Like any profession, success as a landlord depends on hard work, determination, sharp business acumen and a touch of good luck. Many people find investing in real estate a stable way to boost their income. However, those who rush in with little advanced preparation may find their landlord journey filled with more money pits than income-producing properties.

Attaining success as a landlord starts before even selecting an investment property. Those who first take time in educating themselves often report greater satisfaction with their side hustle in property management. Some even go on to make their landlord duties a full-time endeavor and reap high rewards in passive income.

1. Run Some Comps

Becoming a landlord means playing a numbers game. Before investing in a property, research average rents in the area. Remember, locations with high rental price tags also require higher initial investments.

Research neighborhood trends, but avoid selecting properties with negative income potential now in hope of future gains. Rent should always exceed the mortgage payment while allowing a monthly profit. Purchasing property requiring a ton of upgrades seems a prudent way to lower the initial price tag, but keep in mind that repairs often cost much more than originally estimated.

2. Protect Your Investment

All landlords should insure their investment property, but the type of insurance to select depends on the kind of rental owned. Those renting out a mother-in-law suite in their own home may find their homeowners’ insurance company provides the coverage they need. Be sure to include the language “unit rented to others” in the policy.

Those who rent second homes or other detached structures should insure each property with a landlord insurance policy. Whenever cost permits, aim for a policy that covers all natural disasters when not otherwise excluded, and carefully review what coverage the policy omits. Landlords in floodplains, for example, may need to invest in a separate policy to protect property from water damage.

Additionally, all landlords should carry liability insurance. This protects the landlord should the tenant become injured on the property due to an unknown hazard.

3. Attract Quality Tenants

Tenants serve as the lifeblood for any landlord business. Without good tenants, the best rental property in the world still will generate zero income.

Make sure to screen all tenants carefully, including a criminal background check and a credit check. Inquire as to the number of people who will occupy the residence, and require a separate criminal check for any prospective tenants over the age of 18.

Many landlords set income limits for prospective tenants. Most experts advise establishing an income requirement three times greater than the amount of the monthly rent. However, wage stagnation means fewer tenants can meet this standard, so evaluate each application on a case-by-case basis and consider those with lower income but a stellar employment history.

4. Design a Written Lease

In many jurisdictions, no statute dictates that a lease must be in writing unless it falls under the Statute of Frauds, which requires written documentation for any contract longer than one year. However, written lease agreements for shorter time periods benefit landlords should future conflicts arise.

Specify all stipulations for property use in the lease agreement. Many landlords include conditions on anything from banning certain dog breeds to restricting smoking to designated areas. Landlords who own properties within homeowners’ associations (HOA) purview should provide tenants with copies of all bylaws and clearly indicate that repeated HOA violations constitute grounds for eviction.

5. Know the Law

Landlords must comply with local, federal and state law in regards to matters from zoning to anti-discrimination mandates. Landlords may not discriminate on the basis of gender, race, national origin, religious preference or disability. They can’t discriminate against those with small children, although they may establish maximum occupancy guidelines for tenants.

Landlords must provide reasonable accommodations for those with physical disabilities that aid in the tenants’ enjoyment of the property. While landlords do not need to necessarily install safety bars in the shower by themselves, they should allow tenants to make modifications to the property as long as those accommodations do not create unreasonable difficulties for future tenants.

6. Keep Good Tenants Happy

Those in successful businesses know it costs far less to keep good customers than to find new ones. The same goes for tenants. The best landlords hold on to on-time rent payers by providing incentives for renewed tenancy.

Many landlords stipulate that after the agreed lease period, tenants may remain on the property on a month-to-month basis. This provides tenants with little security and a lot of fear that they may need to plan a move in 30 days. Instead, have stellar tenants sign a new lease, perhaps offering an incentive such as a one-time rent discount.

7. Expand Inventory Slowly

Initial success in the landlord business prompts many to build their rental portfolio as quickly as money permits. Avoid allowing initial success to lead to buying new properties indiscriminately. Treat all future property investments with the same care given to the initial income-producing purchase. Landlords with significant numbers of properties in their portfolio should consider working with a property management company, especially if they have other revenue streams to juggle.

The road to success as a landlord begins with smart decision-making. Landlords who fail to exercise due diligence in starting their rental property journey often experience easily avoidable setbacks. When approached cautiously, renting property for profit can pad any investment portfolio.