If you're looking to invest in real estate in Detroit, becoming a landlord can be a profitable venture. However, before you start, there are several things you need to know.
In this guide, our Detroit property management experts cover everything you need to become a successful landlord in Detroit, including the benefits and risks of turnkey properties, how to manage your rental property, what to include in your lease agreement, and more.
Managing Your Rental Property
While owning rental real estate can be lucrative, learning how to become a landlord can be challenging! Managing a rental property can be a time-consuming task. Here are some tips to help you be an excellent landlord and effectively manage your Detroit rental property.
Find Quality Tenants
Not every tenant is a good fit for your rental property. Advertising your rental property on online rental platforms and social media can help you attract potential tenants. Then, be sure to conduct a thorough background check and verify their employment and income before signing a lease agreement.
Handle Maintenance Requests Promptly
Respond to maintenance requests promptly and keep your property in good condition to prevent future issues. It's also important to establish clear communication with your tenants to ensure that they feel comfortable reporting any issues that arise.
Using a property management software system can make it easier for renters to submit maintenance requests and track work orders.
Create an Air-Tight Lease Agreement
A lease agreement is the legal contract that outlines the terms of the rental agreement between you and your tenants. It should include details such as the length of the lease, the rent amount and due date, and any specific rules or regulations for the property.
Beware of using a quick, free downloadable template to create your leases. Without customization to your properties, a template can leave your rentals and income at risk.
What Goes Into a Good Lease?
So, what goes into a rental contract that protects your properties? A property owner needs to create a comprehensive lease agreement that covers all aspects of the rental arrangement to avoid misunderstandings and disputes.
A lease agreement should include details such as:
- Names of the landlord and tenant
- Rental property address
- Rent amount and payment schedule
- Security deposit amount and terms
- Term of the lease
- Renewal options
- Tenant responsibilities, such as reporting maintenance issues and upkeep
- Landlord responsibilities, such as repairs and maintenance
- Prohibited activities, such as smoking or pets
- Termination and eviction procedures
It's important to consult with a lawyer or knowledgeable property managers to ensure your lease agreement complies with local laws and regulations.
Long-Term vs. Short-Term Lease Agreements
When renting out your property, you'll have to decide whether to offer long-term or short-term lease agreements.
Long-term leases typically last for a year or more, while short-term leases can range from a few days to a few months. For rental property owners, longer lease terms offer stability and consistency, while shorter lease terms can provide more flexibility and potential for higher rental income. However, they also require more frequent turnover and maintenance.
It's crucial to weigh the pros and cons of each option and choose the one that aligns with your investment goals and property type.
Know and Follow the Law
As a landlord, it's crucial to be aware of the legal requirements and regulations for rental properties in Detroit. Some of the legal things you need to know include:
- Fair Housing Laws: These laws prohibit discrimination based on factors such as race, gender, religion, and family status.
- Security Deposit Laws: In Detroit, landlords can collect up to one and a half months' rent as a security deposit and must return it within 30 days of the lease termination.
- Eviction Laws: The eviction process in Detroit must follow specific legal procedures, and landlords must have a valid reason for evicting a tenant.
Successful Detroit rental property management requires strict compliance with regulations to avoid liabilities or lawsuits. If you're not sure your properties and operations comply with the laws, a property manager can help!
Work Hard to Prevent Evictions
Preventing evictions should be a priority for every landlord. While it might seem like you have an easy "out" if a tenant situation goes wrong, the eviction process takes time and can be costly while following the legal procedure of removing a tenant. In addition, too many evictions can lead to frustrations and significant income loss from something that can be a passive income stream.
Here are some tips to help you avoid eviction:
- Screen Your Tenants: Conduct thorough background checks and verify employment and income to ensure prospective tenants can afford the rent.
- Establish Clear Communication: Make sure your tenants understand the lease agreement and their responsibilities as tenants. Respond to their questions and concerns promptly.
- Address Issues Early: Address any issues or concerns with your tenants early on to prevent them from escalating into larger problems.
- Be Flexible: Consider offering payment plans or other solutions if your tenants experience financial hardship.
Finally, be fair and consistent. When operating multiple rental properties throughout Detroit, handle every tenant equally to avoid discrimination claims and additional issues.
What Is a Turnkey Property?
Now that you understand a little more about being a landlord let's talk about what a turnkey property is.
In real estate investing, a turnkey property is move-in ready and requires little to no repairs or renovations. These properties are often marketed to investors as hassle-free investments with immediate cash flow potential.
With turnkey investments, you don't have to handle many of the things we've mentioned in this guide! Instead, a property management company does everything for you, from finding the best properties and renovating them to placing a tenant that pays rent before you purchase the property.
Turnkey Vs. Traditional Investments
Are turnkey properties a good investment? They can be an excellent option for those who want to invest in real estate without the hassle of managing repairs and renovations while building tremendous wealth.
With these properties and the right property manager, investors can purchase a building or single-family home and trust that it has a quality tenant paying rent from the start. Investors also never have to worry about any aspects of the rental's management since the property manager handles everything.
On the other hand, traditional investments, such as buying a fixer-upper and renovating it yourself, can also be profitable if done correctly. However, with this type of property, you'll need to invest time and money to get a property into rental-ready condition, then either find a tenant and manage it on your own or hire a property manager to do those things for you.
Should You Choose Multi-Family or Single-Family for Turnkey Investing?
When it comes to turnkey properties, you can choose to invest in either multi-family or single-family homes.
Multi-family homes typically generate more income but require more maintenance, while single-family homes are easier to manage but have lower income potential. The best option for you will depend on your investment goals, personal preferences, and the turnkey property management company you partner with.
Not all property management companies have the resources to manage single- or multi-family properties. So, investors must choose seasoned real estate management professionals that can handle any property they want to add to their portfolio to grow their wealth.
What Is Rental Property Rehab?
Even with turnkey properties, there may be some necessary repairs and maintenance that need to be done on an ongoing basis to keep homes in excellent condition. Property rental rehab refers to the process of renovating and repairing a property to prepare it for rental. This can include everything from minor repairs to major renovations.
If you're investing in Detroit real estate, it's important to understand the unique challenges and opportunities of rental property rehab. For example, Detroit has a large inventory of older homes that may require more maintenance and repairs than newer properties.
Therefore, it's essential to work with a reliable contractor or property management company with the resources you need for these buildings. You'll also want to factor in the cost of repairs when calculating your potential return on investment.
What Does a Turnkey Property Manager Do?
If you're investing in turnkey properties, you may consider hiring a turnkey property manager to handle the day-to-day operations of your rental property.
A turnkey property manager can help you find tenants, handle maintenance requests, collect rent, and ensure that your property complies with local regulations. However, it's important to choose a reputable and experienced property manager who has your best interests in mind.
The most seasoned real estate investment experts in Detroit find and rehab properties for investors to purchase and enjoy passive income!
What to Expect from Detroit Real Estate in 2024
Before investing in Detroit real estate, it's essential to understand the market trends and projections. For 2023 into 2024, Detroit's real estate market is expected to continue its steady growth. However, it's important to remember that real estate markets can be unpredictable, so it's essential to do your research and invest wisely.
Detroit's real estate market has shown signs of growth and stability in recent years, and experts predict that this trend will continue in the coming years. While home values have risen in the last couple of years, that trend could level off for 2023 into 2024.
Mortgage rates are also having an impact on the local real estate market. Owning and operating rental properties meets a consistent demand for good rentals for a Detroit population that may still struggle to afford home purchases for some time.
Detroit's strong job market and growing population drive the area's growth. As more people move to the city for work, demand for rental properties and homes is increasing. This presents a great opportunity for landlords looking to invest in Detroit's real estate market.
Learn More About Becoming a Landlord in Detroit!
No matter how you choose to invest in Detroit real estate, there is plenty of opportunity here!
If you'd like to learn more about becoming a landlord and adding turnkey rental properties to your portfolio, we've put together a guide that can help. In it, you'll learn how simple it can be to build a portfolio with turnkey investments that generate passive income when partnering with the right experts to find, rehab, and manage your properties.
Get your free copy of "The Guide to Investing in the Detroit Market With Own It Detroit Property Management!"