So, you want to become a new landlord? Haven’t you heard the horror stories? 3:00 a.m. calls for a plugged toilet, tenants that don’t pay their rent, nasty evictions…it’s a minefield out there. But maybe you’ve heard the upside too. That owning a rental property substantially increases your wealth because you have a solid asset that someone else is paying off for you.
So how can you, a would-be new landlord, avoid the pitfalls and reap the rewards? How can you dodge the disasters and turn this into a profitable, hassle-free venture? The key is to start out on the right foot. Putting everything in place and being prepared will ensure that your experience as a new landlord is a positive one. Sure, there might be bumps along the way, but if you’re prepared, you’ll meet these challenges head on and overcome them.
The best way to prepare is to learn from experienced landlords that have come before you. Al Williamson and I met on the Bigger Pockets Real Estate blog and decided to share our own experiences by putting together an infographic called “The Top Ten Best Tips For New Landlords”. We think these tips will be very helpful to someone that is just starting out in the rental property business and I’ll break them down here for you in more detail.
- Follow Your Entire Screening Process. We didn’t put the tips in any particular order because we think they are all crucial steps for a new landlord to take – but if pressed, this is #1. Our best advice is don’t EVER take what a prospective tenant tells you at face value and hand them the keys. Be rigorous. Do all of your employment, reference and credit checks EVERY time on EVERY tenant.
- Establish Great Tenant Relationships. This is a very important step for new landlords because new tenants = a successful rental property business. Having good tenants, after all, prevents the aforementioned “horror stories”. Establishing these relationships starts before you even meet your prospective tenants through advertising and screening and then carries on through the duration of their tenancy.
- Run it Like a Business. Owning a rental property is a business and an organized landlord with systems and processes in place is much more likely to succeed than someone who is just “winging it”. Some examples of these systems would include your forms, your ads, your property information binders as well as filing and accounting systems.
- Use Customized Forms. When you’re just getting started with a rental property, it’s important to have your forms ready to go. These would include things like an inspection report, lease agreement and rental application. Many new landlords use generic forms that they find online thinking that one form is as good as the next and often times they don’t even understand everything that is written there. These are huge mistakes which will come to light when a lease needs to be enforced. Use customized forms to lay down your rules and regulations from the outset.
- Make Security a Priority. Most new landlords think that the cost of rent is the most important factor for tenants when they are looking for a rental. In actual fact it is security for themselves and their families that is a top priority. Many tenants are actually willing to pay a little more if there is great security in place when they rent and they know it will be ongoing.
- Make It Easy For Your Tenants. When it comes to “who should do what” between tenants and landlords, conflict often arises unless it is clear from the start. The easier you make it for your tenants, the easier it will be for both of you in the long run. Putting a reference binder in each property, installing a keybox and making the yard low maintenance are just a few ideas to keep things running smoothly and hassle free.
- Use Your Head Not Your Heart. I would venture to say that this might be the hardest obstacle for anyone getting started with a rental property. As a new landlord, you’ll eventually hear a story or promise from your tenants, especially when it comes to late rent payments. Unfortunately, you’ll also figure out that most stories and promises aren’t true. To keep more money in your own pocket, it’s important to separate emotion from business and know your local eviction processes before you have to implement them.
- Prepare For Bumps In The Road. Let’s face it, it won’t ALWAYS be smooth sailing, even if you do follow all of our tips. Even with all of your systems in place, challenges will still come along. It’s how you handle these challenges that will determine your success.
- Save For A Rainy Day. Rental properties cost money for repairs, maintenance and vacancies. If you don’t have a way to cover these expenses as they arise, your properties will deteriorate and so will your grade of tenant. It’s a slippery slope so it’s always best to expect expenses and plan for them ahead of time.
- Keep On Learning. You’re doing a great job of investigating before you become a new landlord. It’s how you ended up here! As your rental property business continues to grow and evolve, so should your education. Keep informed through blogs and online forums for landlords. They are a valuable resource and you will eventually have a lot to contribute as well. Soon YOU will be teaching new landlords how to begin!
Becoming a new landlord might seem like a huge learning curve and in the beginning it really is. Use our inforgraphic “The Top Ten Best Tips For New Landlords” to help you keep all of these points in mind as you start out. Al and I sincerely hope you find it helpful and we wish you all the best with your rental property empire!