In theory, becoming a landlord seems easy enough: purchase a home, hand someone else the keys, and collect a monthly rent payment. But managing a residential property isn’t a matter of simply signing on the dotted line. From buying the home to picking tenants to making sure the heat stays on, there’s a lot that goes into being a landlord, say those who own investment properties on Long Island.
Despite the work it entails, if it’s done right, Long Islanders can see a pretty penny when it comes to real estate, landlords, real estate agents and attorneys say.
“Real estate is the best investment,” says Wendy Liotti, a real estate agent with Rowan Realty in Carle Place. “If you are considering an investment property, make sure you are prepared to be a landlord. Despite the inconveniences, owning property can be profitable and well worth the effort involved.”
Here are a few tips to keep in mind if you’re considering making the leap.
1. It’s not as easy as it looks
While owning a rental property may be profitable, it is also a commitment that takes up a significant amount of money and time, says Ian Wilder, executive director of fair housing agency Long Island Housing Services in Bohemia and a former real estate attorney.
“My first piece of advice is to consider this a full-time business,” says Wilder. “Make sure you have the time and resources available to devote to it. It’s not something that will be an ATM that provides cash for you once you purchase it.”
Ali Rizvi, a builder with R2 Restoration and Design in Woodbury, owns five residential properties on Long Island, as well as several upstate.. He notes that while buying a rental property is easy, making sure it’s well maintained is the hard part. Rizvi says he visits his rental properties twice a week and as needed when issues — such as fallen trees or plumbing problems — arise.
“The key thing is maintenance. I drive by and make sure there’s no garbage outside. During the winter, I have to make sure snow removal is happening really early,” Rizvi says. “My maintenance also includes a check to make sure the people who said they’re going to live there are actually the people who are living there. I have to make sure they’re not subleasing it.”
2. Be prepared to pay
Landlords should be sure to have a good amount of money set aside to take care of mortgage payments, insurance, maintenance and upkeep costs, as well as additional permits that may be required from the town or village, real estate agents say. Property owners can only claim one property for STAR exemptions, so if you’re not planning to live in the same dwelling as your tenants, be prepared to pay full real estate taxes on your rental property, Wilder says.
It’s also prudent for landlords to have a certain amount tucked away for potential legal fees, says Liotti.
“Sometimes tenants are not fulfilling the terms of their lease and stop paying rent,” says Liotti. “If this happens, you will need to hire an attorney to start eviction proceedings.”
3. Do your research
Darrie Dolan, 47, inherited a Freeport rental property from her grandfather. Four years later, she advises anyone looking to become a landlord to “research, research, research.”
“If you don’t, you’re the one who’s going to suffer,” says Dolan, an Oceanside resident.
On the list of things home buyers should research, Dolan says, are landlord and tenant rights.
“You would think you only need to know your rights, but knowing the rights of your tenants can help you make better decisions,” says Dolan.
Rental laws can differ across county, town and village lines, and buyers should be vigilant in making sure the property they are interested in renting out is zoned for its intended use, says Liotti.
“Just because a property is currently being used as a multifamily dwelling does not mean the current owner is following the zoning requirements of the municipality where that property is located,” Liotti says. “A trip to the building department in the municipality where that property is located could confirm permitted use and also show whether there are any open permits or violations on the property. A title search will uncover any liens on the property.”
Study the neighborhood your investment property is in, says Jaishree (Jane) Zilpelwar, a real estate agent with Realty Connect USA in Woodbury. She suggests that individuals find out how much other landlords are charging for rent and price their apartment competitively.
“Suppose a house is going for $3,000. Price yours at $2,950. It’s more attractive and you’ll have more interest,” advises Zilpelwar.
4. Location, location, location
Buyers unsure of where to purchase should consider looking at communities close to highly rated school districts and train lines, says Zilpelwar. She says many of her clients look to rent in Hicksville, Levittown, Bethpage and Plainview, because of their proximity to Long Island Rail Road stations and the easy commute to the city.
“One of the biggest reasons people want to buy or rent in Hicksville is because they can park in the parking garage if they’re a Town of Oyster Bay resident,” she says. “ And a lot of them would rather walk to the train station.”
Steve Rosmarin, an agent with Douglas Elliman Real Estate in Westhampton Beach, says the most important thing to keep in mind when buying a rental home is the annual property taxes.
“Since the tenant doesn’t pay for taxes, you want to make sure you’re not spending all your income on taxes,” he says. “The property should be profitable.”
Rosmarin owns rental properties in Quogue, an incorporated village, and in Quiogue, a hamlet — both in the Town of Southampton. Annual taxes for both homes are each under $4,000.
“If I rent something out for $3,000 a month and only have to pay $4,000 a year in taxes, that’s basically $32,000 in profit,” Rosmarin says. “There’s a big difference between that and paying $20,000 in taxes.”
5. Make sure the home looks good inside and out
Landlords looking to fill a home quickly should avoid purchasing a home that needs a lot of renovations — after all, an empty home makes no money, Zilpelwar notes. While properties don’t have to be completely upgraded, they should be move-in ready and thoroughly — if not professionally — cleaned, says Zilpelwar.
“You put a fresh coat of paint in a clean house and it’s magic,” advises Zilpelwar.
Simple maintenance is also key, Zilpelwar adds. Doors and windows should close, appliances should work, and smoke and carbon monoxide detectors should be in place. Don’t neglect the outside either — untrimmed hedges can send a message to tenants that their landlord doesn’t care about the property, Zilpelwar says.
“When the house is well-maintained, if something breaks, tenants know the owner will take care of it,” Zilpelwar says.
6. Screen your tenants
Liotti advises that landlords carefully screen their tenants, a service that can be performed by companies such as the Tenant Screening Center, SmartMove, MyRental and the National Tenant Network, which will perform comprehensive background and credit checks. But be aware: If you’re planning to pass the cost of the screening onto the tenant, New York State laws say they legally cannot be charged more than $20, says Liotti.
“Screening is important to eliminate tenants with criminal or prior eviction records,” Liotti says. “It is also important to review their income and employment history to make sure they can afford the apartment and that they have a secure job. If a landlord has to evict a tenant for not paying their rent, it can be a very costly process.”
If you’re wary about screening your tenants yourself, Karin Leger, an insurance agent who manages a home owned by her parents in Westbury, suggests passing the task on to a real estate agent.
“Look for the guidance of your Realtor to help. They have much more exposure and can be much more objective when they vet someone,” says Leger.
Leger also recommends asking potential renters for references. “You want someone who will treat the home as if it is their own and be a good neighbor.”
Landlords should be well aware of the federal Fair Housing Act, which prohibits discrimination based on race, disabilities, sex, religion, marital or military status, or sexual orientation, among other characteristics.
7. Build a relationship with your tenants
A good relationship between tenant and landlord is beneficial for everyone, says Wilder. “This may be a business transaction for you, but for your tenant, it’s their home,” says Wilder.
It’s important for landlords to be readily available to their tenants and highly responsive to issues — especially those regarding safety — that may arise, says Wilder. Maintaining a positive, respectful relationship has been a huge help for Dolan, who has had the same tenant for four years, she says.
“You have to find a tenant you get along with and you know they’re going to do the right thing,'' says Dolan, ''whether it’s telling you the dishwasher is broken or telling you they lost their job and are going to be behind on their rent.”
8. Recordkeeping is key
One way both landlords and tenants can protect themselves is by keeping solid records, says Wilder. That includes receipts for payments and a written lease, he adds.
The lease — which should include the name of the property owner (as opposed to a manager or another intermediary) and tenant — should clearly outline expectations such as the cost of monthly rent, length of the contract, any utilities a tenant is expected to pay for, penalties for late payments and if there are amenities outside the home, such as a backyard, patio or parking space, they have access to, says Wilder.
Liotti also encourages landlords to require a provision in the lease that allows them to inspect the property if the tenant has been given ample notice.
A lease “provides a sense of security,” says Wilder, and “there’s less chance of miscommunication.”