Whether you're a seasoned investor, looking to expand your income property empire, or an accidental landlord who's still coming to grips with the whole thing -there's one thing that will ultimately make or break your success as a landlord: your property management strategy.
No matter if you have one property or several, it's important to protect yourself with airtight policies and procedures for your properties -which you're careful to follow. Sticking to your policies will not only help to make life easier for you -especially as you start acquiring more properties, but it will also help to protect you from harmful allegations of favoritism and discrimination -especially if you have a multi-unit property.
As a landlord, you'll want to do everything that you can to ensure that you're managing your properties effectively -and as profitably as possible. Much of this work should be done, ideally in the beginning, so that you can lay the groundwork necessary for your properties to run as smoothly as possible -saving you from unnecessary work and hassles down the road.
With this in mind, here's a look at a few things that you can do as a landlord, to set yourself up for success.
1. Find the Sweet Spot When Setting the Rent
Setting the rent involves more than just choosing a number that feels right. When determining the rent, you'll want to find the sweet spot -that is, the highest price that you can realistically charge, that's still low enough to attract attention. This price will allow your property to command the best price possible, while at the same time, helping to keep your vacancy rate low by reducing tenant turnover, and helping you to fill vacancies faster. To find the ideal number, you'll want to do research on what other similar properties in the area are renting for. Look at other properties that are approximately the same age and size to your property -and in a similar condition. Have a look at rentals on websites like Zillow and Trulia -or even contact local property managers in your area to see what they think you could be getting.
2. Brush Up on Landlord-Tenant Law
Many landlords seem to forget that managing rental property is, in many ways, just like running a business. And as such, there are important regulations and requirements that landlords must abide by. Before renting out your property, make sure you have a working knowledge of landlord-tenant laws -both federal and state, as well as any local regulations that may concern you. The law is always changing -and it's important to keep up with new developments to ensure that you're in compliance. Areas that you'll want to pay close attention to include Fair Housing laws, as well as your responsibilities as a landlord, and tenants' rights -especially pertaining to applicant screening, security deposits, and evictions. Common fair housing violations include everything from asking prospective tenants about their family status, including inquiring about an applicant's number of children -and declining rental applications for subjective rental criteria.
3. Protect Yourself With a Lease Agreement
Another crucial step for landlords is protecting yourself with an airtight lease agreement. Not only will this help to save you -and your tenant from misunderstandings, it will also prove to be invaluable should you ever find yourself in court. It's a good idea to run your agreement it by an attorney first, to make sure you've covered everything, as well as to ensure that it's in compliance with the law.
4. Perfect Your Tenant Screening Process
Without a thorough tenant screening process -that you follow each and every time, you could end up with unqualified tenants in your rental -who fail to pay the rent on time, struggle to abide by the terms of the lease -or even worse, cause extensive damage to your property. To help prevent unqualified tenants from gaining access to your property, you'll want to ensure that you run each applicant through a thorough screening process that includes background, reference, and credit checks. To ensure consistency, you'll want to create a tenant screening policy that you adhere to with each applicant -no matter how qualified they might seem at first. This will help to prevent unscrupulous tenants from falling through the cracks, and will also allow you to prove that you abide by fair screening practices, making it easy to prove, if necessary, that you treat every applicant equally and screen everyone with the same criteria. Remember, you must only screen potential tenants based on their ability to pay the rent and abide by the terms of the lease. So while you can ask questions about the number of occupants, or pets, for instance, you cannot filter out applicants based on any arbitrary reason -including family status or even, in some cases, prior arrests or convictions. Of course, as with your rent agreement, make sure you have your attorney check your screening policy to ensure that you're on the right side of the law.
5. Handle Security Deposits Properly
State law varies considerably concerning security deposits, so make sure you're familiar with federal and state regulations surrounding the processing of deposits. Many states require landlords to maintain security deposits in a specific account, while some specify additional measures, such as requiring the landlord to return the deposit -with interest to the tenant at the end of their tenancy.
6. Prioritize Rent Collection
Your profitability will, in large part, be determined by your ability to receive the rent, every month. Don't make the mistake of letting tenants slide with the rent. Once a tenant is more than a month late, it can be difficult for them to get caught up. It's always a good idea to consistently enforce a late fee for rent that's late. You could even try implementing an 'early rent payment policy,' where you reward tenants who pay the rent before it's due with a discount.
7. Perform Routine Maintenance
Keeping your rental in good condition can stave off many potentially costly repairs. Routine maintenance -such as replacing HVAC filters, cleaning the gutters, doing yard work, and keeping trees trimmed back away from the house -is essential. Plus it's a good way to keep an eye on the rental while you're there. Always provide your tenants with proper notice before doing any maintenance, in most states, landlords are required to provide at least 24 hours' notice -but more notice is always welcome.
8. Always Respond to Repairs Requests Promptly
It's important to stay on top of repairs at the property. This means responding to repairs requests or tenant concerns in a timely manner. As a landlord, it's your responsibility to keep your property in good condition -and you'll want to ensure that you maintain an emergency fund to cover unexpected and potentially major expenses -such as a new roof or furnace. If the property isn't in a good state of repair, you will alienate good tenants, and could even put yourself at risk of lawsuits should the tenants sue for injuries that are caused by defective conditions.
9. Get Organized and Take Advantage of Available Tools That Can Improve Your Efficiency
Being organized is important for any landlord today -whether you own one rental property or ten. Take time to develop systems for everything from tenant sourcing and screening, to maintenance requests, and handling late rent payments. The good news is that there are plenty of tools available today that can help to make life easier -and allow you to be more efficient. If you ever find yourself thinking, "There HAS to be a better way to do this!" chances are, there probably is. From bookkeeping software that makes short work of tracking income and expenses, to online rent payment tools, to web-based calendars, be sure to take advantage of what's available -and save yourself from unnecessary headaches and hassles.
10. Consider Outsourcing
With rental properties, you can be as involved or hands-off as you prefer. For busy landlords today, though, outsourcing can be a lifesaver. Even for landlords who enjoy taking a hands-on approach, it's important to know when to enlist some extra help. For instance, some states require certain work on electrical, HVAC, or plumbing systems to be performed by a licensed professional. You may also want to consider enlisting the services of a legal or tax professional for legal issues, or when tax time rolls around. Finally, many landlords and investors today choose to hire a rental property management company to handle their properties for them. Many investors prefer this option since it frees them up from the day-to-day responsibilities of the rental, allowing them to instead focus their efforts on their investment strategies, and adding new properties to their portfolios.
While many investors have found success with rental properties, it's important to remember that your investment's performance will depend, largely on your property management strategy -and how well the unit is managed. Set yourself up for success by following the above ten tips, or by enlisting the services of a qualified property management company who will be able to manage your properties in your stead.
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Feature Image: Terrah Holly
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