Whether you are jumping into the business of being a landlord, or you are looking to sharpen your skills, there is always something new to learn. Taking on the responsibilities of a landlord is no easy task. You will have invested likely thousands into renovating your passive income real estate investment to attract tenants. In addition, the process of interviewing, screening, and managing potential tenants can be a difficult mission.
Then, for years to come, you will have to keep up with maintenance, repairs, and unexpected costs. There are always ways that you can educate yourself to be a better and more effective landlord, and below are a few ways to show you how.
Screen Tenants before They Move In
Screening tenants is a critical portion of making sure you turn a profit. Even if the tenant is ready with deposit in hand to sign the dotted line, it is essential that you take a step back to screen them first. First, you need to run a credit check. Look for any late or missing payments, or any negligent accounts.
This will give you an accurate picture of their responsibility and ability to handle rent and turn it in on time. Then, you must check their criminal history. Any committed offenses should be considered. You must ask yourself: “Does their history indicate that they will be irresponsible with you or the property? Will they disrupt their neighbors?” After you do this, call their referrals.
This can be difficult because you cannot verify the legitimacy of the referral, so this should considered. Nevertheless, if it comes down between two applicants, you may want to hear from a source who can attest to the candidate’s reliability and trustworthiness.
Enforce the Lease Terms
When the tenant or tenants sign the dotted line, they are bound to the contract. So long as the terms are within federal, state, and local law, the tenants must comply lest they can be evicted or be taken to court. Despite giving landlords a lot of power, many landlords make the mistake of not holding tenants to the contract. Unfortunately, it is not always enough to have good faith in your tenants that they will have integrity and follow the contract.
There will be times throughout your landlord career that you will have to enforce your authority. In order to do this, you have to remember that they are not your friends, but your tenants. You are running a business, after all, and a business cannot be run efficiently without the tenants’ responsible participation. This is also important for your protection—if they disrespect your property you find yourself in financial ruin.
More often, you will run into the problem of paying rent. While not all tenants will be an issue, there may be some over time that will need to be firmly held to the lease terms. Avoiding renter payment problems can be tricky, because again, you want to maintain decent relations.
However, if you allow late payments without some sort of penalty or fee, they will likely take advantage of you in the future. Tip: treat this relationship like a business instead of a friendship and you will have an easier time exerting your authority.
Balance Your Real Estate Income
Managing your own real estate rentals can be a full-time job and you may still not be diversified across property types or regions. That puts your income at risk of tenant problems and larger market crashes.
The best way to balance these risks is to also invest in real estate crowdfunding through different platforms.
Real estate developers and other investors offer their projects on real estate crowdfunding sites. The platforms have analysts that verify the properties and the developer's history with only about 5% of submitted deals making it in front of investors. Investors can then pick which deals in which they want to invest, usually as little as $1,000 per deal.
Besides the opportunity for professional management of your investments, crowdfunding allows you to diversify your portfolio with deals in different property types and across the country for a fraction of the cost it would take with direct ownership.
I follow several real estate platforms to get access to as many deals as possible. It costs nothing extra to have an account on more than one crowdfunding site and you'll be able to invest in more deals.
Make Repairs as Soon as Possible
If you have good tenants, you will want to keep them happy. This means, among other things, being timely with repairs. If your tenant calls or emails you about a leaky faucet, or a broken radiator, it is best to get it repaired within the week. Some issues, like plumbing, will need to be taken care of within the day if possible. Prevent poor relations with your tenants by showing your urgency to fix problems in the property. In addition, offer services that will help maintain the property. For instance, if you have tenants in one unit with a yard, offer gardening services. If you offer services such as these, you can raise the rent so that they can enjoy the luxury of living in a well taken care of place.
Resolve Conflict with Tenants
One of the best ways you can improve your effectiveness as a landlord is to work on your communication skills. At times, there may be conflict between the tenants within the unit, disagreements between tenants in multiple units, or various other conflicts that you will have to manage. In order to solve these skirmishes, will have to communicate between all members involved to come up with a reasonable solution.
A landlord’s job is never done, and this endeavor is about constantly refining your practices. A real estate investing club can help with ideas and keep you focused on your properties. Keep these strategies in mind and make your business more profitable than ever.