How to become a landlord?

If this is the first time you are considering to become a landlord, you should get yourself educated. Join local airbnb groups for insights, check out property management platforms if you are tech savvy, take a landlord certification course if you prefer to have a structured education. Make sure you understand how utilities will be divided between the main house and the accessory dwelling unit. Look into sub-meters for power and water, check options for whole house early leak detection.

We want to help more homeowners understand an ADU (Accessory Dwelling Unit) as business asset and inspire them to start their own ADU rental project.

There are thousands of accessory dwelling units ranging from garage conversions, detached ADUs, and ADUs over garages, which are potentially good rental business.

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Being a landlord can be a wonderful way to make some extra money and to help you acquire an investment property. But being a landlord is not as easy as simply depositing a rent check every month.

Tip#1: Treat being a landlord as a business. Becoming a landlord might be a good option, If you simply want to have a passive income. Many people believe that becoming a landlord and starting a business in this way is pretty easy. For those who can afford to hire a letting agency to manage the property, this is actually the case but for others, there is a larger commitment. If you are managing the property by yourself, you’ll need to deal with maintenance issues and make sure that rent is paid on time. It is also worth noting that if there are no tenants in the property for a period of time, you’ll be responsible for the mortgage payments, if any.

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Responsibilities. This doesn’t just involve making sure that tenants are happy with the property and resolving any issues, you must also consider the health and safety regulations. As a landlord, you must ensure that the property has safe appliances. 

Costs. You should make sure that you are aware of the additional costs that you will encounter when you start a landlord business. You’ll need to pay for insurance on your properties and appliances. On top of that, you’ll need to pay for anything that is broken in the property and relatively quicky so that your tenants are not without important appliances. You might also need to pay for shared communal spaces. And of course, do not forget to pay all taxes.

In addition to meeting these requirements, you should research the market, identify competitors, make price segmentation, and decide on marking and promotion. In the end of your research, you must answer correctly how much to charge for rent? Frankly it’s not the rocket science because you have at your disposal some instruments. To start, check out similar listings in your area to get a general range of how much rent you can charge for your ADU. Sites like Zillow,, Craigslist, and Trulia are great places to look first. 
If you can overcome all mentioned difficulties and calculate all of these things, you might be ready to go ahead with becoming a landlord.

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Tip #2Abide by the 1% rule (if possible) The 1% rule is an easy way to determine whether it makes sense to buy (or build) an investment property. Using the 1% rule, a property that costs $600,000 should rent for $6,000 a month to help ensure you’ll make money. But how likely are you to get $6,000 a month for a rental property? Not likely, given the median rent price in California is about $2,750. So, you’ll want to keep the purchase price of a rental property closer to $300,000 or less to have a positive cash flow. This is nearly impossible unless you’re looking at constructing an accessory dwelling unit.

Tip #3Do not save on design. Design matters, and you should never try to cut corners. In fact, hiring a cheap and inexperienced designer could actually end up costing you a lot more than what you saved. It’s not enough to hire any designer just because they have a nice portfolio. Find designers who focus exclusively on ADUs, that understand what universal design is and can guide you towards cost-efficient solutions. Or work with plans that have design included.

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Tip #4When in legal doubt, hire a lawyer. Landlords are fundamentally no different than any other type of business owner — they aim to make their business profitable while steering clear of liability. In certain situations, hiring or consulting with a lawyer to help you achieve these goals is a smart move. 

Here are some of the most common scenarios that will benefit from a professional’s help:

Evicting a Tenant
In most states, an eviction lawsuit takes much less time than regular civil cases. But in exchange for expedited treatment, landlords must follow highly detailed rules, from notifying the tenant of the lawsuit to filing the right papers and forms. Winning an eviction lawsuit, even one that you’d think is a slam-dunk, isn’t so easy.

Being Investigated or Sued for Illegal Discrimination
You don’t need a lawyer every time a prospect or tenant accuses you of illegal discrimination. But even landlords who diligently comply with fair housing laws still get these accusations from prospects they reject or tenants they evict for legitimate business reasons.

Sued for Injury or Illness
If a tenant or guest sues you and claims that she got hurt or sick because of your carelessness, you’ll almost certainly want to hire a lawyer to defend you. Personal injury cases are typically high stakes, and personal injury lawyers know their way through these cases much better than you do.

Sued for Major Property Damage
Tenants or guests may also sue you if they think that your failure to maintain the rental property caused damage to their property. For example, if you don’t maintain the roof and a leak occurs during a normal winter rain, soaking the tenant’s furniture, the tenant may look to you for compensation.

Audited by the IRS or the State 
You’ll probably want to hire a lawyer to help you with an audit when there’s a lot of money at stake. If you made a serious mistake on your taxes that the government hasn’t yet noticed — for example, you didn’t report certain income or you took deductions for which you’re not entitled — hiring a lawyer before the auditors uncover the mistake can help you avoid a potentially damaging and embarrassing situation.

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Tip #5Keep your tenants happy Being a landlord isn’t just kicking back and collecting rent checks. Keep in mind that as a landlord you have a few responsibilities. Just as a landlord has certain expectations from his or her tenants, from paying rent on time to honoring the lease agreement, a tenant has certain expectations from a landlord. Landlords should do their due diligence when it comes to landlord-tenant law. Laws vary state by state—even city by city—in terms of landlord responsibilities, so be familiar with local regulations. 

Here is a handy list of common landlord responsibilities:

  • Complying with all state and local health and building codes
  • Maintaining structural components and a reasonably weather-protected unit
  • Providing the necessary heat, electric, and hot and cold water facilities
  • Making any requested repairs promptly
  • Ensuring that living conditions are peaceful and quiet, as well as hazard-free
  • Maintaining a pest-free environment

Tip #6Have adequate insurance. If you’re planning on renting out your single-family home or a second home/investment property on an ongoing basis, then you’re likely a candidate for landlord insurance, because a homeowners’ policy typically won’t protect you in this scenario. Like a homeowner’s policy, landlord insurance typically covers the building itself (and other structures on the property, such as sheds or fences) if there’s damage from a fire, lighting, wind, hail or another covered loss. To purchase homeowner’s insurance, you must live in the home. Homeowners insurance may offer coverage if you’re living in your single-family home and renting out a room to tenants, depending on the number of people renting or the length of their stay in your home. Coverage varies by insurer or policy, so check with your agent before you rent out a room in your place or your ADU. If you plan to rent out your entire home to tenants, you’ll need landlord insurance. A local agent can help you understand what types of scenarios you need while you’re renting your ADU to tenants. Looks into tenant insurance as well. You might want to advice your tenants to get one.

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Tip #7Include in your lease as many details as possible. Here are just a few things you should think about including in your lease:

  • When is rent due?
  • Is this a long-term lease (1+ years) or month-to-month?
  • Do you allow pets? Size, type, and quantity restrictions? Is a deposit and pet rent required?
  • Is smoking allowed?
  • Utilities included?
  • Is parking included?
  • Access to yard space or other outdoor areas
  • Anything of value that you are including in the rent

Take all your amenities into consideration.

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Tip #8Screen tenants /Screen Out Bad Applicants. One of the hardest jobs facing any landlord is trying to find a good tenant. Screening process is one of the most vital steps you can take as a successful landlord. It can help to minimize some of the risks of being a landlord, such as late payments and non-payment, tenant eviction, and property damage. Landlords usually conduct screening by running credit checks, verifying income, confirming employment, conducting criminal background checks, and verifying prior landlord and residence histories to assess whether a prospective renter will make a good tenant. 

In addition to checking with previous landlords, you also can check local housing court records to see if the prospect has any evictions and even look for judgments for damages in their court history. Once you have collected the application, reviewed the tenant screening documents, and verified the tenant’s information, it’s time to conduct an interview. It’s recommended you go over the documents with the tenant to give them an opportunity to review the findings with you and provide explanations. 
In many cases, you won’t find an ideal candidate, but will rather scrutinize the “overall package” of characteristics. If one item is a bit less than ideal, but the other areas look good, you may potentially have a good candidate. You may be inclined to trust your gut about an applicant that looks bad on paper but seems like a nice person. Many landlords have suffered by giving an applicant a chance when the verifiable information told them otherwise. Look at the overall package and not just a kind personality.

Tip #9Set Up a Google Voice Number. The first thing is to set up a Google Voice number. It’s a free service provided by Google that allows you to direct calls through Google Voice to your cell phone without having to give people your actual cell number. It’s a nice layer of protection and I highly recommend setting it up regardless of whether you’re renting out an accessory dwelling unit or founding a startup. You can even set up a professional business voicemail.

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Tip #10 Have Emergency List at hand. You should be the first point of contact for repairs, complaints, upkeep, etc. Accidents are bound to happen, so having a list of reliable professionals that you can contact to fix things around the unit is a smart idea. Here’s just a quick list of professionals you should consider having on your list: 

  • Plumber (or two)
  • Electrician
  • Gardener
  • Roofer
  • General handyperson
  • Exterminator

Being a landlord is not an easy task. Landlords are responsible for providing a habitable and safe living environment for their tenants. They should be prepared to address repairs—particularly those that affect habitability or safety—in a timely manner. 

Starting a business as a landlord with a few properties can be a great move if you have the money to do it. There are always people looking for rental properties, and you can pay back your mortgage and earn more on the side at the same time. Do your due diligence to address risks, or get certified as a landlord.

Landlord Certification Course

The Landlord Certification course will focus on both the advantages of being a landlord as well as the duties and laws that you must follow to be successful.

From finding tenants to the business of being a landlord, from maintenance to how to manage turnover – learn the steps for just $99.

Heads up – this certification may be required by your financial institution, if you are planning to take a loan. Ask about the requirements up front.

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