15 Tips For New Landlords – How To Be A Great Landlord!
You’ve just purchased your first rental property and now you are a new landlord, what now? This will be one of the most exciting, yet scary, times of your entire life. Trust me, I’ve been there. You planned, saved, and finally went through with the largest investment of your life. Now it’s on you to fill your new rental property but what do you know? You’re a new landlord.
When I purchased my first rental property I had no clue what I was doing as a new landlord. Yes, I did mitigate my risk somewhat by house hacking but it was still scary. Looking back I made a ton of mistakes. I was basically just going with the flow and frankly, I got lucky.
Lucky in the sense that I had great first tenants. While we were all friends beforehand they understood our very unformal agreement and treated me as if I was a landlord.
How much research did I do before I became a new landlord? Very little.
Yes, I knew the financials but there is so much more that goes into owning a rental property than just the numbers.
Because of that, I wrote this guide with 15 tips I wish I would have known when I was a new landlord.
1) Remember This Is Still A Business
Most of the time when I talk to people about owning rentals I get the sense that they think a new landlord just sits back and counts checks. This couldn’t be farther from the truth. As I explained in my YouTube video: Is Real Estate The Best Form Of Passive Income? – Answered Simply real estate is still a ton of work.
As a new landlord, you are going to have to work hard just like any other business. In most cases, you are the accountant, the property manager, the plumber and everything in between. Just like any other business you are going to build a reputation. Have you ever heard someone called a slum lord? Yeah, you don’t want that to be you.
In addition, you need to take the time to learn federal, state, and local laws. Think just because you have a problem tenant you can walk in and start throwing their stuff out and evict them? Think again. There is a whole process for this and you need to know it.
While being a new landlord is exciting and yes you will start to get paid it doesn’t mean the work stops. Take the time to learn everything now, build processes like any other business, and down the road, you can duplicate the process with more properties.
2) Have A Great Looking Listing
The first thing is first you need renters. I told you in the beginning I got lucky and had some great friends that we’re able to move in with me. Chances are high you are going to have to go the old fashioned route and find renters. This can be done online, by word of mouth, or simply a “FOR RENT” sign out in front of your property.
No matter the avenue you choose one thing is for sure, you need to have a great looking listing. Everyone says “don’t judge a book by its cover” but that is exactly what people do when searching for a place to rent. You need to do the obvious things like have everything sparkling clean and presentable.
I would highly suggest going the extra mile. If something is outdated or hurts the looks of your property then replace it.
Old racecar wallpaper? Get rid of it.
Carpet in your bathrooms? Replace it. (this was me)
It’s these little aesthetic things that add up to huge improvements and will have a direct impact on the amount of money you make. Take how your property looks to a potential renter serious.
3) Set Rent Correctly
Setting rent at the correct price is one of the most important things you can do. This is, of course, second to what I mentioned about having a great-looking listing. Trying to get people to rent from you is extremely similar to having them purchase your property. They are first going to look at your pictures then the price.
These two things combined will dictate whether people ever have interest in renting from you.
The easiest way to set rent correctly is to look at what people are doing around you. Chances are high you have properties that are managed by property managers. These property managers will most likely have access to the best data possible. Just lean on them to set your rent.
Find a property that is similar to yours, in the same area, and priced accordingly. When I first started renting I just set my rent high enough to cover my mortgage payment, huge mistake. I learned and quickly took my rent for my home from $1,100 to $1,500 a month.
4) Have An Air-Tight Lease
If I could go back and change one thing it would be this. My original lease wasn’t even really a lease. In fact, it was just an agreement that we all made. Months down the road I made a ‘lease’, while in reality, it was just a poorly put together Word document.
Eventually, I did take the time to make a formal lease. No, I didn’t use a lawyer to write one for me. What I did was take five leases that my friends had over the last couple of years and combined them all into my own. All five of those leases were obviously written by lawyers so I felt comfortable with using it.
I still use the same lease to this day.
As the years have gone on I have made adjustments to the lease based on things that have happened. Some of these include raising the pet fee, requiring tenants to disclose any firearms, and adjusting the deposit required at the beginning of the lease.
Take your time on this and make sure you cover all your bases because at the end of the day you are on the hook. If you are struggling with putting together a lease then find a lawyer who can help you. As always, I’m an open book so if you want a copy of my lease just message me through the Contact Us tab.
5) Collect A Security Deposit
Since we are on the topic of your lease let’s talk about the security deposit. A security deposit is the money a tenant puts down at the beginning of their lease that you hold as collateral. The fact of the matter is collecting after an incident happens is extremely hard. On top of that going to court is extremely expensive and only eats up more of your time.
To combat this I would highly suggest collecting a security deposit from your tenants at the beginning of their lease.
How much is going to 100% be up to you. I have seen security deposits go as high as two months rent and as low as $100. I think a happy medium is one month’s rent. This is high enough that your tenant will think twice about swinging from that chandelier but also low enough that they can afford it.
Personally, I have my security deposit set at $150 per person. In a four-bedroom home, this obviously adds up to $600. To most, this is low and I’m taking on too much risk. While I will agree I am taking on a higher level of risk I also know these people personally.
6) Get Credit and Background Checks
This is one that has been available to new and old landlords for years but only recently has it become extremely easy to do. Just like you and I can check our credit scores a landlord can check your credit. The easiest way for you to do this as a new landlord is going through Experian who offers free credit checks for landlords.
Why check your tenant’s credit and background? Again, chances are you don’t know these people that well and do you really think someone is going to admit to you about their debt. What if that person has declared bankruptcy at some point? These are all things you would want to know as a new or old landlord because your money is on the line.
7) Have A Rental Application
Just because you have an air-tight lease, collect a security deposit, and do a credit/background check doesn’t mean you don’t also need to do a rental application. This may seem like overkill because it feels like you already know the potential tenant but trust me, you don’t.
A rental application allows you to get all the information you need on your tenant. Name, phone number, employer, income level, etc. This information could help you down the road especially if things go wrong and you have a problem tenant.
This is also a legal document that allows you to screen potential tenants in a non-invasive way. Here are some examples:
- Have you declared bankruptcy in the last 7 years?
- Do you have pets?
- Do you smoke?
- Have you ever been evicted?
If your tenant lies about anything on the application it will make starting the eviction process that much easier if need be.
Another good idea when it comes to having a rental application is making tenants give references. Being able to call one of their past landlords and ask questions is a huge positive for me. I get to ask if they paid rent on time, how they treated the property, and so on.
While a rental application may seem like another unnecessary form of complexity I promise it will save many headaches down the road.
8) Require Renters Insurance
Only recently have I started to require tenants to have renters insurance. Not only is this a good idea for them but it also helps you out as well. Renters insurance is cheap, like $100 a year cheap. So asking tenants to have it shouldn’t be that big of a deal.
On your end when tenants have renters insurances it takes some of the risk-off of you as a new landlord. Unfortunatley disasters do happen and you don’t want to be on the hook to cover your tenant’s belongings. In addition, by you requiring renters insurance it will most likely drop your commercial insurance rate on your home.
Overall it is a win-win situation for everyone. It is important to note though that putting this clause into your lease can be somewhat tricky so I would suggest consulting with a local lawyer for this one.
9) Keep Records Of Everything
You must, I repeat, must keep a record of everything. This goes back to treating being a new landlord like a business owner. I can’t stress this enough. You may think you have the best tenants in the world but do you really know them?
Every text, email, and picture that has to do with the properties I have a record of on my computer. Call me paranoid but I don’t fully trust anyone but myself. My trust goes down and skepticism goes up in particular when you are messing with my money. Because of this, I keep as many records as possible just in case a situation comes up in the future.
You may think this is unnecessary but I’m pleading you to listen to this one. If you don’t I’m afraid you’ll learn down the road, just like I did.
10) Treat Your Tenants Like Your Customers
Your tenants are your customers and as I mentioned at the beginning of this article you are running a business. You need to ensure you keep your tenants happy because if you do they will keep you happy. Yes, of course, they are putting money in your pocket but they are also potentially saving you money because they are happy.
Hear me out.
If your tenants know you then they are more likely to take care of the property. Unless you are a total jerk then sorry you are just out of luck. But for everyone else who is nice out there, I promise your property will be in better shape. I’ve found the easiest way to keep your tenants happy is by always keeping lines of communication open.
Remember, you are the landlord and managing the property is still 100% on you. If they have an issue, any issue, then it needs to become your priority and they should be kept in the loop.
Another suggestion I have to keep your customers (tenants) happy is by giving them gifts. Even the smallest gift around the holidays can make a large impact. I buy my tenants their favorite bottle of liquor. It costs around $100 total and to me, it’s a great investment.
Take care of your tenants (customers).
11) Learn How To Become The Handyman
When you are new landlord money is usually tight. You just made the largest investment probably of your life and the extra cash just isn’t there anymore. You understand that this is a long-term investment so you aren’t worried but you are conscious of the issue. Because of this, you may need to learn to become the handyman.
It’s inevitable that when owning any sort of property things are going to break, that is just how it works. I have had flooding, an oven break, tile needing to be removed and on and on. Could I have paid someone to fix everything for me? Of course. But it would have deeply cut into my cashflow which I needed as a new landlord.
Don’t worry if you don’t know how to fix something because I have great news. Because you are reading this article it means you have access to the internet. While the internet may not always be right it does have some great FREE resources. In fact, anything that needs to be done in a property you can almost guarantee someone has made a YouTube video on it.
12) Collect Rent Digitally
The days of collecting rent from a check are gone. You can (and should) be leveraging tools like Venmo, Paypal, or other online payment processors. By collecting rent online you are going to help yourself out in two majors ways.
First off, it will make actually getting your money so much easier. Tenants can’t use the excuse that rent is in the mail or their car broke down. If they have a phone or computer then they can pay you rent, no excuses. Secondly, it is going to make keeping track of your accounting that much easier.
With most online payment processors you can simply download all of your transactions. Just like with your bank statements you can then break down what income/expenses go where when filing your taxes. This takes out a lot of paperwork and balancing a checkbook. Who even does that any more?
13) Follow Your Own Lease
For some reason, new landlords love to not follow their own lease. Why? That’s a question I can’t answer because it makes no logical sense. Changing rent rates, allowing tenants to pay late, and letting them out of leases are just some examples that come to mind.
I understand at times you will have tenants that you may know personally, that’s great. Just know this is still a business and you need to make sure they get that. When you write your lease you wrote it for a reason. Bending the rules for people and not holding them accountable has nothing but negative effects.
First off, it hurts your wallet and that’s the whole reason you are doing this in the first place. Sticking to your lease may not always be fun and it may make people upset but a lease is a law. Stick to the law.
14) Mistakes Will Happen As A New Landlord
No matter how prepared you think you are something is going to go wrong. When you are a new landlord you can almost bet on it. You may have talked to the best of the best, read the greatest articles (like this one ????), and be as detailed as possible but I promise something got missed. I don’t say this to try and scare you off but to let you know it’s okay.
I had tons of things go wrong and five years down the road I still don’t have everything working as well as I wish I could. I’ve made tenants mad, forgot to fix things in a timely manner, and the list goes on. But at the end of the day, I still have a good looking property that has been full every day for five years.
So relax, do the best you can but go with the flow.
15) Consider Hiring A Property Manager
If this list seems overwhelming to you I would ask that you go back and review one by one. There is a lot here I know, but I think most can do it. If you find yourself in a spot where you can’t handle it as a new landlord or just don’t have the time then you do have another solution, a property manager.
I spoke about property mangers somewhat throughout this article but they can be a great tool to help you look over your rental properties. A property manager does exactly what it sounds like, they manage your property.
It is their job to market your home, screen renters, and manage them throughout the duration of the lease. Your role is simply to be the bank if needed. What I mean by this is that you still have to pay for any repairs or supplies that are needed. Oh and I forgot to mention, you have to pay the property manager.
Yes, they do have a cost and it usually runs around 10% of gross rent per month. That means if I were to use one on my home that rents at $1,500 a month I would have to pay them $150. For me, this is just out of my price range and seeing that I live so close it just seems unnecessary. If I had multiple properties that were spread out this may become more of a feasible option.
The Bottom Line
Being a new landlord is a lot and you are going to get overwhelmed. It’s all a part of the growing process and instead of resisting it I would suggest embracing it. Roll with the punches and it will get better as you go on.
Hopefully from this list, you learned some new things to focus on to become the best possible landlord that you can be. At the end of the day, it is worth it. Yes, you do make money but you also learn how to do so many other things. Dealing with people, becoming more organized, and taking on the responsibility has benefited other areas of my life and I couldn’t be more thankful.
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