HGTV makes landlording look like an everyday vacation. It's always smiles, high-fives, overcoming challenges, and coming out on top. However, real-life home and rental property ownership are a bit different.
Sure, it can still be fun—but more than that, your property is a business.
Your property is a:
- Business: Like a business, your rental property can make money, or it can lose money—that's ultimately decided by how well you run your business.
- Investment: Your property has the opportunity to increase in value—find the right tenants, and they'll pay the mortgage while the investment matures.
- Home: Your tenants will call this property "home." They'll build memories, families, and a life inside those 4 walls.
- Asset: You own your property (or a portion of it so far), and it counts towards your overall net worth.
- Liability: Mortgages need to be paid, and someone's got to do it.
Unfortunately, many landlords make the mistake of treating their property as a hobby. This willy-nilly attitude can lead to dangerous debt, disappointing results, and upset tenants.
If you’re not getting the results you want or need, it’s time to fire your property manager (or yourself) and make a change.
3 Reasons You Should Treat Your Property as a Business
Real estate isn't a hobby—here's why.
1. Keep Personal and Professional Separate
You should be friendly with your tenants—not friends.
Friends don't sign lease agreements and enforce them. Friends don't get authorities involved when rent payments are never made. And friends don't pursue evictions when rules are broken.
Yet, that's exactly what you have to do as a property owner.
For example, your tenants could ask you, "Just this once, could you give us an extension on our rent payment?" And that turns into 2 months, then 3 months, and then 4 months. You're hurting for cash to make the mortgage payments, and your own life, livelihood, and family suffer for it. But how can you evict your friends?
You need to keep your personal and professional life separate. That includes your bank accounts, finances, time, and even your relationships.
Fail to do that, and you could be taken advantage of.
2. Prioritize Profits
Businesses that don't try to make money usually don't. Go figure, right?
When you run your rental property like a business, you'll make the best financial decisions for your bank account and property.
You'll invest money in the right places, market your property at the right prices, and find the right tenants to love your home.
Prioritizing profits isn't wrong or greedy—it's smart business. And smart businesses survive and thrive.
Even nonprofits with completely altruistic motives have to treat their businesses professionally—if they don't, the company will go under. It takes money to make the world (and your wallet) a better place—so be smart with it.
3. Protect Yourself
Everything from your tenant screening to your lease agreements to your ongoing maintenance needs to be done professionally. If you get any of these wrong, you risk yourself and your assets to legal issues.
For example, asking a wrong question during the tenant interview or including an inappropriate statement in your property listing could open you up to legal conflict.
We don't say this to scare you—not at all! We bring this up so that you know what you're getting yourself into.
Rental properties aren't hobbies—they're businesses.
Here's how to treat it like one.
8 Ways to Treat Your Property Like a Business (Not a Hobby)
Here are the top 10 ways to treat your property like a business:
- Hire the Right Person for the Job
- Comply With Federal, State, and Local Laws
- Purchase Landlord Insurance
- Maintain Your Property
- Find Top-Notch Tenants
- Separate Your Finances
- Have a Professional Written Rental Agreement
- Enforce the Rules
- Collect Rent on Time (Every Time)
- Keep Records of Everything
1. Hire the Right Person for the Job
Hint: That might not be you.
That's not a dig, either. That's just a fact.
As the property owner, you aren't always (or even usually) the most qualified person to manage your rental.
This correlates with the Founder's Dilemma—a predicament many entrepreneurs face when they build a brilliant product or idea but lack the management know-how to make it a successful reality.
Think about it.
Do you know how to:
- Market your property at a competitive price to maximize rental income
- Take professional photos with a 3D virtual tour to present your property in the best light
- List your property on the 20 most important sites for renters
- Screen renters to find the best-of-the-best tenants
- Occupy your property quickly to reduce costly vacancy rates
- Write up lease agreements to legally protect yourself and your property
- Maintain your home to increase value and mitigate costly repairs
- Find the right property protection plan to protect your home and assets
- Collect rent on time from your tenants
- Avoid the most common mistakes we see landlords make
If the answer is "yes" to everything, then skip this section and move on to the next—you're clearly in the top 1% of landlords.
However, if you answered "no" to 1, 2, or more of these statements, you may not be the best person for the job—and that's okay.
That's why services like Nomad exist.
We can market your property, screen tenants, collect payments, maintain your home, and do everything to maximize your rental income and earnings potential.
Unlike a property management company, we uniquely align our financial incentives with yours. Learn more about the differences here: Nomad Vs. Property Manager Vs. Self-Manager—Which to Choose?
2. Comply With Federal, State, and Local Laws
Real estate is regulated. You need licenses and permits, and you also need to make sure your property (and terms) comply with the law.
For example, you have:
- Landlord-tenant laws like the Fair Housing Act and Fair Credit Reporting Act
- State-specific laws concerning rental properties and tenant rights—like how much you can charge for security deposits and how evictions must be handled
- Laws regarding your legal lease document and required disclosures
- Laws about providing a safe, habitable environment and making timely repairs
- Landlord laws about a renter's right to privacy
3. Purchase Landlord Insurance
Insurance is never fun, but it's essential.
You'll need landlord insurance to protect you in case your tenant gets hurt on the property or if theft occurs.
You'll also want to consider requiring your tenants to have renters insurance.
If you lease through Nomad, you get Nomad's Property Protection Plan in addition to your Landlord Insurance at no extra cost—this means we'll cover costs up to $10,000 for any damages a resident leaves behind in excess of their security deposit.
4. Maintain Your Property
You'll need to guarantee your property is safe and habitable for tenants. This requires ongoing and preventative maintenance.
Plus, it's much cheaper to maintain than it is to replace.
You'll also need plans in place for how you'll handle immediate repairs or dangerous problems. For example, how will you replace the furnace if it breaks in the middle of winter. And how will you help a tenant who's locked themselves out of the house?
Make relationships with plumbers, locksmiths, and other handymen so you're ready for anything.
5. Find Top-Notch Tenants
Not every tenant is going to be a good fit for your property. You can't just take the first one who makes the offer.
You need to diligently pre-screen and screen your tenants to make sure you're getting the best-of-the-best.
A top-notch tenant will take care of your home like it's their own and pay rent on time (every time). A bad tenant will not maintain the home, may cause damage, and will make rent collection a monthly hassle.
However, finding a great tenant is easier said than done. It's a process, and it takes time.
Fortunately for you, we're pros at finding the best residents. We diligently screen our residents—and many have lived in a Nomad property before. Our residents care for your property like it's their own.
6. Separate Your Finances
Keep your personal and business accounts separate. You should be collecting rent and depositing it in a rental-property-specific account—and you should be using that account's specific debit card for any rental-related expenses.
Come tax season, you'll need these separated accounts to find all your business-related deductions.
PS: Did you know all of Nomad's fees are tax-deductible?
7. Have a Professional Written Rental Agreement
In the business world, you can't rely on handshakes—you need paperwork and signatures.
Creating a lease that protects you and your renters isn't easy, though. There are federal, state, and local laws you'll need to follow and enforce.
It's best to get a professional's help.
8. Enforce the Rules
It's no fun laying down the law, but if you don't enforce the rules, they mean nothing.
When a tenant is late on their rent, then you have to enforce the late rent fee (every time). If you make exceptions to your rules (even just once), they lose their weight and importance.
Refer to your contract for any disputes. It's much easier to enforce the rules when it's in writing and signed by both parties.
Golf is a hobby. Real estate is a business. Have fun with your hobbies—treat your business seriously.
Need the right person to run your business like a well-oiled machine? Look no further.
Lease your property with Nomad, and we'll guarantee you monthly rent for two years while we handle all the nitty-gritty work. That's right—we'll do everything (lease, screen, collect, maintain, everything), and you get a guaranteed check every month. No questions asked.
Now that sounds fun.
Request your rent offer now and get a guaranteed rent estimate within 24 hours.