Thinking about renting out a property? Rentals can be a very safe investment that'll bring in a slow and steady flow of money into your coffers, but only if you minimize the risks. As with any investment, becoming a landlord can be a bit of a gamble. Even so, it's a relatively safe bet and the odds can be moved in your favor by following our top ten tips for landlords below.
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- The landlord process begins with a thorough screening of tenants. Whom you allow to move into 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 more costly than a vacancy. The problems that bad tenants can cause are countless. 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 make repairs. 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 landlord that doesn't currently have them 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.
- 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. Usually, these apply mostly to the landlord. You need to have your tenants sign a set of rules that you require them to obey. Common rules include not disassembling vehicles in the parking lot, no excessive noise after 10 pm, 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 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 repairs and then you promptly making 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 trimmed 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. Required notice can vary from 24 to 72 hours.
- 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 wise to give notice of the potential so that you don't become liable for tenants' health problems.
- 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.
- Manage your property manager. If you use a property manager, be sure you vet him or her before hiring them and supervise them while they work for you. Not doing so can leave you responsible for his or her criminal behavior 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.
Please leave a comment if this article was helpful or if you have a question.
Author bio: Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years. He also draws upon 25 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest in the Olympic Mountains with the Pacific Ocean a couple of miles in the opposite direction.
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