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So You Want To Be A Landlord

Jul 15, 2023 | RI and MA Real Estate Topics

When considering an investment in rental property some look no further than a multifamily. Many feel that there is no better way to build wealth than to have tenants to help pay down your mortgage.  While that may be true, there are many things to consider as you think about becoming a landlord. When you make the decision, you are making the decision to wear many, many hats–Realtor, mortgage broker, handyman, psychologist, attorney, business manager and property manager to name a few. Over the years, I have worked with both investors and those who seek to buy a multifamily to call home and I have learned much from the experience.

Location, Location, Location

One of the first things you consider might be…where should I begin to look for my multifamily? If you plan to live in your property, the answer to where would be simple – it should be located in an area where you prefer to live. When seeking an investment, some look for property in a college town where there are always students seeking housing and some feel that a multifamily in an area that may attract vacationers is the ticket. No matter what your preference, as a Realtor, I would say that consulting a real estate professional is the best place to start.

Financing Your Multifamily Dream

Matt Fenster, Branch Manager from Waterstone Mortgage in Middletown, Rhode Island believes that there are four general things to think about when considering a multifamily purchase: accessible financing, rental income potential, diversified cash flow and long term investment potential.

Accessible Financing – Multifamily properties offer accessible financing options. FHA loans allow purchases with as little as 3.5% down, while RI Housing offers conventional loans with only 5% down. These options make it easier for first-time homebuyers to enter the market and generate rental income.

Rental Income Potential – Multifamily properties unlock rental income potential. By renting out additional units, you generate ongoing cash flow to cover mortgage expenses. Rental income can also increase your loan amount, enhancing purchasing power.

Diversified Cash Flow – Multifamily properties provide diversified cash flow. With multiple units, you’re protected against vacancies or financial difficulties in one unit. This diversification reduces risk, ensuring a more stable income stream.

Long-Term Investment – Investing in multifamily properties offers long-term financial security. As equity builds and property values appreciate, you can leverage that equity for future investments. This helps expand your real estate portfolio and create sustainable income.

Doing It Yourself—Repairs and Maintenance

Are you handy? As a landlord, you are responsible for the general upkeep and safety of your rental units. This is important for the short and long term life of your investment. Consider carefully what items that you can handle yourself and be realistic about those that require a licensed professional. No one sets out to be a “slumlord” but thinking that you can handle all maintenance yourself can create a situation of disrepair and that is quickly followed by angry tenants. That combination can have a lasting impact on your rental property.  

Paying for repairs and maintenance can be as important as who may be doing the work. As a general rule of thumb, many multifamily property owners try to put 20% of their rental income aside to save for future repairs–both planned and unexpected.

Leases–The Legal Stuff

Leases protect both tenant and landlord. They provide a clear understanding of the terms of the rental arrangement. Common items such as rate and dates but also items such as insurance requirements and pet policies can all be spelled out. These days it is fairly easy to find a lease.

There are online sources, attorneys and if you work with a trusted Realtor, to purchase or rent out your property, they usually have access to customizable lease agreements through their Board of Realtors or their MLS.

Lease agreement document with keys and pen

What’s It Worth? 

When considering what to charge for monthly rent, it would be nice if the answer was– “enough to cover my total mortgage payment.” The correct answer unfortunately is– “what the local market will bear.”  Consult local advertisements for similar properties and you will find your answer. You can increase the rate a bit for extra amenities that your property might have but going too far above the local average could spell disaster and you may find yourself missing out on great tenants and thus, a vacant unit. 

Do not be afraid to negotiate any terms of your lease arrangement and price is one of them. If a great potential tenant asks for a reduced rate it may be possible to arrange for them to take some of the maintenance of the building off of your hands–like mowing the lawn.  

Determining a fair rent for your unit should help to get your property filled quickly and alleviate the dreaded vacant unit.

Great Tenants Are Out There

One of the best ways to keep your rental profitable is finding and keeping quality tenants. If you choose to work with a Realtor you can truly be hands off the advertising, showing and screening process. But, with a bit of elbow grease and a bit of money, it is not difficult to find and screen candidates on your own. 

There are many sites out there where you can advertise a unit for rent. Craigslist, Zillow and Facebook Marketplace are a few. Try to provide the best photos possible, create a great description and be clear on the rental terms. (As a side note, it is very important that you follow fair housing guidelines and avoid discrimination in your advertising and in your decision making.) If you live in a college town or are located near a major health center, you may find that these institutions have listing services internally that can take your information and make it available to their students/employees.  Word of mouth can also be very helpful. Making sure that anyone you may know is aware that you have a unit for rent.

Happy tenant moving home resting breathing fresh air

Spending time to do a thorough screening on the front end can go a long way to a good rental situation. If you go it on your own, there are many rental sites that can provide you with credit and eviction reports for a fee. Armed with that information, you can begin to check employment and landlord references.  

When contacting employers, who might have restrictions on what they can say, I generally just try to verify the information provided on the application–income, dates of employment and position. Some employers will be willing to verify the information that you already have but some are hesitant to give you numbers. A work around might be to request that your applicant provide you with a month’s worth of pay check stubs. I do also ask if the applicant’s employment is expected to continue. When considering salary, it is important to take into consideration how much rent a prospective tenant can afford. As a general rule, a maximum of 30% of your monthly income before taxes should be available for rent payments. Keep in mind that if you deny an applicant based on income or credit, federal law requires that they must receive a written notice from you letting them know why they have been denied and where they can obtain a copy of their credit report. This is called an “adverse action” notice.  You can find more information regarding generating these letters by visiting the site below:

Landlord references can be tricky. You do not want to get a great reference from a landlord who just wants their current tenant to move on because they are truly not a great tenant. One work around would be to try to get a reference from the landlord prior to the current landlord. They generally have nothing to lose by providing a truthful account of a tenancy. My questions are usually a combination of the following:

    1. Verify the dates of tenancy.
    2. Do you own the property?
    3. Was rent paid in full and on time?
    4. Was the rental unit left in good repair when they left?
    5. Hypothetically, would you rent to this tenant again in the future? 

Whatever method that you choose to find and screen applicants it is most important to treat all applicants equally and without discrimination.

Landlording—It is a Full Time Job

Being a landlord can be as demanding as any full time position out there – especially since it is a 24/7 responsibility. You will need to be prepared for late night emergency repair calls, excuses for unpaid rent and accounting for the property expenses. It is important to treat your rental as a business and to never stop thinking of it in that way. A property manager can be hired to handle all of these aspects but at a cost. It is important to reflect on your life skills and temperament and decide if the expense of a property manager may be the better route.


Rules of the Rental Road

It is extremely important to make yourself familiar with your federal, state and local rules and regulations related to renting out property.  According to the US Dept of Housing and Urban Development, 

“It is illegal to discriminate in the sale or rental of housing, including against individuals seeking a mortgage or housing assistance, or in other housing-related activities. The Fair Housing Act prohibits this discrimination because of race, color, national origin, religion, sex (including gender identity and sexual orientation), familial status, and disability.”

This general rule guides a multitude of regulations – all of which are equally important. For more information you can visit:

In the State of Rhode Island we are fortunate to have a great publication known as the Landlord Tenant Handbook.  It is a comprehensive guide to anyone (landlord or tenant) with questions regarding almost anything having to do with renting in Rhode Island.

Fairly new to the rental scene are local regulations guiding the use of rental properties for short term rentals such as AirBNB and VRBO. These regulations can vary by location and often are guided by how your property is zoned. If a multifamily purchase is planned for use as short term rental, it is  important to verify the current zoning and regulations in your area.

Being a landlord can be a great way to grow wealth but it is important to consider carefully all of the hats that you may need to wear. It is certainly not the type of investment that you can sit back and watch it grow.  It is an investment that requires time, upkeep and constant attention to detail. But if you know yourself and have a clear understanding of the jobs that you may need to outsource (and thus pay for) you can be well on your way to building your rental empire.

Elise Olson is a Broker Associate with The Donovan Group at Homes By Connect in Portsmouth, Rhode Island

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