Rental property investments offer real estate investors a host of potential upside, including recurring revenue and (hopefully) asset appreciation.
However, rental properties all have one thing in common: the need for a landlord. If you aren’t ready to hire a third party to manage your property for you, here are 10 tips to help you stay on top of your property and keep you tenant situation manageable.
1. Set Clear Hours
Keeping ‘office hours’ will let your tenants know when you’re available and when you’re not. It will also help maintain boundaries and give you guaranteed time off. If you don’t set office hours, your tenants will not hesitate to call you at 4am on Saturday morning when they lose their keys at the bar – and get angry when you don’t answer.
Of course, you can’t be too stringent with your office hours. If your tenants can only reach you two hours each week, you’re not being fair to them and they probably won’t stay around very long. However, telling tenants they can reach you between the hours of 10am and 4pm on Monday-Friday will allow you to solve issues in a reasonable time frame without putting too much of a strain on your personal life.
2. Deal With Issues ASAP
Stick to the hours you set, but make sure you’re available when you say you will be. That doesn’t mean you need to sit around waiting for the phone to ring, but return tenant calls as soon as you are available and deal with their problems immediately.
You are required to keep your property in habitable condition; failing to do so may result in legal ramifications. If your tenants report serious electrical or plumbing issues, a leaky roof, structural problems, or other major safety concerns, those repairs take priority.
However, the fact that you’re not legally required to go beyond the bare minimum doesn’t mean you should leave leaky faucets or running toilets for months on end. If something’s broken, fix it. Landlords who wait weeks or months to repair broken appliances get a bad reputation and have a hard time acquiring new renters. As a general rule, expect to spend around 10% of your rental income on repairs.
3. Screen Tenants
For each potential tenant, run credit and background checks to see if they are fiscally responsible and reliable. While there are legal processes to protect landlords from tenants, most legislation focuses on protecting renter rights. The legal process for evicting tenants is long and costly, so you’re better off choosing tenants who won’t stop paying rent or trash your property in the first place.
Set up interviews with the candidates who pass the preliminary checks. These can be informal; invite them for a cup of coffee and a tour in their potential new home and ask them questions about their history and lifestyle as you show them around. Look for neat, honest, polite individuals who will respect you and your property.
4. Put It In Writing
No matter how well you screen your tenants, you can’t take them at their word. Verbal agreements hold much less weight in court than written ones, if it comes to that.
Put all terms in a signed lease agreement to protect both parties. Include rules, consequences for late payments and rule breaking, and information about your availability and responsibilities to tenants. Have a lawyer draw up a standard contract that applies to all of your tenants and make all of your expectations and obligations clear.
5. Stay Modern
Just because your rooms are full doesn’t mean that your job is done. Rental investing is a long-term strategy; updating the facilities periodically and keeping things fresh will help you keep current tenants and find new ones when they leave.
Updating the building will also help your property value appreciate over time, increasing your payoff if you do sell one day. Plus, keeping up with local trends means that you can continue charging top dollar for your rentals.
6. Use A Separate Phone Number
Making office hours clear to tenants isn’t always enough; there are always those who will try to call at all times of day or night for “emergencies” like a funky smell coming from the pipes. The best way to deal with this is to use separate numbers for work and personal contacts. There’s no need to carry multiple phones at once, though; you can set up a separate number with Google Voice and have calls and texts forwarded to your phone.
You can tell immediately if one of your tenants is calling and choose whether or not to answer. Plus, you can have the message transcripts sent to your email so that if there is a true emergency, you have the option to return the call outside of office hours. Using different numbers will make it easier to separate your rental business from your personal life.
7. Don’t Rent To Family
Regardless of how much you love your family or they love you, they will not make good tenants. Not only will your family ignore office hours completely, but they will probably take all of your rules with a grain of salt. If your brother loses his job and can barely afford groceries, will he prioritize his rental payments or ask for a few months to try and figure it out? If it comes to it, could you evict him?
Working with family is almost always messy, and it’s almost impossible to enforce your rental rules with them, even if they’re clearly laid out in the contract. Suggest very nice rentals in the area, but tell them you already informally committed to other tenants and that you can’t take them on. It will be better for everyone.
8. Set Up Electronic Rent Payments
Electronic rent payments are easier for everyone involved. To reduce the chances of tenants ‘forgetting’ to pay, require your tenants to set up an auto-pay system. You can ask tenants to set up online bill pay with their bank or use an automated clearing house, or ACH, to withdraw rent payments from your tenants’ bank accounts.
While this doesn’t guarantee that your tenants will pay on time every month (if they don’t have the funds, the payment won’t go through), it streamlines the process and reduces the validity of excuses like “the dog ate my check.”
9. Be The Landlord, Not The Owner
Tenants tend to be more understanding if they think they’re talking to the landlord. The owner makes decisions; the landlord just enforces them. When you have to have tough conversations with your renters, tell them you’re the landlord and remind them that you’re just doing your job. After all, the owner is technically the business entity, not you.
10. Stick To Your Guns
Set late fees and enforce them. When tenants break the rules you put in your contract, sit down with them and talk through the rules again; let them know that if they violate the terms of the contract, they may be subject to eviction. If they continue to disregard the rules, take action. If you let tenants take advantage of you, they will, so make it clear who’s in charge.
Holding rental properties is a great way to diversify your investments and maintain steady cash flow, but unless you hire a property manager, dealing with tenants is a necessary part of the job. Following these ten rules for new landlords will help you keep a handle on your renters and keep hassle to a minimum.
If you’re looking for a hard money loan to acquire your next rental investment, ABL has the resources and experience you need in a lender. Check out our Renovate to Rent loan program to see why ABL is the right fit for you.