Working in real estate, I understand the value of owning property lies in the equity you build. When you buy income-producing real estate, you are holding onto that property not only for the resale value, but also for the ability to generate passive income by renting to tenants. Owning rental properties is a long-term investment strategy that can provide financial security.
Since most people don’t start out by buying their forever home, that smaller, “starter” home or condominium may be a great option to convert into a rental when it comes time to move on to the next home. The work of finding a tenant can be relatively easy with online resources, but it’s important to stay picky in order to find the right fit. Landlords should look for tenants with high credit scores and excellent rental histories, and who won’t have any issues paying the security deposit.
Keeping up relations with tenants is important if you want them to continue to stay in your property and pay the rent. It’s much less complicated to keep the current tenants happy than to spend time looking for another, paying for advertisements and arranging tours of the property. As a new landlord, keep the following principles in mind.
Communication Is Key
It’s important that tenants know they can contact their landlord and that you care, even if it’s a small issue.
Regular communication, updating your tenants on what’s happening in and around the property and informing them of any scheduled maintenance well in advance can all help to improve your landlord-tenant relationship. I find emails are the easiest to track and the least disruptive, since there is undoubtedly going to come a time where an issue arises on an inconvenient day such as a holiday. As the landlord, you are expected to be on call for tenant issues.
Be Responsible And Responsive
If you get an emergency request for a repair, you’re obligated to fix the issue in a reasonable time, but offering the same kind of care for any issue will go a long way in the mind of the tenant. The more quickly and efficiently you handle repair problems, the happier your tenants will be. Handling a repair immediately can also be more cost-effective than letting something go and allowing it to worsen with time.
Being a landlord can produce passive income, but isn’t without its share of work. Many investors become landlords and instantly find they are overwhelmed by the amount of work it takes to manage tenants. As a landlord, you are going to face a lot of tough decisions, and conversations can quickly turn awkward if you are the owner and manager of the property, since the blame is on you. I would recommend not disclosing your ownership to the tenants, and just act solely as a landlord. Distancing yourself from the tenant can be difficult, particularly with needier tenants.
Build A Network Of Maintenance People
Even if you are a handy person, you may not have the availability or expertise for every issue that could arise. It’s essential to be prepared and know who to call. I recommend saving the contact information for anyone you have hired in the past, such as electricians, plumbers, painters, etc. Websites like Yelp and Craigslist can be great resources. For my area, hiring professionals from Thumbtack.com has been really helpful. Having a home warranty policy may even be beneficial as an insurance policy for the systems and appliances inside the property.
Have Written Policies
Set policies as to what date the rent is due, how it is to be collected and late fees. Any rules regarding what can or can’t be done with the property should be in the policy and stuck to in order to avoid tenants taking advantage. Never waver from your own written policies. If the tenant is late on a payment, you must charge a late fee despite excuses you may hear. By being strict with late payments, tenants will consider their rent payments higher on the priority scale than other financial obligations. Your extra income when rent is late is your compensation for the financial stress of not getting rent on time.
Since you have likely been a tenant at some point in your own past, remember what experiences you lived through, and use them as learning points. If you remember a time your previous landlord impressed you, replicate that behavior. And if there were times when you felt annoyed with your landlord, use those experiences, and try to improve on them.
Finally, if you take the leap into owning multiple properties or a multifamily unit, outsourcing the property management to a professional is advised to keep from getting in over your head.
- Originally posted on Forbes