Be a landlord? Some things you should know.

First let’s address your objectives as a landlord. 

There are two kinds of landlords:

1.     Accidental

            The Accidental Landlord got stuck with property he either can’t sell or will not sell at current market prices so he rents his property as an interim step.

2.     By Design

            This Landlord acquired the property TO RENT IT.  This landlord “by design” is further divided by his objectives. He is either an income investor or he is making an asset play.

            Income Investor.  The income investor invests for a return on his investment (see CAP Rate discussion here). The Asset investor is more concerned with covering his holding costs while he patiently waits for appreciation. (This is often the case for the accidental landlord). The landlord that has both income and asset growth is the most successful.

What follows are a series of tips/comments on the process which you may want to consider. 

The list is not all encompassing and may not apply to you. Enjoy.

1.     Price your rental properly. What you paid for your property has nothing to do with how much you can charge for rent. Look at comparables. It is better to charge 5% less and be 100% occupied than 5% more and be empty for a month.

2.     Use a lease prepared by an attorney.  A lease is a more important document than a document that you use to buy or sell a house – it is a living document that someone will pull out of a draw and read some day. 

3.     The more time you spend qualifying your tenant the less time you will have to spend managing him. Run criminal checks and ask for a Facebook name.

4.     Prepare an inspection check list with the tenant and take pictures to document. Sign it and have the tenant sign it.

5.     Know the laws and follow them.  There are strict laws on discrimination and escrow monies.

6.     Specify a place, date, AND time that rent is due by.

7.     It’s cheaper to keep a current tenant than find a new one.

8.     Set a list of rules and enforce them and never make exceptions.  Have your attorney tie the rules into the lease.

9.     Do what you say you are going to do in the lease – enforce late fees, pet fees, and document everything you do. (I have never put a bad tenant in a house – but I have had a few go bad after getting there!) What we try to do in the beginning is set the precedence for the term of the lease. If the tenant is one day late I will notice him, in writing, that he is late. I post it right on his door. 

10.  Resort to a higher authority.  Have someone else you can make the “heavy” -either your boss, your bank, your attorney.

11.  Raise Rents regularly, per the lease. Tenants will pay a few points more rather than leave.

12.  Personally inspect your property as often as possible.

13.   Limit the number of people, by name, that can live in your property

14.   Maintain your home because your tenant will not. In some leases we like to add that the tenant pay for an air-conditioning and pool maintenance contract in addition to the rent.  On my lower rent properties I replaced the filters myself. It gives me a reason to inspect inside the unit. If the lease goes long term, consider annual inspections and repairs by a qualified contractor  (roof, driveway, soffits and gutters, lubricating hinges, minor painting.)

15.    If you are considering seasonal rentals – know the sales tax and tourism tax laws. The penalties for non compliance are strict  and the compliance checking is rigorous. (They WILL catch you if you violate these laws)

 

Here are my 25 rules of real estate investing
Buying to Rent
A seasonal rental Gail and I just bought