Not all rental property owners set out to build an investment portfolio. These days, there are a growing number of accidental landlords thanks to things like job relocations, property inheritance, and failure to sell. Last year, we saw the emergence of accidental landlords who didn’t want to give up their 3% mortgage rates.

San Diego Accidental Landlords: 5 Tips for Success in Southern California's Rental Market

However you’ve arrived here, one thing is almost certain: you’re not quite sure what to do next. The idea of earning a rental income sounds nice, but how can you turn a profit when you don’t know the first thing about managing a rental property?

Read on for five top tips for success as an accidental landlord in San Diego’s rental market.

1. Protect Your Finances

As soon as you find yourself in the position of owning a rental property, it’s time to make a few financial adjustments. Rentals can increase both your risk and your tax bracket, but there are simple ways to account for both of these changes.

Get the Right Insurance

Once you rent out a property, you need to replace your homeowner’s insurance policy with a landlord insurance policy. This should include property protection, covering certain types of property damage caused by things like fire or wind. It should also include liability protection, which can offer protection if someone gets injured on your rental property.

Prepare for Tax Season

California has progressive income tax rates, meaning that if your rental income increases your gross income, your tax rates will go up with it. Make sure you’re setting aside the appropriate amount of your rental income and start paying quarterly estimated taxes to avoid late penalties. For the best protection, consult a tax accountant.

2. Learn About Rental Laws

Your finances aren’t the only thing you need to protect now that you own a rental property. Make sure to learn about federal, state, and local rental laws. The last thing you want is to find yourself in the middle of legal troubles with a tenant.

Landlord Rights

Landlords have a variety of rights, including the right to enforce the terms of the lease agreement and collect rent in a timely manner. There a variety of circumstances that allow you to take legal action (e.g., eviction) against a tenant, but you must follow all state and local procedures to do so. Finally, tenants are obligated to keep their rental unit in good condition, preventing damage beyond expected wear and tear.

Tenant Rights

It’s just as important that you know tenant rights and don’t infringe upon them. Tenant rights are extensive, ranging from the right to a safe living environment to the right to privacy. When in doubt, double check that your landlord practices don’t break any tenant rights guaranteed at the federal, state, or local levels.

3. Create an Airtight Lease Agreement

One of the best ways to protect your interests and your property is to craft an airtight lease agreement. Always put your lease in writing and have your new tenants sign before they move in. (Remember, verbal agreements aren’t as easy to fall back on if disagreements or issues arise.)

Financial Obligations

A lease should always state all financial obligations a tenant has, from the amount of rent they owe each month to the size of the security deposit you’ll collect. If you charge fees for things like pet ownership, late rent payment, or lockout services, those need to be in your lease as well. Clear language about rent makes rent collection much easier.

Rules of Tenancy

You also need to use your lease to state any specific rules you expect tenants to follow. Don’t assume that tenants won’t paint or put nails in your walls, or that they’ll mow the lawn twice a month. If you have ground rules, spell them out in the lease (but be reasonable).

4. Make a Property Maintenance Plan

As we mentioned already, tenants in San Diego have the right to live in a safe, sanitary home, even when it requires ongoing intervention and assistance from you. Before you start leasing your property, you need to have a basic property maintenance plan.

Scheduled Maintenance

Scheduled maintenance includes things like preventative maintenance (e.g., cleaning out the gutters in the summer) and fulfillment of maintenance requests. Create a clear channel of communication, like a tenant portal, for tenants to report maintenance issues. Keep a reserve fund and know which contractors you’re going to call for things like leaking pipes or roof damage.

Emergency Maintenance

Some maintenance issues can’t wait until your next convenience. How will tenants let you know about an urgent issue and how will you make sure that someone is available to respond to that information? Without an emergency maintenance plan, you may find yourself in a good deal of trouble.

5. Screen Your Tenants

San Diego landlords set themselves up for success when they find reliable, responsible, committed tenants. Screening tenants before they sign their lease agreement is the best way to find out more about who you’re renting your home to.

Credit Checks

Running a credit check is a low-cost way to find out more about a tenant’s financial standing. This will help to verify their income as well as their income-debt ratio. If the household isn’t making at least three times more than what you charge in rent, they may struggle to keep up with payments.

Rental History

Good tenant screening should also involve a tenant’s rental history. Rental history checks will reveal any information about prior evictions and other complications. If a tenant doesn’t have a rental history, you can ask for a cosigner or evaluate their mortgage history, depending on which step is relevant.

Successful Accidental Landlords Call NLPM

Each year, we see more accidental landlords trying to learn the basics of operating a rental property. These tips will help you cover your bases, but Next Level Property Management can take things a step further.

NLPM is staffed by licensed real estate professionals with rental expertise. We don’t just collect rent and oversee maintenance. We’ll make sure that your property is insured, well-advertised, and filled with the best tenants in San Diego.

Get in touch and let us know if you’re ready to take that accidental rental and turn it into passive income.

Leave a Reply

Your email address will not be published. Required fields are marked *