You have a great investment property, taken good photos and written up an impressive description of your property and you’re ready to open the doors to renters and collect that steady stream of income. As the saying goes, the devil is in the details and your next steps might determine whether you end up with a profitable and stress-free experience or an expensive headache.
These 5 tips can help you maximize your rental success.
- Price your rental correctly
One of the biggest mistakes we see is when a landlord lists the property too high. Sure, you may think your property is worth $2,500/mo., but if the market is only demanding $2,300/mo. you may have a vacant property for far too long. I always like to ask the question, “Would you rather have $2,500/mo. or $0/mo.?” A slight drop in your rental price may be the difference between leasing your property in a week or having it sit for months on end. Look at comparable rentals in your neighborhood or surrounding areas to ensure you’re competitively priced. Another option is to check some rental pricing tools online through rentometer.com, Rent Zestimate or others. The best option, of course, is to hire a professional property manager who is familiar with the market and can use their knowledge to set the price right.
In contrast, asking too little can leave money on the table and reduce your cash flow.
- Use a solid lease agreement
Your lease agreement can make or break you. You should ensure that you have a solid lease agreement for your tenants and include your policies in detail. One of the biggest problems that we see as a property manager are landlords that have been using a generic lease agreement from Office Depot or agreements that are available online. Specific states have certain rules about what can and cannot be included in the lease, so be sure to consult with an attorney or a local property manager that has experience.
It is imperative that anything ambiguous is clearly stated. For example, “no smoking” is ambiguous because it doesn’t clearly specify whether this prohibits smoking inside the property or anywhere on the property. Be as detailed as possible so nothing is open to interpretation and make sure you review the lease with the tenant in person to ensure they understand the rules and expectations.
- Screen, screen, screen
As a property manager, I cannot emphasize this enough. When I first started investing in properties at 23 years old, I had a generic paper application that included some basic information, but I didn’t take the time to screen the tenants carefully. I had a mortgage payment and I needed someone to cover that payment…and quickly! So, I trusted the applicant’s word too many times. Let’s just say that I learned how to file evictions very early in my investing career. Screening should always include, at a minimum, pulling a tenant’s credit report, verifying employment and confirming their rental history. Be sure that you apply the same screening criteria to all prospective renters to avoid fair housing violations. As a property manager, I also recommend performing a criminal background check.
- Perform move in/out inspections and document the condition of the property
Another very important aspect of being a landlord is ensuring that you perform a walk through with the tenants prior to their occupancy. Walk through the entire unit, inside and out, with the tenant. Use a move-in/move-out checklist to the note the condition of every room, appliances, carpet, windows and so forth. Discuss each item and ensure that all parties are in agreement with the assessment and have them sign the document.
Take plenty of photos of the inside and out. You may even consider recording a video of your walk through. Upon move-out, you will have a record of the original condition of the property. When you perform your move-out inspection, bring the checklist and any photos and/or videos you may have. This should leave little room for the tenant to dispute damages above normal wear and tear during the course of their tenancy. As a property manager, our firm performs all of this work electronically with a patented software that captures pictures, notes and other pertinent information. Tenants can then sign electronically right there onsite and a copy is generated and sent to them for their records.
Another good idea is to perform regular inspections, whether that is monthly or quarterly. This will help prevent any surprises at the end of their lease when you perform the move-out inspection. This also shows the tenant that you care about the condition of the property and will be keeping a watch on it. The tenant may be less inclined to have an unauthorized pet, treat the property poorly, etc.
- Stick to your policies
Even if you have a great lease, it’s not useful if it’s not enforced. If you say you’ll charge a $50 late fee if rent isn’t paid on time, charge the fee. If the lease names one occupant and your tenant has moved in their significant other, insist that they leave or sign a new lease naming both occupants.
Always be sure to treat your rental like a business and hold your tenants accountable. For the renters that refuse to abide by your policies, enforcing penalties as stated in the lease can encourage them to clean up their act or make them uncomfortable enough that they choose not to renew. Of course, there is always the topic of eviction, but we will save that for a later time!
We hope the above tips are helpful if you choose to become a landlord and manage your property. Of course, we always suggest hiring a professional property management company to take all of the headaches away so you can maximize cash flow and keep it stress-free!