Rents have steadily been on the rise! And rents are expected to continue rising. If you’ve had the desire to learn how to be a landlord, now is your time. However, whether you’re experienced or this is your first venture into renting homes, the key is ‘learning how to be a landlord’. There is always something new to learn, whether getting started or improving your existing processes. Here, we look at tips to getting started.
Tip #1. Learn the Process.
It’s often very tempting to jump right in buying a property and running a classified for tenants. Without a doubt, many investors have done exactly that. But in the long run, it doesn’t save time by beginning a new business without first learning the nuts and bolts. Of course, this is where I slip in a little plug to take advantage of my experience. When you’re ready to learn how to be a landlord, start here: Landlording 101 For Success Books, courses, and a mentor are all great ways to assure your success. When you have landlording questions, don’t just shoot from the hip. Have someone to talk with that has been there and done that.
Tip #2.Decide on your Processes.
Don’t run your business by creating new policies off the top of your head and on the spur of the moment. Your tenants will quickly catch on and whenever they want, they’ll create their own policies to fill in the gaps. Instead of trying to explain every decision you make on the fly, you want to be able to refer to ‘the policy’. For instance, rent is due by the 4th of every month and payable by money order or cashier’s check. A late fee equal to 10 percent of the rent applies after that. Eviction begins on the 20th if the rent and late fees aren’t current. No noises are allowed that can be heard outside of the dwelling after 10 pm, no pets, no smoking, etc. Once set, stick to your policies without exception.
Tip #3. Get your Paperwork in Order.
You need rental applications, credit check authorizations, rental agreements, inspection checklists, rental rules, etc. Keep these all in a well-organized folder on your computer along with keeping one or two paper copies with you at all times. You’ll also need a filing system for the completed and signed copies. This becomes part of your processes outlined in tip #2. It’s all part of how to be a landlord.
Tip #4. Don’t Be the Owner.
That might seem peculiar but what it means is set your business up as a business. Create a legal entity separate from yourself. Typically, this is a limited liability company (LLC), limited partnership, or corporation. You represent yourself as the manager of the business. It cuts way down on arguments with tenants when you can say that you’re only following company policy. Just as importantly, it has legal implications that protect you as an individual. Don’t rent a home without it.
Tip #5. Don’t Rent to Family or Friends.
Renting to family or friends is among the most common and ruinous mistakes many new landlords make. Everyone I know that did this faced the choice: take a financial bath or lose the relationship. Learn how to be a great landlord by putting no family or friends in policy from the beginning.
Tip #6. Know When to Outsource.
This can be for property management, collecting rent, or maintenance and repair. I’m not saying to never do the work but you have to know the ‘value of your time’. You may be good at it and even enjoy doing it. But can you afford to spend a month of your time rehabbing a property while neglecting the rest of your business?
Tip #7. Set Office Hours.
Have a business number that you direct tenants to call during normal business hours – 9 am to 5 pm, Monday through Friday. Your business phone needs to take messages. You should have calls forwarded to your personal cell phone (which your tenants don’t have the number for). That gives you the ability to decide if you want to deal with a plugged toilet at 2 am on Sunday morning. You’ll also find that if they don’t leave a message it probably wasn’t a big problem. This is another successful policy that will insure that you are a great landlord.
Tip #8. Be Professional.
Your product isn’t only your rental properties. Many of today’s tenants rent because they don’t want the hassles of ownership. Keep your properties in good repair and respond to problems promptly. That may not be at 2 am on Sunday but you need to be on top of that problem at 9 am on Monday. Also, match your properties to your clientele. You don’t want to put stainless steel kitchen appliances in a section 8 voucher property but you do want one of the best properties in the neighborhood. Being professional and maintaining the property becomes your reputation. You’ll attract the best tenants – the ones paying the rent on time and not destroying your property.
Those are good starter tips. Of course, there is more to learning how to be a landlord. It also means learning the federal and local regulations. Key among these are the Fair Housing Act and the Fair Credit Reporting Act. Violation of these laws can be very costly.
Neither is difficult to understand but you do need to read them and abide by them. You also need to review these regulations occasionally (yearly) to remind yourself and to look for changes in requirements that you need to meet. Lastly, I this is a great resourse for knowing fair market rents across the US and working with Section 8.