Owning rental properties is a great way to build wealth, but landlords face many unique challenges, some of them very costly. But hey, at least you get the distinction of “lord” in your title, right? Being a good landlord starts with some pre-planning and is continued through thoughtful maintenance. In order to make the most of your rental properties, here are five ways to be the best possible landlord, starting now.
1. Screen your tenants.
You want a tenant as soon as possible, but no matter how few applications you receive, you can’t just accept anyone. Your best bet for choosing a valuable tenant is to conduct a thorough background and credit check. By screening your tenant applicants, you learn if they are able to afford the rent and also if there are any other issues from their past you should be aware of. Though screenings may cost $20-$50, you will reap the rewards far into the future.
2. Customize your lease.
Your lease is one of the most important documents you’ll draft when it comes to your rental properties. Don’t go the easy route and print off a basic one. This lease needs to define the terms of your rental agreement, protect you against liability, and guard your investment. In the lease, you can set out any terms you would like. It’s important to then review these terms with the tenant—but even more important is to actually enforce the lease. Nobody wants to be the bad guy, but letting small infractions go unpunished only opens the door to more rule-breaking. If you say no pets, then don’t allow pets. Be kind, but firm.
3. Understand state laws.
Depending on which state your property is located in, there are probably unique laws regarding tenant-landlord relationships. Do you know the laws in your state? If you answered no, then you need to get on that—asap. The last thing you want is for your tenant to take legal action against you for something you didn’t know was against the law. Arrange a meeting with your lawyer to discuss the state laws that pertain to your property. You can also use this meeting can also help you use the proper language on your lease.
4. Remember the golden rule.
“Treat others as you would like to be treated.” Good advice for life, even better advice for being a landlord. How you treat your tenant matters, but it also matters how the property looks. Create and maintain a property you would be comfortable living in. This means replacing the roof when it needs replacing, fixing the furnace in a timely fashion, and doing any other necessary repairs as they come up. Your pride in your property may just rub off on your tenants. And everyone knows that if a tenant takes pride in their home, they will maintain it well. Remember, your investment impacts real people’s lives. So caring for the home is really caring for the tenant.
5. Establish a system for collecting rent.
In the lease, make sure to determine the proper system for collecting rent. It’s one that each party, the landlord and the tenant, should agree on. This agreement should be made in writing. You must stick to the agreement and enforce any consequences for late rent. This isn’t a negotiable piece of the contract.
Owning rental properties is an age old profession, but it’s one that has advanced and changed over time. There is no excuse for being a bad landlord. Your responsibility to your investment is to choose good tenants and treat them well. You will face unpredictable challenges, but by following these five tips you will at least limit some of the potential problems. Best of luck in your new venture!
Peter Dunn, aka Pete the Planner, is an award-winning financial mind who has authored five books, hosts the popular Pete the Planner radio show and travels around the country offering financial education. His signature wit will have you laughing as you learn. For more from Peter, visit www.petetheplanner.com.