every month to the penny… Hold on to them for as long as possible!
With all of this in mind, you are ready to deal with almost any situation that could arise in this business. Stay organized, be a good host and you will have great success in the renting industry.
Published on Holr Magazine