Although becoming a rental property owner is exciting, it also comes with its fair share of challenges. First-time real estate investors have to grapple with such issues as:
- How they will handle rent collection
- How they will formulate their lease agreement
- How they can successfully manage tenant screening
- How they can stay on top of routine maintenance and repairs
- How to manage their property: alone or with DFW property management.
Familiarizing yourself with the real estate industry and the tips we have to share will help alleviate the confusion that comes with being a first-time rental property owner in the DFW area.
Keep in mind that this article is not legal counsel. When in doubt, get in touch with your attorney or with the property management pros here at RentHub!
Get to Know Rental Law in DFW
- The former sets forth standards for how information an applicant provides for the tenant screening process should be used and handled.
- The latter prohibits investors from discriminating against renters based on their color, disability, nationality, race, religion, or sex.
- Also, familiarize yourself with Texas laws that govern the relationship, responsibilities, rights, and rules of both parties.
Prepare Your Lease Agreement
A lease agreement is a legally binding document that will provide answers to all the questions your renters might have. For instance, it will point out:
- Whether or not renters can make alterations to the property
- How much you plan to charge for the monthly rent
- Details regarding security deposits
- Expectations for rent increases
- Dates of occupancy
- The notice period
- If pets are allowed.
The internet is full of downloadable templates for this crucial document, but you should have one prepared by your preferred DFW property management company. The experts are more familiar with the laws governing rental property in the DFW rental market, and they are better placed to guide you than a prefabricated download.
Dive Into the Right Rental Research
- What's the makeup of the neighborhood?
- How are comparable rental properties in your area?
- Are you located in a residential area or near a college or university?
- Should you make any updates to your rental homes to stay competitive?
Answering these questions will help you determine your rental property’s price point in DFW and decide on the type of updates you may want to make to stay competitive. For instance, you might want to furnish your investment property if it is near a college or university. This will make it appealing to students if that's how you plan to direct your marketing budget.
Make Tenant Screening Crucial
Screening your potential renters is your best defense against problematic issues. For the screening process to be effective, you will need to be clear on what characteristics you are looking for right from the start. If possible, list these traits on your rental listing.
- Income verification and credit check: You need to verify that your potential renters can afford your property’s monthly rent. Pay stubs and bank statements are an easy way of establishing that a person is financially stable. You will also need to establish their creditworthiness by reviewing their credit history.
- Criminal background checks: As an investor, it's worth understanding who can rent your property when it comes to its proximity to public features like schools. Persons with a history of assault, domestic violence, or sexual assault in the past seven years are not ideal candidates for your property. However, this can get tricky—so it's best to work with an attorney or property manager.
- Rental history and reference checks: This helps shed more light on how potential renters will treat you, your property, and those around them. If an applicant has no rental history, ask them for professional references—and verify them.
Plan for Emergencies
It’s inevitable that you will incur expenses on repairs and renovations for your rental property. You'll need to work with your DFW property management team to design a budget that prepares you for emergency repairs.
Make sure your residents know what to do and whom to contact in case of an emergency. You can also do your part to include renters insurance as a critical component of your lease agreement.
Insure Your Rental Property
An insurance policy as a property owner covers you against property damage, liability, and in some cases, loss of rental income. Depending on your rental property’s location in DFW, you may also want to obtain additional coverage for flooding.
Investing in real estate is as rewarding as it is challenging. Having a profitable property in a prime location and pricing the rental units reasonably is only part of the game.
Following the above tips will help you avoid pitfalls that often come about as a first-time investor. However, it's not the only way to begin investing successfully! Learn more useful tips with your free copy of Protecting Your Investment Property: A Guide.