How to Become a Landlord in Texas


The decision to become a landlord is not one that should be taken lightly. On the outside looking in, many people see success stories and the rewards of many years of hard work and decide to jump into this type of investment. The reality is that there is a lot of blood, sweat, and tears that go into any sort of endeavor worth taking, and renting property is no different.

Learning how to become a landlord takes time, but gaining this knowledge can be the difference between beginning your real estate career or heading towards foreclosure before you ever really get started. Avoid some of the headaches and get a clearer picture of what it means to provide housing with this simple guide.

Research The Costs of Having a Rental Property

Before you purchase your first investment property, you’re going to want to set yourself up for success by researching the costs of having a rental property. Understanding these costs is going to do many things for your venture including:

  • Setting a price range for your first rental purchase.
  • Help you better understand the market.
  • Prepare you for setting up appropriate margins to help ensure success.
  • Provide a realistic scope of the budget you’ll need to save and generate to operate your rental property.

Knowing how much your costs are can help you prepare and save money in the long run. Several operational expenses go beyond purchasing your rental including marketing, maintenance, landlord insurance, HOA fees, property taxes, income taxes, and more. Understand your costs, create a budget, and stick to it for success.

How Much Money Do You Need To Become a Landlord?

It depends on a variety of things, including the amount of risk you can take on and your other lines of income, and what level they may be. Each situation is different, but let’s look into some key considerations that might help you decide:

  • You’re going to need money for a down payment as well as closing costs. Your down payment will be around 3% to 5% of the sales price at a minimum with closing costs averaging ~2% of the sales price.
  • If you do decide to go with the minimum down payment, remember to include private mortgage insurance (PMI) into your costs.
  • Repairs are going to happen one day or another. It’s important to have enough rainy day funds stashed away in the event of a major repair such as a blown A/C.
  • You’ll also want to keep some cash laid aside in the event that your rental property is left unoccupied for a period of time or your tenants fail to make payments.

You have many different options for the types of properties you can rent out as well. All of these factors and more will help you pinpoint how much money you’ll need to get started.

Find Your Investment Property

You can’t be a landlord without a property, so it only makes sense that one of the first steps you’ll need to do is to find your investment property. Realtors can help you find the exact property that works for your investment goals and is a great resource for many aspects that go into purchasing a rental. There are plenty of databases and apps, including that can also help you get started on your journey.

Understand Landlord Law

Property codes, local ordinances, taxes…there are many legal areas to navigate when renting property. Many anti-discriminatory laws will affect how you market your property and your application process. You’ll also want to brush up on the rights of your tenants and your responsibilities as a landlord to avoid pesky disputes about repairs and rental income.

Going unprepared by failing to understand the laws landlords must follow can set you back in many ways. You don’t want to become a slumlord, nor do you want to be blindsided by failing to hold up your legal responsibilities through ignorance. It’s also a great idea to have a Realtor and/or an attorney which can help you understand the many rules and regulations that are involved in renting property.

Learn Your Property’s Rental Market

Having a rental property means that you’re going to want to understand the market you are in. There are several factors including the cost of operation, laws, the price you can charge for rent, how to find renters, and much more to consider. All of these variables are all directly tied to where your rental home is located.

Texas is one of the best states to be a landlord. While the Lone Star State does come with higher property taxes, it is still a landlord-friendly state due to the favorable protections it affords landlords and the affordability of most properties. But as the second-most populous state in the country, it’s no shocker that there are many market variables.

Consider the ways of the Dallas-Fort Worth area and then compare them to those of Austin. You’re likely to find differences when comparing the Gulf Coast region with that of Central Texas. Even within individual cities, from suburbs to subdivisions, you’re going to see unique local characteristics that are going to play into how you operate your rental property.

Develop A System For Screening Tenants

The entire purpose of screening tenants before allowing them to rent from you is to minimize risk. You might not be able to determine who is a great tenant and who is not every time, but with the right system in place, you’ll minimize your risk of signing up an unreliable or destructive tenant.

All landlords in Texas should remember to follow the laws in place to treat potential tenants fairly and avoid legal issues. Many websites can help you use legally binding rental agreements that can be signed and saved online to make sure everything is in line. To learn more about the tenant screening laws in Texas, be sure to click the link from Caretaker, experts in property management.

Create A System For Maintaining Your Rental Property


Properties don’t run themselves. You’re going to have to put in some work if you are going to maintain your investment. Not only do rentals come with work, but they also require time and money. This is why soon-to-be landlords should self-audit their lives before jumping in.

Do you have a lot of extra time on your hand? Are you willing to sacrifice time with your hobbies, family, friends, and other endeavors to make your rental a success? Can you fully run and operate a rental property efficiently?

These questions and more are important because they are going to allow you to choose your property management style. Perhaps, you are ready to jump all in and have the time, money, and knowledge to do so, build a team around you as resources and begin your new life as a landlord. If you are looking for a more passive approach, be sure to do your research and find a property management company with a good reputation that fits your budget.

When You’re Tired of Being a Landlord

Part of being a landlord includes having an exit strategy. This type of business isn’t for everyone and things will change over time. Knowing how you are going to leave the venture is important and responsible for all parties involved including any stakeholders, tenants, and your neighbors. Having a basic plan and a good relationship with a Realtor can help you navigate the best way to sell your rental property when the time comes.

Cultivate A Relationship With A Mentor

Being a landlord in Texas is a great way to develop a profitable revenue source, but like any investment or venture, there are risks associated with the endeavor. Having someone on your side that can help you navigate the good, the bad, and the ugly sides of being a landlord can help you overcome obstacles and maintain your operation.

Networking is an important and often overlooked part of becoming a landlord. Because there is a lot of money involved, you don’t want to simply pick someone off of the street. You’ll need someone that is in your corner, knowledgeable, trustworthy, and holds a track record of success. Here are a few examples of ways you can network to find your landlord mentor:

  • Speak with your Realtor about potential contacts.
  • Search online for landlord groups and develop relationships.
  • Attend real estate events and begin to become a part of your local market’s community.

Remember, who you invest your time and efforts with here will affect your money. Your best bet is to always be cautious and keep financial information and only accept financial advice when involving a licensed expert. Learning from someone’s experiences is important, but so too is protecting your operations.

Purchase Protections For Your Rental Property

Once you determine how to become a landlord and purchase your property, you’re going to want to protect your investment. There are many things you can do, but two of the most important to consider are home warranties and landlord insurance.

Having a home warranty is important because it will help you protect against things that are going to happen at some point no matter what. There are only so many wash cycles, so many hot summers, and so many hours of cooling your home’s dishwasher, HVAC unit, and refrigerator can endure respectfully. In the end, every component of your home will succumb to wear and tear and require replacement.

But some things might happen to your home that can be harmful that go beyond wear and tear. This is where landlord insurance comes into play. Also known as dwelling fire insurance, your policy will act similarly to that of a home insurance policy and can protect you against property damage, liability concerns, and even a loss of income depending on your coverage.

Home insurance doesn’t qualify for rental properties. A landlord insurance policy is like homeowners insurance for rental properties. Although landlord policies cost about 15% more on average due to an increase in risks, perils such as damage from burglaries, fires, frozen pipes, and more depending on your policy. These losses can cost thousands upon thousands of dollars to restore and without a financial safeguard in place, it can be devastating to your investment.

Finding the right rental property insurance policy boils down to finding the best coverage for the lowest price possible. Freedom Insurance Group works with 25+ of the best insurance providers available in Texas. Through our relationships with these carriers, we can compare your rate among many different brands to find the best possible price for the exact protection you need.

Each landlord has a different need and depending on these factors will depend on the type of coverage you need. Failing to shop around and instead rely on a singular insurance brand can leave serious money on the table. Since 2005, we’ve helped landlords save an average of 40% on their premiums. Talk to an agent today or get a quick, accurate landlord insurance quote using our online tool.

Contact Us

Freedom Insurance Group
3861 Long Prairie Rd Ste 110
Flower Mound, TX 75028
Phone: (972) 798-3769


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