Want to diversify your income and build long-term wealth? Real estate is often touted as a smart investment strategy, and renting out a property can be a lucrative way to achieve this. But navigating the world of landlords and tenants can feel daunting, especially for first-timers.
From understanding the legal obligations to finding reliable renters, there’s a lot to consider. This guide breaks down the process of renting out a property for the first time into eight manageable steps, helping you avoid common pitfalls and set yourself up for success.
1. Understand the financial benefits and costs
Before property hunting, assess your financial situation. Rental income can offset mortgage payments, but you have to also consider the cost of landlord insurance, property maintenance, agency fees, and any legal obligations. Of course, these costs will vary considerably depending on the property you choose to rent out.
Once you have a breakdown of outgoing and incoming amounts, calculate your potential return. Research rental prices to ensure your rates are competitive with similar local rentals. Don’t forget to factor decorating and furnishing costs into the mix. This will help the property attract the interest of higher quality tenants who will allow you to steer clear of many issues such as damage to the property or its physical assets, such as furniture.
2. Decide how to rent out a property
There are two main ways you can rent out a property: through self-management or a letting agency.
- Self-management: Offers more control and saves on agency fees, but you’ll need to handle everything from advertising the property to resolving maintenance issues.
- Letting agencies: Provide a hands-off approach by taking care of tenant screening, legal paperwork, and ongoing management. This is ideal if you’re renting out a property for the first time or have limited time.
Landlords must also be aware of their rights and responsibilities. For instance, you have the right to reclaim possession of the property under specific legal circumstances. You’re also responsible for arranging repairs, making sure the property meets safety standards, and complying with tenancy laws.
3. Prepare the property for tenants
Once you’ve determined the financial and legal aspects of renting, you can move on to furnishing and decorating the property. You’ll want to opt for timeless design styles. The style shouldn’t need to be frequently updated; so avoid the temptation of hopping onto home trends here.
Appeal to a broad audience with neutral colors and durable furniture. If you’re looking to attract long-term tenants, you’ll want to include appliances like a washer/dryer, a refrigerator, an oven and hob, and other additions needed for someone to live there for an extended period.
If you’re open to tenants with pets, weigh the pros and cons. Pets can cause wear and tear, but accepting them opens the property up to a broader pool of renters. Pet-friendly properties are in high demand, and tenants with pets often appreciate the opportunity which makes them more likely to care for the property.
4. Ensure you’re legally ready to rent
When renting a property, several checks are standard. Expect processes like a credit check, references from previous landlords, and proof of identity.
Before tenants move in, the landlord is responsible for conducting checks on the property. These include gas and electric safety checks and energy efficiency regulation compliance. The landlord is also responsible for ensuring the tenant’s deposit is protected in a government-approved scheme.
Finally, you’ll need to check the tenant’s right to rent. Some documents and factors that are typically required are copies of passports to prove identity, proof of income, and possibly UAE residence visas.
5. Screen and secure the right tenants
The tenant background check doesn’t end with their proving right to rent. There will have to be reference checks such as proof of income, proof of identity, and credit checks. Some landlords also still ask for character references; so if this is important to you, you might want to factor that in.
Here at Frank Porter, we boast a thorough screening process; from inspecting the property before and after each guest to handling issues with damage caused by tenants. We also offer policies such as ones on guest deposits to mitigate any risks of damage.
6. Create a strong tenancy agreement
A clear, well-written tenancy agreement protects both parties from most complications. Include essentials such as:
- Rent amount and payment terms
- Length of tenancy and notice periods
- Responsibilities of the tenant and landlord
Make sure there’s no ambiguity to prevent any possible disputes and to maintain a good relationship with your tenants. For instance, the phrase “reasonable wear and tear” doesn’t explicitly relay what constitutes reasonable wear and tear and what’s considered damage. This can lead to disagreements regarding whether reimbursement is required if the landlord views the “wear and tear” as damage.
Instead, opt for something which cannot be misunderstood. For example, if referring to a couch, say: “Reasonable wear and tear constitutes slight marks that can easily be removed or that cannot be seen at a distance of a foot or more. Damage constitutes any irreversible damage to the upholstery fabric or structure”.
7. Consider renting to multiple tenants
Another thing to consider is renting to multiple tenants, which can significantly increase rental income. However, this arrangement comes with stricter licensing requirements and safety regulations.
You’ll need to first register the property for co-tenancy. This is typically done through contracts on Ejari. Before tenants move in, you’ll also have to provide additional fire safety measures, such as smoke alarms and fire-resistant doors. Since it’s a co-tenancy, any communal spaces will need to be prepared and well-maintained.
8. Plan for long-term success
To maintain and grow a rental business, one major step you can take is to invest in landlord insurance. This covers risks like property damage and missed rent payments. Another thing to factor in is scheduling regular maintenance. Inspections and timely repairs help preserve a property’s value. Long-term success also stems from expanding strategically; use your insights from your first rental experience to build a portfolio over time.
Maximize your rental income with Frank Porter
Renting out a property can be a rewarding venture, but preparation is key. Whether you’re renting out property for the first time or expanding your portfolio, reach out to our dedicated team of property managers to streamline your rentals.
