Being a landlord is a great way to enhance your portfolio and bring in additional cash flow. In fact, real estate has produced many of the world’s wealthiest people. Think Leonard Stern, Sam Zell, Stephen Ross and Donald Bren.
That said, to be a landlord is not all sunshine and roses. With the extra income comes a set of challenges – from maintenance costs to problem tenants. It goes without saying that the challenges are more rampant with
first-time landlords.
First-time landlords often lack the experience and knowledge on how to go about managing their property. You may not know how to best market your vacant rental, screen prospective tenants or go about enforcing the lease terms.
Luckily for you, this guide will help you become the best landlord you can be.
Tip #1: Market your vacant rental effectively.
A vacant rental unit is bad for your bottom line. Not only does it mean zero income at the end of the month, but it also means you may need to look for funds elsewhere to meet your other obligations like paying taxes and servicing your mortgage.
While yard signs and newspaper ads used to work wonders back in the day, they don’t anymore. To stay light years ahead of your competitors, you’ll need to make use of effective strategies that are geared towards modern-day renters. That may include doing things like listing on
top rental listing sites and running social media campaigns to a targeted audience.
Tip #2: Screen tenants properly.
Failure to screen tenants properly is among the top reasons why first-time landlords usually fail. Renting to problem tenants will only yield ‘problems.’ Problem tenants won’t care for your property or pay rent on time, will give all sorts of excuses and won’t renew their leases.
When screening prospective tenants, make sure to have a checklist to help during the qualifying process. Check things like:
- How much income they make: If you charge, say, $1,500 a month as rent, then consider requiring prospective tenants to make at least $3,000 a month. This way, you’ll have peace of mind knowing that you have rented to someone that can pay their rent without difficulties.
- Their credit rating: The credit rating gives a much clearer picture of the financial wellbeing of a person. As a general rule of thumb, only rent to tenants that have a credit rating of at least 700.
- Their rental past: Get in touch with their previous landlords and ask them a few questions. For instance, did the tenant pay rent on time? Did the tenant violate any term of the lease? Do they know that the tenant is looking to move out? Asking such questions will help you learn a thing or two about what kind of a tenant they will be.
Besides making the screening process thorough, it's also important that you
ensure the process is fair and equal to all. Asking different questions to different tenants can land you a discrimination lawsuit.
Tip #3: Understand the Fair Housing Laws.
When just starting out, it’s easy to get on the wrong side of
the law. You could, for example, ask certain screening questions that may inadvertently land you in legal trouble. Such questions may include:
- Do you need directions to the nearest church? That’s because the applicant could assume you only rent to Christians and not atheists, Muslims and Hindus, for example.
- How many children do you have?
An applicant could interpret this to be discriminatory against their familial status.
- Is this a service animal? An applicant could interpret this question to mean that you don’t rent to disabled people.
- In which country were you born? The applicant could interpret this as a racist question.
As a general rule of thumb, when screening tenants, avoid questions that touch on the 7 federally protected classes. These include disability, national origin, familial status, sex, race, religion and color. Additionally, you should also check whether your state has added protected classes.
Tip #4: Collect rent online.
Rent is the bread and butter of any investment property. In this day and age, collecting rent via mail is not only time-consuming, but it can also cause endless issues.
Collecting rent online is convenient and easier. It's also faster and more secure. Recurring payments increase the probability that you’ll receive payments on time.
Tip #5: Invest in the right renovations.
Landlording is a competitive business. It’s a constant battle to keep your property looking attractive to both existing and prospective tenants.
However, unlike renovating your own home, with a rental property, you have to weigh the costs against the expected ROI. As such, you need to invest in renovations that will not only
attract good tenants but those that will also increase your property’s value.
The following are some rental property renovations that can help you in that regard.
- Improve the curb appeal.
- Add architectural moldings.
- Update hardware and lighting.
- Install a glass shower door.
- Install a dishwasher.
- Create a private laundry space.
- Give your walls a fresh coat of paint.
- Update the bathroom and kitchen.
Tip #6: Prepare a detailed lease agreement.
If you're just starting, then enlisting the help of
a professional attorney or property management company is key. A detailed lease agreement includes important details, such as:
- Names of all legal tenants.
- The term of the tenancy.
- Responsibility for maintenance and repairs.
- Important rules about rent.
- Rules on landlord entry.
If you find managing a rental on your own daunting, consider hiring expert help. Advantage Realty Services has more than 31 years of property management experience in the Tampa area. Get in touch with us today.
