Tag: Rental businesses

Rent Is Dropping in 27 U.S. Cities. Here’s Where to Rent Now | Entrepreneur

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^{This article originally appeared on Business Insider.}

The “year of the American renter” is off to a strong start — unless you’re a landlord.

A new report from online rental platform Zumper found that in January, the going rate for a one-bedroom apartment in the US was $1,496, and $1,847 for a two-bedroom setup. Those two figures changed little from last month.

Rent is slightly below the record levels set in September but remains higher than last January. Median year-over-year rent growth rates this month were 0.3% for one-bedroom apartments and 1.4% for apartments with two bedrooms, according to Zumper. One-bedroom rent rose by less than 1% for the fifth-straight month after rising for 12 consecutive months starting in October 2021.

Rent growth in the US is far from its pandemic peak, according to the January rent report from @Zumper. pic.twitter.com/3QhWPCyaUp

— James Faris (@JamesFaris_) January 25, 2024

Apartment prices have been driven down by surging supply, Zumper noted. New units are going up rapidly across regions following years in which demand for rental units far outpaced supply.

“2023 was a record year for new supply across the country, and the multifamily industry will add even more inventory in 2024,” Zumper’s researchers wrote in their January rent report. “This jump in supply is good news for renters looking for a deal.”

A more competitive rental market isn’t just driving down prices. Many renters are now enjoying perks that would’ve been unheard of during the pandemic, including waived security deposits and a free month of rent, Zumper found. That trend can continue as interest rates slide, which will likely bring homebuyers back from the sidelines.

“Renters have more leverage right now than anytime in recent memory,” said Anthemos Georgiades, the CEO of Zumper, in a statement for the report. “Now is the time to renegotiate existing leases or score a deal on a new apartment.”

27 cities where apartments are getting much more affordable

Exactly half of the top 100 rental markets in the US saw median apartment prices fall from 2023, according to Zumper. However, those declines varied widely by region and were more significant in the Sun Belt than in the Midwest.

Below are 27 metropolitan areas where the going rental rate for a one-bedroom apartment is at least 5% lower than it was last January, according to Zumper. Along with each city are its year-over-year and month-over-month rent changes, average rent price, and national rent ranking among the largest 100 US real estate markets.

1. Scottsdale, Arizona

^{Scottsdale, Arizona. Tim Roberts Photography/Shutterstock via BI}

Year-over-year rent change: -17.7%

Month-over-month rent change: -3.5%

Average rent: $1,670

National rent ranking: 24

Source: Zumper

2. Irving, Texas

^{Skyline of the Las Colinas area of Irving, Texas. iStock / Getty Images Plus via BI}

Year-over-year rent change: -16.1%

Month-over-month rent change: -0.8%

Average rent: $1,250

National rent ranking: 61

Source: Zumper

3. Winston Salem, North Carolina

^{Winston-Salem, North Carolina. halbergman/Getty Images via BI}

Year-over-year rent change: -14.6%

Month-over-month rent change: -1.1%

Average rent: $880

National rent ranking: 92

Source: Zumper

4. Greensboro, North Carolina

^{Sean Pavone/Shutterstock via BI}

Year-over-year rent change: -13.9%

Month-over-month rent change: 5.3%

Average rent: $990

National rent ranking: 82

Source: Zumper

5. Boise, Idaho

^{Boise, Idaho. Charles Knowles/Shutterstock via BI}

Year-over-year rent change: -12.8%

Month-over-month rent change: 3.2%

Average rent: $1,290

National rent ranking: 55

Source: Zumper

6. Augusta, Georgia

^{Augusta, Georgia. SeanPavonePhoto/Getty Images via BI}

Year-over-year rent change: -12.5%

Month-over-month rent change: -1.2%

Average rent: $840

National rent ranking: 95

Source: Zumper

7. Buffalo, New York

^{Buffalo, New York. Getty Images via BI}

Year-over-year rent change: -10.7%

Month-over-month rent change: 5.9%

Average rent: $1,080

National rent ranking: 74

Source: Zumper

8. Austin, Texas

^{Austin, Texas. Evan Semones via BI}

Year-over-year rent change: -10.2%

Month-over-month rent change: 0%

Average rent: $1,490

National rent ranking: 35

Source: Zumper

9. Asheville, North Carolina

^{Asheville, North Carolina. Kevin Ruck/Shutterstock via BI}

Year-over-year rent change: -8.4%

Month-over-month rent change: -2.1%

Average rent: $1,420

National rent ranking: 41

Source: Zumper

10. Arlington, Texas

^{Shutterstock via BI}

Year-over-year rent change: -8.3%

Month-over-month rent change: 1.9%

Average rent: $1,100

National rent ranking: 70

Source: Zumper

11. St. Louis, Missouri

^{The Gateway Arch, St Louis, Missouri. joe daniel price/Getty Images via BI}

Year-over-year rent change: -8.3%

Month-over-month rent change: 3.5%

Average rent: $880

National rent ranking: 92

Source: Zumper

12. Memphis, Tennessee

^{Memphis, Tennessee. Connor D. Ryan/Shutterstock via BI}

Year-over-year rent change: -8.2%

Month-over-month rent change: 2.3%

Average rent: $900

National rent ranking: 90

Source: Zumper

13. Providence, Rhode Island

^{Providence, Rhode Island. Mihai_Andritoiu/Shutterstock via BI}

Year-over-year rent change: -8%

Month-over-month rent change: -5.9%

Average rent: $1,600

National rent ranking: 25

Source: Zumper

14. Glendale, Arizona

^{Saverino and his boyfriend rented in the Phoenix suburb of Glendale before buying a one-bedroom condo in Mesa for $204,000. halbergman/Getty Images via BI}

Year-over-year rent change: -7.7%

Month-over-month rent change: -5.5%

Average rent: $1,200

National rent ranking: 65

Source: Zumper

15. Colorado Springs, Colorado

^{Jacob Boomsma/Getty Images via BI}

Year-over-year rent change: -7.6%

Month-over-month rent change: 0%

Average rent: $1,100

National rent ranking: 70

Source: Zumper

16. Wichita, Kansas

^{Sean Pavone/Shutterstock via BI}

Year-over-year rent change: -7.2%

Month-over-month rent change: -1.5%

Average rent: $640

National rent ranking: 100

Source: Zumper

17. Houston, Texas

^{Houston, Texas. Sean Pavone/Shutterstock via BI}

Year-over-year rent change: -6.9%

Month-over-month rent change: -1.6%

Average rent: $1,220

National rent ranking: 63

Source: Zumper

18. Oakland, California

^{Oakland, California city skyline. Jonathan Clark/Getty Images via BI}

Year-over-year rent change: -6.8%

Month-over-month rent change: -1.4%

Average rent: $2,050

National rent ranking: 13

Source: Zumper

19. Dallas, Texas

^{Dallas, Texas. f11photo/Shutterstock via BI}

Year-over-year rent change: -6.8%

Month-over-month rent change: -2.2%

Average rent: $1,360

National rent ranking: 46

Source: Zumper

20. San Antonio, Texas

^{Sean Pavone/Shutterstock via BI}

Year-over-year rent change: -6.1%

Month-over-month rent change: 0.9%

Average rent: $1,080

National rent ranking: 74

Source: Zumper

21. Orlando, Florida

^{Orlando, Florida. Songquan Deng/Shutterstock via BI}

Year-over-year rent change: -6%

Month-over-month rent change: 0.60%

Average rent: $1,580

National rent ranking: 26

Source: Zumper

22. Lincoln, Nebraska

^{Lincoln, Nebraska. Jacob Boomsma/Shutterstock via BI}

Year-over-year rent change: -6%

Month-over-month rent change: 1.3%

Average rent: $790

National rent ranking: 97

Source: Zumper

23. El Paso, Texas

^{Northwest in El Paso, Texas John Coletti/Getty Images via BI}

Year-over-year rent change: -5.8%

Month-over-month rent change: -5.8%

Average rent: $810

National rent ranking: 96

Source: Zumper

24. Bakersfield, California

^{Bakersfield, California MattGush/Getty Images via BI}

Year-over-year rent change: -5.4%

Month-over-month rent change: -0.9%

Average rent: $1,050

National rent ranking: 78

Source: Zumper

25. Jacksonville, Florida

^{Jacksonville, Florida. ESB Professional/Shutterstock via BI}

Year-over-year rent change: -5.3%

Month-over-month rent change: 0.8%

Average rent: $1,260

National rent ranking: 59

Source: Zumper

26. New Orleans, Louisiana

^{John Coletti/Getty Images via BI}

Year-over-year rent change: -5.1%

Month-over-month rent change: 0%

Average rent: $1,500

National rent ranking: 31

Source: Zumper

27. Albuquerque, New Mexico

^{Albuquerque, New Mexico. Sean Pavone/Shutterstock via BI}

Year-over-year rent change: -5%

Month-over-month rent change: 3.3%

Average rent: $950

National rent ranking: 85

Source: Zumper

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James Faris

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January 30, 2024
6 Ways to Make Passive Income Through Rental Properties | Entrepreneur

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Opinions expressed by Entrepreneur contributors are their own.

One of the oldest and easiest ways to create passive income is through rental properties. Luckily for investors and entrepreneurs, the property rental market remains strong and continues to grow. Based on data from the U.S. Census Bureau, more than 35% of households in the U.S. rent homes. Additionally, RentCafe reported that multifamily construction in 2022 reached a 50-year high nationwide, and according to Axios, “one million rental units are slated for completion through 2025.”

Additionally, a recent GoBankingRates survey revealed that 14% of Americans don’t believe they will ever be able to afford a home, and 27% have no interest in buying a home, contributing to the demand for rental housing options. This is due to a variety of factors, including a low inventory of homes for purchase, barriers to homeownership such as high prices and high-interest rates, and a growing nomadic workforce that doesn’t want to be tied down to one location.

Although rents appear to be stabilizing, demand for rental properties is still high and on-time rental collection rates recently rose above pre-pandemic levels. That means now may be a good time to rent out property, which may be easier than you think.

Here are six types of rental properties that can help you earn passive income and even begin building generational wealth.

1. Traditional investment properties

Traditional investment properties have long been a popular choice for those seeking to generate passive income through rentals. It’s a rather simple concept: purchase a property, find tenants to rent it out and collect monthly rental income. Investors have the opportunity to decide whether to invest in long-term, mid-term, or short-term (vacation) rentals.

Long-term rentals offer stability in rental rates and cash flow with a reduced risk of vacancies, while vacation rentals and short-term stays allow for higher rental rates with a higher risk of vacancies. Vacation rentals are also less passive, requiring more work to clean and ready the property in between stays and find tenants on a much more frequent basis. But the returns on investment can be much higher.

There’s also a “mid-term rental” investment option, where the lease lasts for more than one month but less than one year (college student housing would fit into this category). Mid-term rentals require a bigger time investment than long-term properties but aren’t as demanding as short-term rentals. Some investors may want to diversify their rental property portfolio by owning a mixture of long-term, mid-term, and short-term rental properties, while others may commit to whichever style best suits their preferences.

2. The accidental rental

Investing in a new property isn’t always necessary to become a rental property entrepreneur. There are instances where you may already own extra property, such as a vacation home, a newly inherited property or perhaps you recently got married and both you and your spouse own your own home. Instead of selling these extra properties, you may consider renting them out.

Sometimes, it’s more beneficial to hold on to a property over the long term rather than collecting a quick payout. Retaining properties for rental purposes cannot only help you build more real estate equity, but it can bring in a significant amount of passive income as well (and you may benefit from tax savings, but consult a tax professional on that). Combining the extra income with long-term equity gains can contribute to building generational wealth.

3. House hacking

Another strategy that has gained traction in recent years is “house hacking.” House hacking involves renting out a portion of your own home. If you own or purchase a property that is bigger than your housing needs, and you’re looking for a way to earn some extra cash, rent out a room (or several rooms).

House hacking allows you to significantly reduce or eliminate your own housing expenses by using the rental income from renting out extra rooms to help pay down your mortgage and/or offset utilities and other costs of homeownership. House hacking can be a great way to start building passive income without the need for a large initial investment.

4. Built-for-rent

A growing trend in real estate is the “built-for-rent” market. Built-for-rent homes are built by companies that specifically design their properties for rental purposes only. These properties are often strategically located in desirable areas, ensuring high demand and consistent occupancy rates, and are marketed to people looking to maximize their returns on investment in the real estate industry.

Investing in built-for-rent properties has become one of the most lucrative ways to generate a steady stream of passive income. By purchasing residential properties specifically designed for rental purposes, you can benefit from a consistent monthly income with minimal involvement. Typically, the built-for-rent company handles all aspects of property management, including finding tenants, handling maintenance and repairs, and collecting rent. This enables you to sit back and enjoy your rental income without the stress and time commitment associated with traditional real estate investments.

5. Mixed-use properties

A mixed-use property is a real estate asset that combines both commercial and residential spaces. This provides a unique opportunity to rent out both residential and commercial units. Leveraging the potential of these properties can lead to a sustainable and reliable passive income source, but there are several strategies to consider.

One effective strategy for generating passive income through mixed-use properties is maximizing rental yields. This can be achieved by strategically curating a mix of commercial and residential tenants that complement each other. For example, having a retail shop on the ground floor of a residential building can attract more tenants and increase rental demand.

Another strategy is to focus on choosing the right location for your mixed-use property by conducting thorough market research to identify the most profitable locations. For example, investing in areas with strong growth potential, high foot traffic, and a good mix of commercial and residential demand can increase the value and attractiveness of your property.

In addition, look for other shared space opportunities like coworking spaces that provide short-term or flexible rental options that cater to the evolving and increasingly nomadic habits of modern workers. By taking an innovative approach to offering mixed-use rental spaces, you can tap into a variety of rental markets and maximize their passive income potential.

6. Storage units

When you think of rental properties, storage units usually don’t come to mind. However, renting out storage space can also generate passive income streams. There is a high demand for storage space, and fulfilling this need can help you earn money effortlessly by maximizing unused space. In addition to renting out traditional storage units, people can also rent out space in garages, basements, attics, and spare rooms. By getting creative and marketing effectively, you can effectively turn your empty spaces into profitable assets.

Regardless of what kind of property you decide to rent out, technological advancements have streamlined property management, making it a more efficient and attractive endeavor. Property management tools and software automate many routine, time-consuming tasks such as listings, tenant screening, rent collection, and maintenance requests. This means you can spend less time on administrative duties and focus more on more important life activities, all while maximizing your passive income.

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Ryan Barone

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October 20, 2023
5 Tips for Evaluating Your Next Rental Property | Entrepreneur
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Are you looking to invest in a rental property but aren’t sure what the telltale signs of a good investment are? In this article, I’ll share five tips for how to evaluate whether a property is worth your time and money and what to look for in an investment property.

From market research and risk analysis to comparing local rentals and calculating your Net Operating Income (NOI), this guide equips you with the knowledge to evaluate your next investment wisely.

Related: 3 Things to Consider Before Buying an Investment Property

1. Do thorough market research

It’s vitally important that you conduct thorough research on your new property before taking action. Real estate investments can be lucrative, but they can also be a money pit without proper planning and preparation. That’s why the first step in how to evaluate an investment is to take the time to figure out exactly what goals and ideas you have for the property.

You should have an idea as to whether you would like to rent the house out long-term or have a series of short-term renters. Long-term tenants serve as a consistent income stream, and you don’t have to dedicate as much time or effort into finding tenants to fill vacancies as often. However, short-term tenants allow you to raise rent prices between periodic leases, plus you have the opportunity to remove tenants who you’d rather not rent to again, even if you don’t have proper grounds (or funds) for eviction.

You should also start investigating the market you’d like to invest in. There are many factors that influence how appealing a particular area will be to renters — for instance, an influx of new construction might lessen the demand for your rental, while attractive amenities, restaurants or school systems in the local area could increase the demand for and value of your property.

It’s also important to realize the potential costs that come with a new rental. Do you want to offer a furnished unit? The cost of furniture and cleaning associated with a furnished unit can add up. You’ll want to consider these costs plus appraisal fees, inspections and other fees that can put a dent in your capital.

2. Conduct a risk analysis

Building on the last tip, conducting a risk analysis is a great way to plan for potential risks and be better prepared for hiccups when they happen. The real estate industry is known for being volatile, so to best protect your investment, expect changes in the following factors:
- Essential service prices, like gas and electricity
- Local employment rates
- Property taxes
- State and local laws
- Quality of applicants
- Government real estate policies
A good way to quantify the level of risk for each factor is to assign each one a score of, for example, one to five — five being the highest level of risk. If a property has a higher risk factor score, be aware that it could potentially lead you to spending more money than you’re comfortable with.

Related: How to Get the Most Out of Your Rental Property Investments

3. Use comparable rentals in the area

An important step in evaluating your new rental property is to see how it stacks up against the other properties in your local market. In doing so, you can keep your expectations on expected cash flow in check.

Conduct a sales comparison by finding properties that are similar to yours and calculating the price per square foot that they sold for. Be sure to look at properties that have been sold within the last month so that your numbers are as accurate to the state of the current market as possible. When looking for comparable properties, try to find units that have approximately the same number of bedrooms and quality of amenities as yours.

Additionally, consider whether the location that you’re researching is the right location for the type of renter you’re looking to attract. For instance, if you’re primarily targeting local families for your rental, you’ll want to evaluate whether the school system nearby is high quality. If you’re targeting young professionals, however, you might investigate whether the property is close to public transit. An excellent location can upgrade a mediocre property to an extremely desirable one, so don’t overlook this step when choosing where to invest.

4. Calculate your NOI

Your property’s NOI (Net Operating Income) is the total amount of income that it will generate, minus general operating expenses. It is calculated by taking your total rental revenue over a certain period of time and subtracting all regular operating expenses required to maintain the property over that period, such as the cost of repairs, property management fees, insurance, property taxes, etc.

If you divide your NOI by the original price you paid for that rental property, you get the capitalization rate, which measures how long it will take for you to make back your initial investment. If you have a high cap rate, you have more revenue and a strong overall investment.

However, it’s important to remember the few factors that could skew your cap rate calculation. When you use cap rate to evaluate a property prior to purchasing it, you’ll need to estimate the potential rental rate and total expected income. That means that you’ll have to find the cap rate after you research what similar properties are charging in your area. Also, if you intend to flip a low-value home, your cap rate will not include the cost of renovations or the fact that you will not be renting the space out and are selling it instead.

Related: How to Start Investing in Rental Properties — Your Step-by-Step Guide

5. Consult a professional

As an investor, you need to understand how a property’s current state will influence what it could be valued at in the future and how much you can profit from it at the time of sale. One of the ways to do this is to hire experts who are experienced in this field to give you an estimate.

A professional property valuation estimates how much capital you’ll need to maintain a property. Maintenance costs are a significant factor in determining your overall profit from a rental property. A property valuation will take stock of larger assets like the roof, insulation or HVAC system to see what condition they’re in and how much you may have to spend to keep them functioning. You can also request a formal appraisal to have a professional estimate of the true value of the property based on factors like location, demand and lot size.

The key to a great investment is solid upfront research. Real estate is a great way to be your own boss and possibly achieve streams of passive income — but first, you must dedicate significant time and effort to ensure your venture is a good one. Hopefully, the investment property tips above help you find a quality investment.
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Dave Spooner

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September 26, 2023
5 Steps to Prepare to Sell Your Rental Property | Entrepreneur

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Opinions expressed by Entrepreneur contributors are their own.

Preparing a house to sell is quite the process. If you’re a real estate investor with current tenants, it can become even more complicated. However, whether you’re deciding to sell because of a shifting business plan, a big life change or interest in investing your money elsewhere, figuring out when the best time is to sell and how you plan on doing so should be top of mind.

Here are five steps to take when preparing to sell your rental property.

Related: 6 Tips for Successfully Selling Your House

Step 1: Plan when to sell

The first step in selling your rental property is to strategically plan when to put the property on the market. If you can figure out your area’s local market trends, you will more easily be able to see what times are most profitable to sell your rental property. Here are some indicators that it’s a good time to sell:

Higher demand for housing:

Is there a large influx of buyers, perhaps due to new jobs cropping up in your area? While demand is high, it’s a strong sign to start preparing to sell just in case this demand doesn’t last long.

You have substantial equity:

It’s possible that you bought your property for a reasonable price and have made good renovation decisions over the years and now have a good amount of equity from that property. You should consider whether your potential gains will outweigh how much you’ll make in cash flow if you were to keep the property: If not, it’s best to wait until you have a stronger reason to sell.

Incoming drop in rental prices:

There are a few signs that rent prices in your area are about to drop. Although these are not guarantees, an influx of new construction or lower interest rates could lower the demand for your rental. If you see these signs, it’s a good idea to get out ahead of the decrease and sell your rental property.

Step 2: Communicate with your tenants

Maintaining a friendly, professional relationship with your tenants should always be top of mind for you as a landlord. Undergoing the selling process will force your tenants to decide between three options: They can move out, wait for you to sell the property and then move out, or remain a tenant under the new owner. If they choose to stay, it’s in your best interest to stay on their good side and encourage their cooperation.

Tenants are going to be inconvenienced during this process. They will have to deal with a new owner, potential showings and repairs, and they could have to renegotiate their rental agreement. While these inconveniences could prompt some tenants to be difficult, if you already have a strong relationship with them and offer incentives to make them feel appreciated, the selling process is much more likely to go smoothly.

Some ideas for tenant appreciation are offering gift cards to those who stay throughout the selling process or setting up activities like food trucks to stop by your property. Showing that you care about the sacrifices they’re making with their time and privacy will go a long way.

Related: 6 Strategies to Increase Your Real Estate Cash Flow

Step 3: Repair and prepare

Preparing your property for the market entails advertising, making necessary renovations or repairs, and creating a listing.

The first obstacle in this step is evaluating the current state of your property. Are there any big repairs that need to be done? Do you need to replace the carpet or appliances? Perform a pre-listing inspection to identify any glaring opportunities for improvement.

Then, arrange to fix anything you found in that inspection. Vacant units are the easiest to arrange service on because you don’t have to work around tenants’ schedules or inconvenience them by constantly being in their living space. Extensive projects sometimes require an empty unit, like installing new flooring or repainting.

Step 4: Hire a real estate agent

A real estate agent will help you navigate the advertising and showing process, along with any legal steps that may be included.

Advertising is extremely important. A good real estate agent will guide you toward the best ways to advertise in your area based on population trends and the local market, and they may also give you recommendations on house showing etiquette. They may also have access to databases that make it easier for you to find a great buyer.

Related: 5 Real Estate Mistakes That Could Make You Lose Money

Step 5: Choose a buyer

First of all, a great buyer must have the means to buy your property. This buyer could be a real estate investor like you or someone looking for their next home. It would be beneficial for you and your current tenants if you chose an investor who is willing and prepared to take on your active leases, so your tenants don’t have to move.

Also, if you have kept detailed records that prove your current tenants’ reliable record of paying on time and in full, investors may be willing to pay more for the property. The new investor will have an almost guaranteed positive cash flow right after they purchase the property without having to put in extra work for advertising or dealing with and filling vacancies.

However, this decision is ultimately up to you. A real estate showing agent will be able to provide experienced advice on what kind of buyer would be best for your business’s needs, so be sure to take the time and hire someone you trust.

Selling your rental property is best done with maximum preparation. The more research and prep you do into the process, the easier it will be for you and for your tenants. Consult with professionals in the field if you’re unsure of how to proceed. Picking a plan and sticking to it will be the best course of action, and ensuring your tenants are fully in-the-know will ease your stress as well.

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Dave Spooner

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August 30, 2023
6 Things Landlords Should Know About Automated Rent Payments | Entrepreneur
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As a first-time real estate investor or new property manager, you are responsible for choosing which rent collection method(s) you’ll offer your tenants. Automatic rent collection is increasingly popular among landlords and tenants alike, but it often comes with questions and concerns from both parties.

If you’re thinking of offering automatic payments to your tenants, there are a few things you need to know first. In this article, we’ll review the benefits of autopay for rent collection as well as six key points to know before getting started.

Related: How Successful Landlords Approach Rent Collection

Benefits of automated rent collection

Automated rent collection, often facilitated by a bank or property management software platform, is a method of rent collection that automatically transfers funds from your tenant’s account to yours each month.

Autopay differs slightly from online bill pay, which you may also be familiar with. The key difference with online bill pay is that a tenant gives permission for their bank to make recurring payments from their account to the landlords’. Autopay, on the other hand, is when the tenant permits the landlord to debit their account each month.

Autopay is an excellent way to manage regular payments in the same amount each month, like rent. Other benefits of automated rent collection include:
- Guaranteed on-time payments
- Fewer late fees for tenants
- Peace of mind if there is no rent grace period
- Less stress on the first of the month for both parties
What landlords need to know about automatic rent payments

Before you get started with autopay, however, there are a few important things to know. Keep each of the following six tips in mind before implementing your automatic rent collection system:

1. You should include an autopay clause in your lease agreements

It’s important that you establish all your rental policies and expectations in the lease or rental agreement, including payment options and requirements. In every lease, explain in detail the options tenants have for rent payment, including autopay. Be sure to also include a description of how autopay works through your property management software or other platforms, as tenants will likely have varying levels of literacy with technology.

Related: 5 Property Management Tasks to Automate in 2023

2. Don’t require tenants to use autopay (or electronic payments)

This is one of the primary causes of legal issues regarding rent payments for landlords. In certain states (such as California), it’s illegal to require tenants to pay rent electronically. In these states, you’ll need to provide at least one offline method for rent payments, such as cash or check. The same applies to autopay — whether or not you can require tenants to set up autopay depends on which state your property is located in. It’s important to know which state and local laws apply so that you can provide tenants with multiple options to pay rent when necessary.

3. Be aware of fair housing regulations

Even in states that don’t specifically forbid it, requiring tenants to set up and use autopay could be interpreted as a violation of fair housing laws. In some states where tenants are protected against discrimination based on age, a policy requiring tenants to pay via automatic payments may be seen as discriminatory against older renters, who are less likely to be digitally literate.

If you have older tenants, an online-only policy could induce unnecessary stress or even motivate them to find a new rental. Use caution when developing your rental payment policy, and be cognizant of how your leases uphold fair housing laws.

4. Be sure you can reject automated payments

No matter which method of rent collection you use, you must have a way to reject payments. This is important because in some states, accepting full or partial payments during the eviction process could delay the legal action and require you to file an entirely new complaint. For this reason, it’s critical that you are able to reject an automatic rent payment and stop autopay altogether when necessary, such as when the lease ends.

5. Learn about NACHA rules and regulations

The National Automated Clearinghouse Association (NACHA) is responsible for regulating the ACH network and ensuring its security. For example, NACHA requires merchants (like landlords) to have a written security policy explaining how tenant information is stored. These rules ensure the integrity and confidentiality of sensitive information and are critical whenever you’re dealing with tenant data. Be sure your payment processor is NACHA-compliant before implementing your autopay policy.

Related: ACH Payments: What Are They and How Do They Work?

6. Watch out for cases of non-sufficient funds

Just because a tenant has enabled autopay, this does not mean their payments are 100% guaranteed. If a tenant does not have enough funds in their account to cover the debit, the payment will bounce and you won’t receive the rental amount on time. In many states, landlords can charge a service fee when this happens, but be sure you know how much you can legally charge based on your state.

Automated rental payments are a benefit to both landlords and tenants but are typically accompanied by a learning curve. Be sure you’re aware of these six points to prepare for a smooth integration of this rent collection method.
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Dave Spooner

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July 21, 2023
How Online Rent Collection Can Boost Transparency in Your Rental Business | Entrepreneur

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Landlords experience a variety of benefits when switching to online rent collection: automation, convenience, accurate bookkeeping and the ability to meet tenant needs in the marketplace.

Transparency is an often overlooked benefit. As consumers, we want and appreciate transparency throughout the transaction process. We want to be able to track our packages, payments and orders and know that everything is proceeding as it should. The same is true for the rental marketplace. The more you can clue your tenant in on the rent collection process, the more they’ll appreciate it.

Here’s how you can use online rent collection to enhance transparency in your own business:

Related: Landlords, Don’t Believe These 5 Myths About Online Rent Collection

Track IP addresses and login credentials

One common concern that tenants have about online payments is that they aren’t secure. In reality, online payments are often more secure than traditional cash and check payments. This is because online payments track IP addresses (physical locations) and login credentials for every person who signs onto the rent payment portal.

These details help distinguish a device from thousands of other devices online in the area, and incorrect details can indicate when there has been a problem. Combined with timestamps, IP addresses can be used to verify the validity of a transaction, especially if you or a tenant notice something amiss in your records. The addition of these data points is a clear strength of the online approach, and it helps facilitate communication about potential security breaches and other concerns between landlords and tenants.

Record dates and timestamps

As mentioned, dates and timestamps are another important data point that is beneficial to collect. Online platforms record these details automatically, and they can hold both you and the tenant accountable. For instance, a tenant may be able to claim that they dropped a check in the drop box at 11:00 p.m. on the day rent was due, but how would you know for sure whether it wasn’t really the next morning? There’s no way to confirm exactly when your tenant paid (or, in the case of cash, even how much their payment was).

To solve this problem, online rent payments automatically record the exact time a payment was made, providing you with a benchmark you can use to apply late fees and hold tenants accountable. Plus, if a tenant doesn’t remember having made a payment at a certain time, you can investigate potentially fraudulent transactions much sooner.

Auto-generate invoices and receipts

Part of transparency is making sure all parties understand what is expected of them. That’s where invoices and receipts come into play. By providing your tenants with an automatically generated rent payment invoice each month, you can gently remind your tenants of the rent due date and encourage them to make more payments before late fees are applied. Additionally, if changes are made to the agreement or special circumstances of any kind, you can make these changes on the backend and still ensure your tenant receives the correct invoice at the correct time. And after each payment they make, your tenants will receive a receipt verifying the amount, date and time of the payment. There’s no better way to stay transparent with your rent collection process than to inform your tenants that their payments have been received on time, in the correct amount, right after they make them.

Know exactly when your funds come in

Online rent collection can also offer you transparency benefits. On some property management software platforms, for instance, you can use rent payment tracking to find out exactly when your funds are expected to hit your account. If tenants are not paying rent on time, you’ll know that as well, and you can still track the progress of the transaction until it’s finalized and the funds are deposited into your bank account.

Related: How Successful Landlords Approach Rent Collection

Keep a history of rental payments

Lastly, online rent collection creates transparency for both you and your tenants by keeping an accurate history of rental payments. For each tenant, your rent payment platform keeps a rent payment ledger — or a history of all the transactions between you and that tenant. This increases transparency because your tenant doesn’t have to take your word for it about whether a certain fee was charged months ago or how many times they’ve had late payments. Instead, both you and the tenant can see the details of every transaction at any time.

There are so many reasons to adopt online rent collection that we didn’t cover here. But as transparency is the foundation of good communication and lasting relationships, it’s no wonder that incorporating it into the rent collection process leads to better landlord-tenant relations and longer tenancies. By switching to online payments, you can serve everyone’s interests while looking after your business, too.

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Dave Spooner

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July 11, 2023
5 Myths About Online Rent Collection Landlords Need to Know | Entrepreneur
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When customers are online, so are businesses. It’s no less true in the rental industry — with customers increasingly embracing online bill pay, online rent collection is only a logical next step for landlords.

But online rent collection is often met with hesitancy. Some believe that online payments are less secure or reliable. Others fear the complexity of online rent collection for themselves and their tenants.

However, most of these concerns are proven myths. The truth is that online rent payments are one of the safest, most efficient and overall best methods for rent collection. This article will discuss and refute five myths about online rent collection to ease your concerns about switching to this vastly superior method.

Related: How Digital Payments Are Disrupting Our Entire Ecosystem

1. Online rent collection isn’t secure

You or your tenants may have concerns about the security of online payments. Surrendering your credit card number or account and routing numbers to an online platform without knowing who’s behind it may make it seem like anyone can steal your information. However, transaction fraud is very rare in actuality. This is because rent payment platforms are usually encrypted so that hackers can’t access the sensitive information you enter.

There are a few steps you can take to decrease the risk of fraud further. When you switch to online payments, encourage your tenants to:
- Always use a secure internet connection: Advise tenants to avoid using public WiFi when paying rent or to use a VPN (virtual private network) if they must make a payment while out and about.
- Use a credit card instead of a debit card: Credit cards are generally more secure than debit cards, which deal with real funds from your tenants’ accounts. It’s much easier to recover lost funds with a credit card by disputing a fraudulent payment.
- Keep track of all accounts: Even if your tenants use automatic payments, remind them to regularly check their cards and accounts to ensure that the right amounts are being taken at the right times. Any suspicious transactions should be reported immediately.
2. Tenants won’t know how to use it

Many landlords also worry that their tenants (especially older ones) won’t know how to use online rent collection and won’t bother learning. Many older renters are accustomed to writing paper checks, and the stress of learning a new platform or site might be too much to ask.

Despite these qualms, you may be surprised to learn that online bill pay is more common than you think. Fifty-six percent of all bills were paid online in 2017, and this percentage is only increasing. Even older generations are likely to have at least purchased a plane ticket or paid off their credit card bill online.

For those who do choose to pay rent online, the interface is usually quite intuitive and simple to learn. Even the least tech-savvy individuals will easily get the hang of paying rent online from a secure platform each month.

3. Online payment platforms are too complex to learn

On your end, you may worry that an online rent collection platform you choose won’t be easy to get the hang of. Getting a platform set up can feel overwhelming, especially since there are so many options, including online bill pay through your bank, peer-to-peer (P2P) platforms and property management software.

However, by carefully researching these different options ahead of time, you can determine which platform will be the easiest and most straightforward for your rentals. Platforms that offer rent pay online are designed to have smooth interfaces, navigable menus and automation capabilities. Yes, you might have to invest a morning or afternoon exploring the platform or scheduling a walk-through with a customer service rep if you use property management software, but the payoff to this small investment is that rent collection can be largely hands-off from then onward.

Related: How Successful Landlords Approach Rent Collection

4. Online rent collection will deter renters who would rather pay via cash or check

Some landlords fear that collecting rent online will play into the overall decline in cash and check payments and deter tenants who would rather pay the traditional way.

While it’s true that online payments have become more popular over the last few years, there are still uses and purposes for paper payments. There’s no reason to eliminate paper options altogether. Instead, you can simply offer online rent payments as an option (and even encourage tenants to use it), but you can still allow offline methods of payment for those tenants who want them. In fact, it may even be against your state’s laws to require that tenants make payments electronically.

If you do have tenants making payments in multiple ways, keep in mind that you’ll need to keep careful records of offline payments by entering them into your software and sending receipts manually.

5. Online payments increase the risk of bounced eChecks or credit card chargebacks

eChecks, also known as ACH payments, are just what they sound like — electronic checks that work by transferring money directly from your tenant’s bank account to yours. And just like paper checks, eChecks have a risk of bouncing. It’s possible that a tenant won’t have the funds in their account to fulfill an eCheck payment they submitted. It’s also possible that credit card chargebacks will occur if a tenant sees a payment on their statement that they don’t recognize.

While both bounced eChecks and credit card chargebacks are possible with online rent payments, they are no more likely than with traditional checks and credit payments. There are also ways you can prevent both of these risks from occurring, including reminding your tenants to regularly check their accounts if using automatic payments and to write down the payment processor name they should expect to see on their credit card statements.

If a tenant does end up making a claim for the rent payment on their account statement, the good news is you can usually easily dispute the claim with a little evidence. All you need is the original lease agreement stating the rental amount and due dates or an invoice showing that the charge was valid.

It can be overwhelming to consider upending your rental business’s traditional payment model and switching to online methods instead. However, given the array of benefits online rent collection can offer you and your tenants, you shouldn’t hesitate to make the switch.

Related: How Landlords Can Prevent Rent Payment Fraud
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Dave Spooner

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May 31, 2023
3 Things I Wish I Knew as a First-Time Airbnb Host | Entrepreneur

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In 2017, I purchased a single-family home and listed it on Airbnb as a short-term rental. Several years and additional units later, the venture grew into a full-time business that now gives me around $150,000 per month. I could say I had a good ride.

But the journey to this success wasn’t smooth. There were many things that I wish I had done differently, especially when I was just starting. And while some might say they’re part of the whole experience, I still won’t recommend them to anybody.

And that is why I want to share the things I wish I had done when I was new to the Airbnb industry. These lessons impacted how I did my business, and if you’re starting on your own, these will be helpful for you too. The following are the three things I wish I knew as a first-time Airbnb host:

Related: 10 Pieces of Financial Advice I Wish I Knew in My 20s

1. An “employee mindset” won’t get you far in the business

Now, I don’t have anything against employees. They’re awesome because they are the foundation of our labor force. I started as an employee myself, and I have a staff who helps me with my business too.

However, if you want to create a flourishing Airbnb business, you don’t need the kind of mindset that most employees have. Allow me to explain.

When I started my Airbnb business in 2017, my wife and I operated our unit, and we had no trouble doing so. Our profits were more than enough to cover our mortgage for the first three years.

However, the struggle started when we decided to do all the cleaning ourselves. At that time, we didn’t think it was necessary to hire help because we could always do the cleaning on our own. Plus, we thought it was better not to pay anyone and keep the profits to ourselves. But we couldn’t have been more wrong.

As days and months went on, we realized that we should have done things differently. We spent so much time cleaning our Airbnb that it was draining. Sometimes we’d be tired from appointments, and we still couldn’t rest because we had to clean our unit.

It was then that we knew the business became another 9-to-5 job for us, and we were operating with an employee mindset. We wanted the job done right and to make more money, so we thought we had to do everything ourselves.

But this employee mindset didn’t get us far, and neither would it be for you. The Airbnb business requires effort, and if you’re not careful, it could drain your time away from the most important things you should be focusing on. Instead, I recommend you get people who can make the work easier for you.

Don’t hesitate to use some of your profits to hire help because, in the long run, you’ll benefit more from it. It’ll free up your time, and when you have more time, you’ll get the chance to focus on growing the business. You can even launch a new Airbnb if you want to!

Related: How to Start an Airbnb Business Without Owning Property

2. Delegation is the key to time freedom

This is in the same context as the first lesson I mentioned, but it’s so important that it bears repeating.

You see, there are three primary operations in the Airbnb business: cleaning, maintenance and communication. Now for your business to thrive, you have to take care of these three areas equally. But this would be extremely difficult, especially if you have more than one unit and you’re doing all the operations alone.

People will check in and out of your Airbnb, so cleaning and maintenance need to be taken care of regularly. The problem when you’re doing those things yourself is that you are trading time for money. This is why you need to delegate those tasks and automate them for your work to be easier.

You can hire people to do the cleaning and maintenance for you, create an automated cleaning and maintenance calendar that they will follow, and you’re good to go. You can even get a virtual assistant to help you on the communications side.

This is how million-dollar entrepreneurs operate their businesses: by building a team and a system, hiring, delegating, and automating all the operations. And I wish I had known this sooner.

3. Collecting a 1099 Form will reduce your taxes

The IRS 1099 Form is a collection of tax forms that you have your subcontractor sign so you can take what you pay them as a tax deduction. This applies to the people you hire to clean, do the maintenance, and do your communications. As long as you pay them $600 or more within the same calendar year, you must collect a 1099 Form from them.

This is something that I wish I had known when I was getting started. I didn’t know that I needed to collect a 1099 Form, so I ended up paying for money I didn’t keep.

Now to be fair, no one told me about it then, so I didn’t know. But now that you have an idea make sure to implement it to protect your profits so that you won’t lose out in the end.

Related: 8 Ways to Save Money on Business Taxes

Conclusion

Making mistakes as an entrepreneur is perfectly normal, especially if you’re new. However, no rule says you must make blunders for the sake of experience.

Instead, you can learn from those who have already been through the same struggles and learn from their backgrounds. After all, success leaves clues. By learning from the experience of others who have overcome similar struggles, you gain valuable insights and avoid unnecessary pitfalls.

So take advantage of the wealth of knowledge available to you, and start building the business of your dreams today.

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Jorge Contreras

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April 21, 2023
Is Buying Rental Property Worth It in 2023? | Entrepreneur

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Picture this: It’s New Year’s Eve, 2022, and you’ve finally committed to a resolution you really want to keep. In the coming year, you want to buy your first rental property and start investing in real estate. But what will real estate look like in 2023? Will housing prices continue to drop? There seem to be more questions than answers.

If this scenario sounds like you, you might feel intimidated by the uncertainties of the coming months. Deciding to buy your first rental property can feel like a scary or risky endeavor in any market climate, but doing so during a housing correction may seem even riskier. You might be questioning your decision and wondering, “Is buying rental property worth it?”

Before you throw out your resolution, however, reconsider what you know about real estate and how to retain and increase its value. This article will hopefully give you some of the tools and resources to invest in any market and demonstrate that 2023 can still be a fruitful time to buy your first property.

Related: How to Start Investing in Rental Properties — Your Step-by-Step Guide

What is a housing correction?

First things first: What is a housing correction?

A housing correction is a period during which housing prices start to fall in some places after a rapid rise. This fall is usually only by 10% or less, according to U.S. News & World Report. It typically occurs because home prices were unsustainably high in recent years, and the market therefore “corrects” itself to more reasonable prices that match the current supply and demand. Corrections are more gradual than housing market crashes, but they can last anywhere from a few months to a few years.

Housing corrections are caused by interactions between a variety of factors, including mortgage rates, supply, demand, affordability, inventory and stock market trends. Analysts track these factors over time to look for signs that prices will soon fall. These signs can include a decline in sales, homes selling more slowly and homes selling for significantly less than just a few months prior.

Many people who own property during a housing correction may worry that their properties aren’t worth as much as they used to be. However, housing corrections aren’t inherently “bad,” nor do they spell the death of your rental business. In fact, they can make home-buying possible for first-time owners or those looking to start their investing journeys without competing with high-capital peers. Corrections are part of the real estate cycle, and knowing what to expect can help you navigate one with confidence.

What’s happening in 2023?

Analysts and economists are monitoring the housing market, and many have predicted that a housing market correction has already begun or soon will. Today, the national housing market is up by only about 6% compared to March 2022, which is a relative slowdown in comparison to 15% a few months prior. Experts predict that house prices will continue to fall through 2023, with the markets that grew the fastest in the past year likely to see the starkest decreases (even up to 30% in overpriced cities).

Why is this happening? Experts cite a few factors. For one, there are fewer people looking to buy expensive homes than there were in previous years. Many Baby Boomers now have fixed incomes and aren’t as interested in buying expensive homes, which is a natural cause of corrections. Meanwhile, young families are looking for starter homes.

Related: 5 Tips for New Investors Who Want to Make Money With Real Estate

How and why you can still invest during a housing market correction

Don’t let decreasing prices discourage you from investing in real estate. A good deal is a good deal, and if you do your research, you have a good chance of securing a lucrative one.

The key is to stay informed on market trends and be patient. Housing corrections are temporary, and they help transition from a seller’s market to a buyer’s market, so you can actually benefit from this period of low prices. Plus, as experts at BiggerPockets remind us, housing prices do not equal profit. There are a variety of other ways to earn revenue in real estate besides appreciation. Cash flow, value add deals and tax benefits all make real estate worth it even in less-than-ideal markets. It makes sense to be cautious, but don’t let that prevent you from taking advantage of great opportunities when you find them.

Buying a rental property

So, you’ve decided to buy a property in 2023: What do you need to know?

When considering what to know when buying a rental property, one of the most important steps is analyzing the local market. Local data is more useful than national averages any day, as it will provide the clearest insight into the rental marketplace in the specific area you’re targeting.

Calculating ROI:

When choosing a property, the best way to get a picture of local demand is to survey local rent rates of comparable properties nearby. For a given property in that area, you’ll be able to estimate approximately how productive that investment will be.

To do this, you’ll want to calculate ROI, or return on investment. ROI for rental property is the ratio of income you’ll generate to your initial investment or purchase price of the home. To calculate it, divide your expected annual return by the purchase price. If the resulting percentage is 10% or more, it is typically considered a good investment.

Remember that you can increase your ROI by adding value to your property, then increasing the rental rate. For instance, if you add another bedroom and bathroom to a single-family home, you now have a property worth far more than the one you started with. You may have bought the house at below-market value during a correction, but you’ll soon make up for it in revenue generation and appreciation as the market leaves the correction period.

Related: 6 Effective Real Estate Investment Strategies

Legal and administrative tasks:

You’ll also have some legal and administrative tasks on your checklist for buying a rental property. Namely, you should hire a licensed property inspector to review the property before finalizing the deal. You don’t want to discover that the home has severe infrastructural problems or water damage after you’ve already locked yourself into a price.

Other important tasks include reading over the property title documents to confirm the seller’s ownership, confirming property tax receipts and writing up a solid property purchase contract. You may have an agent assist with this process. The goal is to clearly define and explain the terms of the sale so that you know exactly what you’re paying for. Many of these steps are also required by lenders to secure a mortgage — your lender has an investment in the property, too, so they also want to ensure you’re making smart choices.

Becoming a first-time landlord doesn’t come without its challenges. The first step is to find and analyze a great deal that will lead you toward financial freedom. By following these tips, you can be a successful real estate investor in any market season.

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Dave Spooner

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April 20, 2023
The Pros and Cons of Hosting on Airbnb, VRBO and The Landing | Entrepreneur

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Investing in real estate is a great way to create passive income, but it also comes with a number of challenges. One of the biggest challenges I have faced as a rental property owner is finding the right hosting platform for my Palms Springs rental property.

There are many options available — from traditional leasing to Airbnb-style short-term rentals — and more have become increasingly popular among real estate investors, like VRBO and The Landing. Each of these options offers different benefits and drawbacks, so it’s important to carefully consider each one before making a decision. Let’s take a look at the pros and cons of these options.

Related: Tips for Making Real Money on Airbnb

Pros of hosting on Airbnb

The most obvious pro of hosting a property on Airbnb is that it provides an opportunity to make money quickly and easily. Airbnb offers a variety of services, from basic rental units to more luxurious accommodations like resorts and private villas. Additionally, the platform provides a simple way for hosts to get their properties listed, and Airbnb even has an automated system for handling payments.

By renting out your property using these short-term tenants, you can profit more from your rental property as you’re not tied down to long-term leases, which can often be difficult to fill.

Cons of hosting on Airbnb

The main downside of using Airbnb for short-term rentals is that the platform charges its hosts a commission for each booking. This can eat into your profits, depending on the length and scale of your rental offerings. Many hosts, including myself, have tried to counter the fees by charging more and adding higher fees for cleaning.

Additionally, Airbnb is known to attract younger travelers who may not be as respectful of the property or its amenities as traditional tenants — hence the launch of Airbnb Cover.

The lack of proper filtering and background checks can leave you vulnerable to seasoned scammers on the platform. I’ve personally experienced this and have had to complain and make a claim with Airbnb Cover. In the end, I was taken care of, learned a great lesson and was invited to the Airbnb community.

In conclusion, while hosting through Airbnb has many advantages such as being able to make money and meeting new people from around the world, there are also some drawbacks such as high commissions and liability risks associated with damages caused by guests during their stay at your property.

Related: 15 Property Management Tips for Entrepreneurs Seeking Passive Income From Real Estate

Is VRBO the right choice for real estate investors?

Vacation Rental By Owner (VRBO) is a popular way for real estate investors to generate income from their properties.

One of the biggest advantages of hosting on VRBO like Airbnb is that it offers a lot of flexibility in terms of when and how often you rent your property. This means that you can take advantage of peak tourism seasons or special events like music festivals to maximize your earnings potential.

Another benefit of hosting on VRBO is that it can be lucrative because many travelers prefer to use VRBO rather than traditional hotels. This provides an opportunity for savvy investors to capitalize on this trend.

VRBO cons: Protection offer and fees

While there are plenty of benefits associated with hosting on VRBO, there are some drawbacks as well. For one thing, since you have limited control over who rents your property and when they stay there, this can make it difficult to predict how much money you will make each month — which is a problem if you rely heavily on rental income to cover your mortgage payments or other expenses related to the property.

Additionally, since renters only stay for short periods of time (usually 1-2 weeks), this means that turnover costs like cleaning fees can quickly add up if not managed properly.

VRBO also has set fees, and there is also a fee for protection starting at $59. This is a separate charge that you can add to a guest booking. While the booking fees are typically less than those charged by Airbnb, you may find that they still take a significant chunk out of your earnings.

While you can encounter scammers on any site, I personally noticed an increase in people wanting to speak outside of the site as well as inboxes filled with more inquiries than people ready to book. Most of my inbox has questions about the fees and how to get around them.

Related: 10 Hosting Options Besides Airbnb #TravelHosting

Pros of hosting on The Landing

The main benefit of hosting on The Landing is its flexibility as well as being able to charge for utilities separately. Unlike traditional leases, guests can choose how long they want to stay with the option to extend their stay using The Landing APP. This makes it ideal for investors who want to test different rental strategies without being locked into a single approach. Additionally, The Landings offers access to an array of features such as automated payments and tenant screening services that make managing your property easier than ever before.

Another advantage of hosting on The Landings is its convenience and attention to quality. They have a standard that must be met for each listing such as high-quality photos, designated work spaces, reliable appliances and other things like white linens. Their standards lean more towards corporate housing. They target digital nomads, travel nurses and young professionals.

Cons of hosting on The Landing

One potential downside of hosting on The Landing is its application process. Unlike the other platforms, you go through an approval process. The platform is also membership based and offers housing that could potentially compete with the individual investment property owner.

As a current membership holder, I love the platform — but as a rental property owner, I would not rely on that site alone. I would suggest using all sites while being aware and prepared for issues that may arise mentioned in the cons for each platform.

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Saba Tekle

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April 7, 2023
5 Property Management Tasks You Should Automate Now | Entrepreneur

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In our fast-developing digital world, there’s little we can’t automate with a few lines of code.

The same is true in the property management industry. The property management software market will be worth $2.7 billion by 2023, according to Strategic Market Research. The reason for its growth is easily apparent — software makes it possible to automate many tasks that traditionally belong to property managers.

As landlords race to implement affordable software tools in their rental businesses, automation is one feature you should be on the lookout for. The more tasks that can be automated, the fewer you must take on yourself, and the less money you’ll spend paying other people to do them.

Here are five property management tasks to automate in 2023, if you haven’t done so already:

Related: 11 Ways to Automate Your Business and Boost Efficiency

1. Rent reminders

Basic rent reminders are an essential part of your digital toolkit as a landlord.

Even the least tech-savvy landlords can set up a recurring email to remind tenants about upcoming rent payments before the first of each month.

However, there are much more sophisticated ways to automate rent reminders in 2023. On most property management software platforms that offer online rent collection, you can automate a monthly message that includes a link to the payment portal.

Your software tool also knows which tenants have already paid and which haven’t, so it can target additional reminders to tenants who still have outstanding balances closer to the due date.

Plus, for most tenants, a simple reminder is all they need to regularly pay on time. Rent reminders are the simplest kind of automated communication you can set up in your rentals with the highest rewards.

2. Applicant pipeline

Your rental applicant pipeline can also be largely automated. From responding to a listing to signing a lease, much of the process can proceed without your direct supervision.

If you use a listing syndication service, you can often compose message templates to be emailed to a prospective renter at specific points in the pipeline — for example, immediately after they respond to a listing or even a few days after they might have forgotten about the listing to follow up.

Automated messages can also include your current availability, so you don’t waste time communicating personally with tenants who ultimately won’t be interested in renting your properties.

Lastly, tour scheduling can also be automated. By setting up a platform for prospective renters to schedule tours of your properties on their own, you minimize the time you both spend attempting to coordinate schedules. Your availability is already on the calendar, so the tenant simply needs to choose a time that works for them, too.

3. Renewals

The lease renewal process varies from state to state and property to property. Sometimes, leases automatically renew after the original lease term is up. In other states, the tenancy switches to month-to-month by default unless a new agreement is signed.

To make the renewal process easier on your tenants (and yourself), you can automate renewals in your rental business. For instance, if tenants need to sign a new lease each year to continue living in the property, you can automate reminders with links to information about renewals or an offer to schedule a time to meet and negotiate any details.

If the tenancy switches to month-to-month by default, you can automate a reminder message that this will happen if the tenant doesn’t respond by a certain date.

Automating renewals can eliminate much stress at the end of the lease term.

Related: How to Manage Your Real Estate Business Like a Pro

4. Financial reports

There are a variety of financial reporting tools available for landlords currently on the market. In addition to the reporting tools included in your property management software subscription or account, you can also opt to use a general business accounting tool like QuickBooks.

A good financial reporting tool will allow you to automatically generate income statements, profit/loss (P/L) reports, year-end summaries and bank reconciliation. Many platforms also generate certain tax documents to help you prepare for tax season.

While you can certainly (and often should) hire an accountant for this job, any person you hire will still appreciate tools that automate their work. Rental accounting is no different, and there is a myriad of ways available to do so.

5. Late fees

Late fee enforcement is one of the most practical ways to leverage automation in your rentals.

With property management software, you can easily schedule late fee reminders and apply late fee charges to the accounts of tenants who haven’t paid by the due date (or after a designated grace period).

This way, your tenants can’t claim that they “didn’t know” or “forgot” about the late fee — the charge automatically appears alongside all late rent payments.

Automatic record generation is also useful should you ever need to evict a tenant. During an eviction hearing, you are required to provide proof that the tenant violated the lease agreement. With automated records, you won’t have to worry about whether you remembered to record that the tenant didn’t pay on time. You’ll already have dated and time-stamped records of all payments and late fee charges.

Related: New Real Estate Technology: Disruptive Ideas Transforming the Industry

There’s no shortage of responsibilities when you’re running a rental business, and everything that simplifies the process is an asset. Automating components of your property management is a massive step you can take to embrace the digitalization of the industry.

Instead of juggling tedious, everyday rental tasks, leverage automation to pursue bigger and better goals.

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Dave Spooner

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March 15, 2023
The Landlord’s Complete Guide to the Eviction Process | Entrepreneur
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If you’re like most landlords, evictions are a last resort. However, despite the cost and trouble, some evictions are inevitable.

According to a recent White House Summit, the eviction rate in the U.S. was 14% in 2022. This means nearly three out of every 20 tenants were evicted in the past year. It’s safe to say that if you didn’t experience eviction this year, you will at some point in your landlord career.

When you need to evict a tenant, it pays to be prepared. By understanding the eviction process and best practices, you can save yourself time, trouble and expense. Read on to learn everything you need about evictions, from the basics to a step-by-step guide and the cautions to heed during the process.

Related: How to Manage Your Real Estate Business Like a Pro

Eviction basics

Eviction, or unlawful detainer, is the legal process of removing a tenant from a rental property. It involves not only physically expelling the tenant, but also the legal documentation, filing and court hearing for eviction.

Evictions are both time-consuming and expensive. An average eviction costs around $3,500, but the entire process (including legal and court fees, lost rent, repairs and cleaning, tenant screening, etc.) can total up to $7,000. Evictions can also take around three weeks to a month or longer to complete.

Due to their costs, you should avoid evictions when possible. Some strategies for preventing eviction include performing thorough tenant screening and automating rent collection.

A caution: Even if it seems easier, never attempt a self-help eviction. You should never try to regain possession of your property without going through the proper legal steps. Instead, carefully educate yourself on the eviction process in your state. If it’s your first time evicting a tenant, or if the eviction gets complicated (e.g., your tenant filed for bankruptcy, hired a lawyer, etc.), it’s a good idea to have a lawyer walk you through the process.

Reasons for eviction

There are several reasons you might file for eviction. The most common is late rent. If a tenant does not pay on time, and you’ve waited for any grace periods required by law or included in your rental agreement, it’s time to initiate eviction.

Here are the other acceptable reasons for eviction:
- Lease violations — e.g., smoking, unapproved pets, subleasing, long-term guests, etc.
- Property damage — e.g., graffitied walls, shattered windows, deliberately broken appliances, etc.
- Illegal activity — e.g., manufacturing or selling drugs, theft, violence, etc.
- Holding over — continuing to live in the unit after the lease has expired.
Related: 4 Changes Every Landlord Should Consider

Step 1: The eviction notice

If you’ve decided an eviction is warranted, the next step is to deliver the eviction notice.

There are three main types of eviction notices:
1. Pay-or-quit notices are for when the tenant has not paid the rent. In general, these notices require you to give the tenant between three and seven days to pay rent before eviction proceedings officially begin. This notice may also be called a rent demand notice or notice for nonpayment.
2. Cure-or-quit notices are for violations of the lease agreement. The tenant generally gets a certain number of days to correct or “cure” the violation before eviction proceedings begin. This notice may also be called a notice for lease violation.
3. Unconditional quit notices are for severe breaches of the lease or the law (e.g., selling illegal drugs). The tenant does not get any opportunity to correct their violation and must quit the unit immediately or within a few days.
The exact length of each notice varies by state, as does the terminology for eviction notices. In general, a plain “quit” notice does not allow the tenant to correct the violation, while a “pay-or-quit” or “cure-or-quit” notice requires you to wait the number of designated days before filing for eviction.

Remember that quit notices differ from grace periods, which are mandatory in some states. For example, landlords in Tennessee must wait a 5-day grace period before applying late fees and an additional 14-day pay-or-quit period before they can file for eviction.

Lastly, send the eviction notice by certified mail and also post it on your tenant’s front door. This way, you can request a receipt and get confirmation that they received it.

Step 2: Filing for eviction

In many cases, the threat of eviction is enough to resolve the issue. The tenant will often cure their breach or move out without going past the notice stage.

However, if you’ve delivered the appropriate eviction notice, and your tenant still hasn’t cured their breach within the notice period, it’s time to officially file for forcible detainer.

After you file a complaint at your local court, an eviction case will be created. The court will set a date for the hearing and send a summons to your tenant, informing them of the eviction case and their hearing date.

Step 3: The hearing and judgment

The next step is the hearing itself. Prepare for the hearing by gathering the necessary documentation:
- The rental agreement
- Proof of the lease violation or nonpayment, such as payment records, bounced checks, photographs or tenant communications
- Copies of the eviction notice and USPS receipt
In essence, bring any documentation that will help prove the tenant’s noncompliance and support your case for eviction.

At the hearing, a judge will review the case, look over the materials you provide and issue a judgment for repossession of the property, assuming the court rules in your favor.

Related: 5 Real Estate Mistakes That Could Make You Lose Money

Step 4: Evicting the tenant and regaining possession

After the hearing, a local sheriff will give your tenant notice to quit within a set number of days (typically several weeks). If the tenant does not move, the sheriff may physically remove them from the property.

Only after the tenant has permanently left the premises can you remove the tenant’s belongings, change the locks and re-list the property.

If the evicted tenant still has unpaid bills, you do have options for getting your past-due rent. Your landlord insurance may cover unpaid rent, or you can file a claim in small claims court to retrieve your funds. It’s also possible to take the judgment to your tenant’s employer to garnish their wages or use a private debt collector.

Eviction mistakes

Despite the carefully designed procedures for eviction, landlords can occasionally get ahead of themselves.

Here are some things you should NEVER do during an eviction:
- Attempt a self-help eviction: If you forgo the formal eviction process, you may be required to pay damages or return the entire security deposit.
- Accept partial payments: This may delay the eviction process. Once you begin, do not accept any payments from the tenant.
- Neglect proper notice: Always wait the appropriate number of days.
- Remove tenant belongings before the judgment: Landlords may not infringe on tenant privacy or touch their belongings before the tenant is removed.
- Shut off utilities or change locks: Do not turn off utilities or change the locks before the tenant has been removed. These constitute a self-help eviction and are illegal.
- Harass the tenant: This is also illegal.
Evictions can be difficult, especially if you know your tenants well. However, you must remember that evictions are not personal, but rather part of running a rental business. Following the steps outlined above will help make evictions as smooth and painless as possible.
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Dave Spooner

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February 22, 2023
Entrepreneur | 10 Steps to Leasing a Commercial Space

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Opinions expressed by Entrepreneur contributors are their own.

If you are new to commercial leasing and will be leasing a commercial space for the first time, here’s an overview of the commercial leasing process.

1. Find a location

Determine the demographic you want to reach and find an area that caters to that demographic. You will then want to research the market by considering the competition in the area and how your business will differentiate itself.

In analyzing your potential locations, you need to look at costs: I recommend creating a spreadsheet where you put all your costs associated with each place you are considering. You can now make a side-by-side comparison of different sites with a cost spreadsheet.

Related: How Your Business Can Be Its Own Landlord

2. Tour with your general commercial contractor

Once you have visited all locations and analyzed the costs, you will tour the locations with your general commercial contractor. You will want your general contractor to assess the condition of the walls, floors, roof and foundation to ensure they are in good shape. In addition, check the availability and condition of electrical, plumbing and HVAC systems to ensure they are adequate for the intended use. Finally, if you need gas, you will want to ensure that gas is currently at the premises.

Make sure you have your general contractor evaluate the accessibility of the space. Ask your general contractor whether the property meets American With Disabilities (ADA) requirements.

After you tour with your general contractor, if you want to submit an offer, ask your general contractor to provide you with a quote. This quote will allow you to evaluate the cost of any necessary repairs or renovations.

Related: How to Start an Airbnb Business Without Owning Property

3. Draft and submit a lease offer

If you are working with a real estate broker, they will be able to assist you in drafting your lease offer. You will want to ask your real estate broker for comps before you let them know the lease rate you want to offer. Remember, when reviewing comps, you need to know the big picture. Landlords often give tenants a cash allowance and free rent to get a higher rent.

After reviewing comps, determine your budget. Decide how much you will pay for rent, security deposit and other fees. Also, decide on the length of the lease you are comfortable with. At this time, you or your real estate broker are in a better position to prepare a letter of intent, often referred to as a LOI. Your LOI should outline your proposed terms, including the length of the lease, rent amount, security deposit and other relevant details.

4. Wait for a response

This part is the hardest for many of my clients since once the ball is out of our court, it can be challenging to know when it will come back in. If you seem too anxious, it will affect your ability to negotiate.

5. Review and negotiate

Once you receive the response from the landlord, you will either continue your negotiations or move on to another property. Please note that it is scarce for a landlord to accept an original offer from a tenant. Therefore, if you continue the negotiation process, you will engage in further negotiations until you reach a mutually acceptable agreement. This process can be as quick as a few weeks, but complex deals can last over a year.

Related: Cultivate Your Negotiation Skills For Entrepreneurial Success

6. Lease draft

If you agree with the landlord on the LOI, you will wait for the lease draft to review. I recommend you interview and decide on a commercial real estate attorney skilled in lease review and tenant representation during this time.

7. Attorney lease review

Once you receive the lease draft, send the lease along with the agreed-upon LOI for your attorney to review. Additionally, it is essential that you carefully read the lease agreement to ensure you understand the terms and conditions. You, along with your attorney, will want to verify the terms. Make sure that the lease agreement accurately reflects the terms that were negotiated.

Related: 8 Essential Real Estate Questions To Ask Potential Franchisors

8. Final inspection

Before you sign the lease, I recommend you do a final inspection. Typically the general contractor will do an initial review at no cost before this point. To get an in-depth inspection, they will require a fee. Considering the financial costs involved in the lease, it is a good business practice to pay for this final inspection.

9. Execute the lease

After you are comfortable with the lease and the final inspection, you will then be executing the lease. It is important to note that typically your time will start ticking when the lease is mutually executed. This time is most importantly specific to the free rent period.

Related: Why Real Estate Agents Should Take Advantage of BPOs Right Now

10. Hire an architect, if applicable

You may need to hire an architect to draw plans if you make significant modifications. If the landlord has existing plans, it will save you money and time. I recommend you ask for these plans during your LOI negotiations.

If you need to have plans drawn, your architect will submit them to the city once they are complete. Each municipality has different speeds at they operate. You need to understand that you can only start your build-out once the plans are approved.

The process of leasing commercial real estate can be complicated and time-consuming. Therefore, I recommend you work with a commercial real estate broker, a general commercial contractor and a commercial real estate attorney to assist you in your journey.

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Roxanne Klein

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February 20, 2023
What to Know Before Signing a Commercial Lease

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Opinions expressed by Entrepreneur contributors are their own.

When it is time to start looking for a commercial space to lease, there are many items to keep in mind. If this is the first time you have leased a commercial space, there are certain factors I recommend you know in advance before beginning your search.

1. Zoning

First and foremost, you must understand the concept of zoning. Zoning laws control what types of businesses may operate on any specific property — next, list cities where you are interested in opening your business.

Once that list is created, you can either go online to the cities’ planning departments’ websites, call the planning departments or visit in person. I recommend you visit in person since it can expedite the process. When you speak to the person in planning, let them know the exact details of the business you will be opening.

Remember that once you have an address of interest, you will need to check in again with the city. This time you will give the planning department the address and confirm that you can open your business at the address. Also, ask the planning department if your use is permitted by right or by permit. If it is by right then, you should be good to go regarding your use being allowed to operate. However, if the planning department mentions the use is allowed by permit, you will need to ask follow-up questions. The follow-up questions should include finding out what permits you will need, how long they will take to obtain and how much the permit cost.

Related: 6 Overlooked Investment Opportunities in Commercial Real Estate

2. Size

Once you understand the zoning you are looking for, you need to know your ideal space size. If you need to know the square footage for your type of business, I recommend you research it before starting your search. You can quickly get an idea of the size space you need by using the internet and searching square footage and your use. I also recommend walking into similar businesses to get an understanding of space.

Related: Criteria to Consider When Renting Commercial Space

3. Customer demographics

Next on the list is to know who your customers are through demographics. Age, average incomes and population are the key demographics you will want to keep in mind. For reference, in my markets of the Inland Empire and San Gabriel Valley regions of Southern California, most retailers seek sites with a minimum of 100,000 people within a three-mile radius.

Additionally, you will want to know when your business will be the busiest. If you expect lunch to be critical, you will also want to know the daytime population numbers near the potential space you will be leasing.

Knowing who your customers are will assist with understanding if visibility is vital to your business. Are you a destination tenant or an impulse tenant? If you are an impulse tenant, you need high visibility. Without high visibility, potential customers will have more difficulty seeing you and will not be able to visit your store.

An excellent example of an impulse tenant is dessert. People often decide to have ice cream because they see it in a shopping center. Since prime street front space leases at a premium, you will have more leverage with landlords if visibility is not a significant concern for your business.

Related: What to Do When Your Ideal Customer Isn’t Who You Expected

4. Traffic counts

If you need prime visibility, you will also want to pay attention to traffic counts. In commercial real estate, cars per day are examined. As a point of reference, 25,000 vehicles per day on the main street where the site is located is a minimum number many retailers are looking for when high-traffic areas are needed.

5. Access

Next to consider is access. It does not matter if you are an impulse or destination tenant. Access is a critical component in deciding on a space to lease. When figuring out the access for a potential site, make sure to drive all streets in all directions. Please pay attention to the road’s lines and whether they are broken. Also, pay attention to street medians and no U-turn signs. You want to make sure your customers will be able to access your business conveniently.

Related: How to Make Your Product More Accessible to Customers

6. Signage

Signage can also be critical. Most centers have monument signs. Often tenants think that if they are leasing a space that had a monument sign prior, they will be able to take over that sign. That is not the case. You only have the right to use a monument sign if it is in your lease.

When considering a center, I recommend you fully drive the entire center and take pictures of all the monument signs. In your offer, you must include these images of the monument signs and the specific panels you request rights to utilize.

Related: 5 Major Leasing Deal Points to Know Before Signing a Lease

It is essential to realize that there are basics in site selection. If your company has done its homework in advance, your site selection process will be simplified when looking for commercial space to lease. If you have an understanding of what you are looking for but also keep an open mind, the process of finding a location will run smoother.

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Roxanne Klein

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January 18, 2023
Man Builds Backyard Airbnb Treehouse, Makes Enough to Quit Job
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- Will Sutherland owns a treehouse Airbnb on his property. It took him about six months to build.
- When he first got the idea, he thought it’d be a pipe dream he’d never be able to do.
- Now, he makes $30,000 per year renting it out and gets to watch guests make memories in it.
This story originally appeared on Business Insider.

Courtesy of Will Sutherland and Sabrina Hartley via Business Insider

This as-told-to essay is based on a transcribed conversation with Will Sutherland, who owns a treehouse Airbnb. It has been edited for length and clarity.

Even before I bought my house, I had the idea of building a treehouse on the four-acre property. When I walked around the site for the first time, I saw two trees sitting over a rock ledge and wanted to put a treehouse there. At the time, it was a pipe dream that I never thought I would actually be able to do.

I built the treehouse by myself, and it took me about 6 and a half months

I carried up every piece of wood, every piece of floor, the roof trusses, the floor trusses, and the big quad beam. I also sourced a bunch of cedar logs from a friend who was having a house built. I have a sawmill at my house, so I was able to mill all the cedar for the siding.

Sabrina Hartley via BI

When I told my now wife, Sabrina, that I was building a treehouse to rent on Airbnb, she said: “As long as you build another bathroom for guests, I’m all for it.” For years, our guests in our Airbnb skoolie — a converted school bus — had been using the bathroom in our house. It was a necessary inconvenience since the skoolie didn’t have a toilet or shower.

When I built the treehouse, I also built a bathhouse with a shower and a toilet at the same time. Now all of our guests use the bathhouse.

Sabrina Hartley via BI

Sabrina helped me with some of the details, like the floor finishing and trimming some boards. She was by my side every day when she got home from working as an arboretum specialist at the Virginia State Arboretum.

The treehouse is small but has a lofted bedroom to add square footage

It’s like a bunk bed and is great for kids. There’s also a main queen bed in the treehouse too. There’s no running water, but I do have a five-gallon water tank for hand washing and brushing teeth. There’s also a hotplate so guests can heat up the water, a window unit air conditioner, and an electric heater.

Sabrina Hartley via BI

I built a staircase in front, which is kind of steep, and an emergency exit in the back that’s more of a ladder to get into the treehouse. Since it sits on a rock ledge, the front of the treehouse is about 18 feet from the ground, and the back is about 14 feet.

The first year, I earned $30,000 from the treehouse rental

The treehouse gets thousands of views per month on Airbnb, and I’m booked for months out. The nightly price for the treehouse fluctuates between $160 and $250 a night, depending on the time of the year.

With the skoolie and the treehouse, I started enough money from Airbnb to quit my job. I now have a lot more time to help friends and family with projects, and to daydream about new things I want to make. I also get to see them come to fruition sooner than I used to with my full-time job.

Sabrina Hartley via BI

Since I’m now in the business of hosting people, I’ve had to change how I go about my day. I can’t be outside using the chainsaw or running my sawmill when there are people trying to read a book on the porch of the treehouse. Once I see guests leave, I’ll quickly mow the grass.

We basically live in a little miniature community here, flanked by our bus guests and treehouse guests all the time.

Sabrina Hartley via BI

I feel fulfilled seeing guests create quality memories at the treehouse, and income from Airbnb has enabled me to work from home which has given me more quality time to spend with my friends and family.

Axel Springer, Insider Inc.’s parent company, is an investor in Airbnb.
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Cari Shane

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January 3, 2023
Why Insurance Policies Are Critical to Your Rental Business
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Opinions expressed by Entrepreneur contributors are their own.
As an investor, taking calculated risks is part of your job. Not every investment is profitable, and you can’t always know the risks you’re taking when buying a property. Problems could arise many years down the line. For example, an apparently sound building could develop infrastructure problems after several years of ownership. Or an unpredictable squabble between tenants could turn into a liability issue you couldn’t have foreseen.

For this reason, it’s essential to protect yourself from risk by purchasing insurance. Both you and your tenants should have coverage to protect you should something unpredictable occur. But how much will your coverage cost? Why do your renters need insurance, too?

Let’s explore these questions and discover why insurance policies are critical to your rental business.

Related: The Beginner’s Guide to Investing in Rental Properties

Landlord insurance

Like any insurance coverage, landlord insurance protects you and your rental business against potential losses and liabilities.

Here’s how it works: When you buy a property, you work with an insurance provider to decide which dwelling policy (DP) you want. Dwelling policies are insurance plans for property owners with varying levels of coverage.

For instance, the cheapest dwelling policy might only provide basic coverage for fires or storms. More substantial dwelling policies may add other types of natural damages, lost rent if those disasters make your units uninhabitable or liabilities.

What does landlord insurance cover?

A typical landlord insurance plan covers three types of losses:
1. Property damage to your building or equipment, including that caused by natural disasters, fires, wind, lightning or criminal break-ins
2. Lost rent from months wherein your properties are uninhabitable due to any of the above damages
3. Liabilities, or legal claims (including medical bills, legal fees or court costs) made against you, usually resulting from an injury on the property.
These three types of coverage are standard across many insurance plans. However, you also have the option to purchase additional coverage. These add-on policies may cover vandalism, construction damage, or upgrading to fulfill building or health code policy changes.

Another thing to note is that flood and eviction insurance are not included in a typical landlord dwelling policy. Coverage for these losses must be purchased separately.

When deciding on your coverage, think about where your properties are located. Is the geographical area vulnerable to flooding, wildfires or earthquakes? Is the crime rate in the neighborhood high? If so, you might consider purchasing more comprehensive insurance coverage.

How much does landlord insurance cost?

The average cost of landlord insurance is around $1,200-$1,300 a year, paid in monthly installments. This is approximately 25% more than a typical homeowners insurance policy with the same coverage — because renters tend to introduce more risk.

However, the cost ultimately depends on several factors, including the building’s age, the materials used to construct it, the presence or absence of pets, the dwelling policy you choose and the location of your property.

In general, dwelling policies that use replacement cost value (RCV) are valued higher than those that use actual cash value (ACV). RCV represents the cost of rebuilding your property at today’s construction rates, while ACV represents the current, actual value of your property. Coverage based on RCV will lead to higher premiums.

Why buy landlord insurance?

If you take care of your properties, do you really need to be insured? Landlord insurance is highly valuable and usually worth the monthly fee. Here are some of the top reasons to purchase landlord insurance:
- Protect your investment: You can’t predict what might happen to your properties or your tenants. It’s best to be prepared.
- Achieve better interest rates on your mortgage: Some lenders require landlord insurance.
- Take advantage of tax deductions: Landlord insurance premiums are usually fully deductible as operating expenses that you can subtract from your taxable income.
Related: Getting Your Feet Wet in the Rental Property Business

Renters insurance

If landlord insurance protects your properties, what does renters insurance cover? Your landlord coverage won’t cover every loss related to your rental properties. Your renters need insurance coverage for their losses as well.

What does renters insurance cover?

Like landlord insurance, renters insurance typically covers three types of losses:
1. Personal property and tenant belongings, such as clothes, electronics or valuables
2. Liabilities due to a tenant’s responsibility for an injury or property damage
3. Living expenses in the case that a tenant’s unit becomes uninhabitable and they must find other accommodations until repairs are made
You may decide to offer a standard renters insurance package to your tenants, but they might also wish to purchase their own coverage. For instance, if a tenant keeps particularly valuable items in their unit, they may wish to add on scheduled personal property or valuables coverage.

Tenants may also purchase theft extension coverage to cover their cars, boats or trailers; credit card coverage for unauthorized transactions; or other add-on policies.

How much does renters insurance cost?

Renters insurance is relatively inexpensive for tenants. The average cost is around $15 per month. However, this cost varies depending on the coverage level.

Ultimately, the benefits offered by renters insurance are well worth the monthly premium. Your tenants may not appreciate the extra fee up front, but they’ll be thankful they have coverage should something happen.

Why require renters insurance?

Many landlords make renters insurance a requirement to rent their units. This is generally a smart move, and here are our top reasons why:
- Prevent resentment for damages: Your tenants are less likely to sue you or pursue litigation if their insurance policy covers the loss.
- Be transparent: In the event of a natural disaster, for instance, your tenants may expect that your landlord insurance will cover their belongings. They’ll be surprised to learn that it doesn’t. It’s better to inform your tenants upfront.
- Avoid unnecessary complications with your insurance: If an accident occurs on your properties, it’s likely that your tenants’ renters insurance will kick in first. This saves you the trouble of interacting with your insurance company until necessary.
Related: 5 Real Estate Mistakes That Could Make You Lose Money

Insurance tips and tricks

If you’re ready to get started with landlord and renters insurance, here are a few tips and tricks:
- If your property management software offers renters insurance as a secondary feature, use it: This saves your tenants the trouble of finding a policy themselves and allows you to determine which type of coverage you think your tenants need.
- Track renters insurance policies: Remind tenants to renew their policies before their coverage expires.
- Avoid making claims for minor damage: Conserve your coverage for more severe losses and prevent your rate from increasing.
- Ask for a discount if you own multiple buildings: You never know which deals are available until you ask.
Disasters and accidents can be entirely beyond your control. However, by preparing for them ahead of time, you’ll know you’re protected in case of a major loss or casualty in your rental business. Both you and your tenants will appreciate the peace of mind and protection offered by insurance.
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Dave Spooner

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November 7, 2022