It continues to be a great time for landlords. Monthly rents have been increasing for years, vacancies remain at historic lows, and a really big benefit for landlords is that the renters are paying down any loans you have on the property, while your equity continues appreciating every month. All is good! This makes now the right time to fine-tune and improve your processes.
The landlord process begins with a thorough screening of tenants. Who you allow to rent your property always makes a difference in how profitable your business will be? No landlord likes having a vacancy but allowing the wrong tenant to move in can be even more costly than a vacancy. The potential problems that bad tenants might cause are countless. You can go for two or three months without collecting rent and not be able to market the rental as a vacancy. If it's a multifamily residence, one bad tenant can cause good tenants to move out. Bad tenants can move bad friends in to create even more trouble. Of course, the damage they do to the property can easily exceed your rent profits, the security deposit, and cause you headaches to repair. Besides the obvious screening for criminal backgrounds and credit reports, always follow up on references. Require at least two previous landlord references and place more weight with a previous landlord that doesn't currently have him or her as a tenant. A current landlord is likely to give a bad tenant a glowing report just to get them out of their rental property. Also, make sure all adults living in the residence sign the lease.
Go beyond the standard rental agreement to set your own rules. Certainly, your state has minimum requirements that must be met to rent a property. These typically apply mostly to the landlord. You also need to have tenants sign a set of your rules that you enforce consistently and fairly. Common rules include not disassembling vehicles in the parking lot, no excessive noise after 10 p.m., and the number of days a guest is allowed to stay overnight, etc.
Understand and enforce security deposits fairly. Some states allow double or triple recovery of unfairly withheld security deposits when a tenant moves out. Always have a walk through with a new tenant and take photos of existing damage. Have the tenant sign and date the written description along with signing printed or digital copies of the photos.
Keep the property in good repair. Failing to make prompt repairs can give tenants the right to move out without advance notice, to withhold rent, or to make repairs themselves, and deduct it from rent. Stay in control of your properties by requiring tenants to promptly notify you of needed repair and then you promptly make the repair.
Maintain a secure property. The best tenants insist that the property be kept secure from criminal activity. Often this only requires good outside lighting and shrubbery kept cut back. Larger properties might add security cameras as an additional deterrent to crime.
Notify tenants before entering their dwelling. Tenants have a right to expect privacy. Most state laws allow landlords to enter under emergency conditions but you must give notice before entering for any other reason.
Give notice of any known hazardous conditions. For older properties, the most common hazard is lead paint. Even if you don't know if lead paint is four or five layers down, it's required to give notice of the potential so that you don't become liable for tenants' health problems (especially young children). You may have other hazards such as an old covered well.
Maintain enough insurance to protect your investment. You need rock-solid insurance to protect you from injury liabilities, discrimination lawsuits, fire, storm damage, and much more. Now is good a time to review your coverage.
Manage your property manager. If you use a property manager, be sure you vet them before hiring them and supervise them while they work for you. Not doing so can leave you responsible for his or her criminal behavior, negligence, and/or incompetence.
Resolve disputes promptly. Conflicts can arise over rent, noise, mold, repairs, and a plethora of other issues. When a tenant has a complaint, discuss it with them quickly. Attempt to put a resolution in place as soon as possible. Doing so can avoid rent being withheld, moving out without notice, or even having the issue escalated to attorneys and courts.
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Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years with articles listed on Yahoo Finance, Benzinga, and uRBN. Brian is a regular contributor at Realty Biz News
Make prompt repairs is great advice! It makes rent increases much more tolerable and less contentious in my experience.
Thanks for pointing out that a benefit of prompt repairs is making rent increases easier to justify.