A well performing rental property can completely change your portfolio. Not only will you be able to take advantage of strong monthly cash flow returns but you can build a base for the future. As appealing as this sounds getting there can be a different story. There are many hurdles and pitfalls to becoming a successful landlord. You cannot simply find a tenant and wait for rent checks to roll in. Many new landlords make the mistake of not running the property like a business. Instead of establishing firm systems and procedures they take things as they come. Eventually they face something they are not ready for that throws them for a loop. If you can survive your first lease or two unscathed you should be set up well for the long term. Here are five important tips to help any new landlord.
- Document Everything. Owning a rental property is filled with trial and error. Every day you will come across situations you have never faced before. How you respond to them makes all the difference. As you are just starting out you can’t be expected to do everything right. You will make some mistakes along the way. The key is to keep any mistakes to a minimum and not make the same mistake twice. The best way to help ensure this happens is by documenting everything you do. You can read about something in a book but until you are actively involved it may not sink in. Write down how you found a prospective tenant, what questions they had for the property and what other rental properties are in the area. Once you tenant is in the property there will be a slew of issues and scenarios during every lease. By documenting these you are better prepared to deal with them when they happen again.
- Prepare The Property. Your rental property will not sell itself. Even if the property is located in a hot market you still need to focus on the presentation. Prior to looking for tenants you need to make sure there are no lingering issues that could diminish demand. You don’t necessarily need to give the property a complete facelift but you should focus on the major items. Things like freshly painted walls, updated flooring and clean looking landscaping can make a huge impact on tenants. This will go a long way in attracting good tenants. It also reduces the chances you will have issues during the lease. By attacking any old appliances or potential problem areas in the property before a tenant moves in you decrease the chances they will be an issue during the lease. This allows you to simply run the property and not have to worry about constant tenant phone calls.
- Find Good Tenants. The most common reason that new landlords get in trouble is because of bad tenants. Most new landlords are so excited about someone showing interest in their property that they don’t take the time to perform due diligence on the tenant. They see cash flow coming in instead of all the problems a bad tenant brings. It is critical that you spend time finding the best tenants you possibly can. Take the time to have prospective tenants fill out an application and do your homework in following up. Reach out to any past landlords listed and call their current employers. If you have the ability to run a credit check you should do so to find out exactly who you are renting to. You can never fully guarantee that you are renting to a good tenant but due diligence gives you the best possible chance. The better your tenants are the easier your life as a landlord will be.
- Lease And Expectations. In addition to taking the time to find good tenants you need to go the next step and walk them through the process. The first item is the lease. The lease is the one document that can save you in the event of a disagreement, or worse. There are many inexpensive, or even free, leases you can find online. As the saying goes you get what you pay for. You would be better served spending some money having your attorney write out a custom lease for you and the property. No new landlord ever thinks something will go wrong until it does. A good lease can not only protect you and the property but may even save your business. When you find a new tenant you need to walk them through the lease and expectations. Tell them if there are strict rules against pets, smoking, parking or noise. Let them know what the consequences are and how you will handle any infractions. By sitting down for a few minutes before your tenant moves in you give them a better understanding of what they can and cannot do.
- Put Team In Place. There are always unexpected issues with any rental property. Where new landlords get in trouble is not preparing for the inevitable. It is important that you assemble a good team around you well before you need them. You never know when you will need to reach out to a handyman, electrician, snow removal company or locksmith. The more people you have in place the easier it is to react. Instead of stressing out and overpaying when you get a maintenance phone call you will have everyone lined up and ready to act.
Owning a rental property can be a difficult adjustment. However the more prepared you are before a lease starts the easier your life will be during it.
