With foreclosure and home prices at their lowest in many years, buying some of these properties to turn into investment properties has become even more attractive. But before I give you a check list of what to work toward to become a successful Rental-Property Owner (hereafter referred to as RPO), you want to consider this caution, again!
Most of us have been renters and some point or another in our lives. The positive aspect for Tenants is less headaches, yet we lose some power. When you are Leasing, it seems like the landlord has all of the power. He chooses the paint color on the inside of the house, what trees or shrubs you have in your yard, when your lawn gets mowed or your driveway cleared of snow. When your toilet breaks or your roof leaks, a repairman shows up, paid for by your rental-property owner. When your rent is late, even a teeny tiny bit, that landlord is on YOU like white on rice. And when your lease is up for renewal and you’ve been late in payments, the rent goes up as inexorably as the rising sun, just to get you out of there!
And yet, suddenly you are the rental-property owner, as in a horror movie, now all of a sudden the roles have reversed, and unless you have the temperament and/or “guts” to be a true landlord, you realize you have lost power to your tenant.
The tenant physically occupies your property. They can damage the structure or the appliances. Their pets pee on the carpet and chew up the woodwork. If they sell drugs, the police could literally seize your property. And the tenant controls that ultimate item of power, the rent check, which you desperately need--on time--in order to pay the mortgage each month. In fact, unless you are very lucky, the rent check probably won't cover the mortgage. Worst of all, if your tenant suddenly turns deadbeat, it can take months to evict them from the house, and all the while that mortgage payment has to be made, on time, every month, or you could lose the house to foreclosure. A myriad of laws and advocacy organizations protect the rights of the tenant, but as a landlord or landlady, you are always the bad guy, and if things get ugly, you will be pretty much on your own.
Are you scared yet? You should be. If you decide to go ahead and become a landlord or landlady for the first time, here are some tips for controlling that risk.
The Magnificent Seven
1. Screen your tenants. Always run a credit check! Always check ALL references! You will be tempted to rent to the first non-scary person or couple that puts in an application, but be choosy. PAY attention to RED FLAGS! If those things don't check out, don't rent to them! This is no time to be "nice." Rent to the person who can pay for it, not who you think “deserves it”.
2. Be VERY Cautious with section eight tenants. They usually do not have the same respect for your property as others do. In my experience I have had a number of section 8 tenants over the past 15 years and now I do not have one. I am happier because of it. Yes you will have some of your rent “guaranteed” to be there every month, but you will have inspections to deal with, repairs that the tenant is supposed to make but you will end up doing them, and you may have trouble collecting even their small part of the rent. I have also experienced that what used to be called boyfriends are now “fiancés” that end up living with them, even though they are not allowed on the lease. You can though evict them for nonpayment of rent even though Section 8 has paid their share.
3. Get help from a lawyer. Dependant on your State and your local laws, it is always a good recommendation to consult an attorney, especially on your lease or rental documents.
4. Obey the fair housing laws. You are not allowed to discriminate on the basis of race, color, national origin, religion, sex, familial status or handicap. Obey this law scrupulously to reduce your legal risk.
5. Have proper insurance. Cover yourself. Also remember and be sure to remind prospective tenants that THEY are responsible for insurance covering their furniture, cloths, valuables, etc.
6. If at all Possible DON’T Rent to people with pets. There is no better way to get stains on your carpet along with tears where they locked them in a room they wanted to get out of, chewed woodwork, urine smells and torn screens along with broke windows than by renting to people with dogs and cats. If you want to see what happened to a property I owned wherein the tenant said he did not have pets see my page about pet odors, a bane for Rental-Property owners.
7. Maintain good relations with your tenants. Respect their space. Respond promptly to maintenance calls. Be understanding of the occasional rent check that arrives late, I give in my leases 6 days after the due date before I consider the rent payment late. My line to prospective tenants though when they first sign an application is: “I don’t care WHO you pay, but you PAY ME FIRST, or I WILL EVICT YOU!”. Then I smile. They have to know where you stand!
Rental Property Investing: Don’t invest on Emotions (Free Video)