I was once a first-time landlord but now I have over 10 years worth of experience investing in real estate. During those years, I have seen and have personally made some serious mistakes, so I would like to offer some landlord tips. My hope is that this will be helpful to you so that you don’t make the same mistakes as I have. Here are my top 10 landlord tips.
1. Make Rent the Priority
Rent is your revenue. It’s amazing how many landlords are not aggressive in pursuing rent and late charges. It’s sometimes a good idea to work with people who generally need help … if they communicate with you. But if your tenants just stop paying rent and ignoring your calls or texts, you need to start eviction proceedings. Otherwise, you could be six months behind on rent before you know it, which makes this probably the most important of all the landlord tips.
2. Partner With The Right Investor
Find an amazing business partner who is completely honest and transparent, two qualities that are absolutely critical when choosing business partners. For some reason, some new landlords are very willing to partner with somebody they barely know just because a deal looks good. This is usually a mistake. Ensure you have the same end-goals and values.
3. Screen Tenants Properly
Screening tenants is a really big deal, and I am the first to admit that I have made some serious mistakes in this area. Take the time to meet each tenant in person and, if you can, run a background check & call their current employer.
4. Don’t Allow Cats
Sorry if this is offensive to any cat lovers out there. I’m sure your cat is awesome. However, I’ve had a very bad experience with cats and will never forget it. I renovated a property and was really excited about the new carpet I installed. I then rented the place, she paid on time for several months but then fell late on her payments. After I finally was able to get her out of the apartment, the entire unit spelled like cat pee for several months, even after I installed new carpet. Lesson learned.
5. Don’t Ignore Extra Income Opportunities
Most investors think 1-1. What do I mean by that? If somebody buys a house, they simply rent the house out and that’s it. But that method means you could be ignoring several extra income ideas that could improve your property’s return on investment. Here are some out-of-the-box ideas to think about for earning extra money:
- Could you install solar panels? Look into selling back any excess energy generated to the grid.
- Is there room on the property to install a billboard and/or cell phone tower?
- Is there an unused shed that you could rent out for self-storage?
6. Know Fair Housing Laws
For some reason, many investors choose not to educate themselves on fair housing laws, and there can be serious implications if you violate them. There’s no excuse to not educating yourself on the laws in the real estate industry.
7. Don’t Invest in Renovations That Won’t Produce Higher Rent
One of my friends has made a lot of money in his current profession and is now buying rental properties using all cash. There is nothing wrong with this. However, he is absolutely going over the top renovating these properties. For instance, he is buying properties in what I would characterize as “B” neighborhoods. Then he renovates them by putting tile in the bathrooms, granite counter-tops in the kitchen, and crown-molding in the den. After renovating the properties, they are nicer than many owner-occupied homes. The problem is that these renovations don’t lead to a high enough rent rate to justify the expenses.
8. Collect Rent Online
There is no reason for you to be collecting rent by a check in the mail. Not only is it time-consuming to go to your P.O. Box or mailbox, keep up with all the checks, and then deposit the checks, but it’s riskier. The check can bounce, and then you’ll need to pay a non-sufficient funds fee and then contact your tenant for the rent and the NSF fee. When you collect rent online, this whole process is negated, and the process is dead simple if you use a service like Cozy.
9. Use the Right Financing Strategy
I have a little adage that I say every day to anyone who’ll listen: A good deal with the wrong financing strategy is a bad deal. Most investors focus on the interest rate, but there’s a lot more to consider when financing rental property.
- Is there a balloon payment?
- How long is the amortization period?
- Can there be an interest-only period when renovating the property?
- Can we have a line of credit instead of a term loan?
Investors focus 99% of their time finding deals. When they get a deal, they then scramble to find financing. I have seen several friends lose good real estate deals because they didn’t have enough time to put their financing in place. Be just as proactive about financing rental property as you are about finding deals.
10. Market Rental Properties Effectively
It’s amazing to me how many real estate investors still advertise in the newspaper and use yard signs. From my experience (12 years now) potential tenants who call you and pretend to be interested in your property are just nosy neighbors. Using an online resource to market your listing is great because tenants can view pictures of inside the property and get valuable information about the property without bothering you. (ask me about getting your rental listed for free on: www.MichelleGoetzinger.com.)
Bonus: BE ORGANIZED!
Perhaps the biggest mistakes I see landlords making is that they aren’t organized, and they don’t keep proper records of revenue and expenses. If you don’t keep proper records of revenue and expenses you have absolutely no idea how profitable your property is.
I hope you find this helpful!