Being a landlord is often a thankless job. However, there’s a reason so many people get into the business – it can be lucrative! In order to become successful as a landlord, you have to make sure you’re smart about what you’re doing. Here are some helpful suggestions:
1. Thoroughly Screen Tenants
Few steps are more important when onboarding a new tenant than screening. And while you never really know who you’re allowing to live in your property, proper screening significantly reduces your risk.
When screening tenants, make sure you verify income, speak with past/current landlords, and run background checks. It’s also a good idea to review social media profiles for a complete picture.
2. Conduct Detailed Move-In Inspections
Be careful not to view the move-in inspection as a formality. It’s an extremely critical part of the process and should be conducted carefully and thoroughly.
A move-in inspection is all about protecting yourself from any future damage that a tenant may cause during their lease. Walk around with the tenant and use a checklist to denote anything that’s currently wrong with the unit and/or not working. You may even want to take pictures or video to have visual evidence. This protects you and makes it easier to claim the security deposit should there be damage to the property.
3. Hire a Property Management Service
With all of the paperwork, documentation, communication, and responsibilities involved with being a landlord, it’s helpful to hire a property management service to do the heavy lifting for you. A good property management company will screen tenants, supervise inspections, handle rent and accounting, schedule repairs, etc. It’s well worth the expense!
The move-out inspection is also important but is highly predicated on the move-in inspection. If you’ve done a decent job of documenting this first inspection, you shouldn’t have much trouble with the latter one.
4. Don’t Let Maintenance Lapse
It’s easy to let maintenance go when you aren’t personally residing in the property, but be careful not to let things get out of control.
While it’s never fun to replace a water heater or make a major repair, it’s better to deal with problems while they’re minor, rather than waiting until they become more serious.
5. Keep a Cash Cushion on Hand
While you’ve certainly run the numbers on your properties and know how much rent you need to bring in to generate positive cash flow, things don’t always go as planned. Between vacancies, maintenance, repairs, and property tax hikes, it’s easy for your numbers to get out of alignment. And the last thing that you want to happen in a situation like this is to be unable to make your mortgage payment.
To insulate yourself against the threat of foreclosure, keep a cash cushion on hand. Some landlords call this an “emergency fund.” It should have enough funds to cover three to six months of expenses – including mortgage payments.
6. Require Renters Insurance
As litigious as American society is, require all tenants to have renters insurance. This is a pretty standard practice in the industry and the cost is very minimal. This simply prevents you from having to deal with the backlash that could occur in a situation where your tenant’s belongings are compromised in a natural disaster or burglary.
7. Be a Stickler for Rent Payments
The last thing you want to happen is to have a tenant become inconsistent with their rent payments. While it’s easy to give a tenant leniency one time, a single late payment opens up the door for subsequent late payments. Be a stickler and don’t let anything slide. If possible, set up direct deposits from your tenant’s bank account to your own. This limits the excuses they can use.
Never Stop Learning
In the early days of landlording, you’re hyper-aware of everything that’s going on around you. You ask questions, seek out answers, and double-check details. But after a while, you get comfortable and it’s easy to become less diligent about the details.
Whatever you do, make sure you never stop learning. Learn from other landlords, read books, stay tuned-in to local news, and stay thirsty for knowledge. That’s what sets the most successful landlords apart from the ones who barely scrape by.