The median home price in the United States seems to fall each time we turn on the news. Although this does not inspire confidence, it does have an upside. If you are a person who has always wanted to try your hand at being a landlord, you are in luck. If you are able to qualify for a loan, odds are that your investment will pay off in the future.
I have been a landlord on and off for over twenty-five years, sometime leasing houses, sometimes condos or townhouses. I never owned a larger property such as an apartment building. I chose to rent out smaller homes that I could personally manage. Of course, there are companies that will do this for you, but I wanted not only to save money, but also to gain the experience. The following are what I would consider to be the most important points a prospective landlord should consider.
How to Be a Successful Landlord
1. Take time to select a good tenant. The natural urge is to want to “get it rented as quickly as possible”; however, that type of thinking may backfire in the long run. Be sure the tenant fills out a rental application. Do a background check and an employment check. Make a copy of his or her driver’s license. After all, you are handing your house over to a stranger.
2. Get a good security deposit up front. I now charge a deposit equal to the monthly rent. If the rent is $1000 per month, the security deposit is also $1000. If you allow pets, secure a non-refundable pet deposit. This can range from $200-500.
3. Accept only a cashier’s check or money order for the first month’s rent and the security deposit. This transaction needs to be made before the tenant moves into your property. Make sure it is a valid check prior to turning the keys over to the renter. Unfortunately, there are many scammers out there, especially in this economy.
4. Prepare a lease, and then both you and the tenant sign it before he or she moves into the home. Include items such as whether or not the appliances will be replaced if they break, which utilities are the tenant’s responsibility, and so on. Many rental applications and leases can be found online.
5. Have a cash reserve that will cover the monthly rental and expenses for a few months. If the tenant breaks the lease and moves out, you will be digging into your own pocket.
6. Treat your tenant well! He is your “customer” and is paying your mortgage. Fix problems such as repairs in a timely manner. I always left a gift for the tenant to find when he/she moved in to the property. This started the relationship out on a good note.
I have had to evict tenants sometimes too. That is not fun, but I do think the experience makes a person a real landlord! Anyone can just sit and collect rents…you need to be ready to handle problems as well. Take some action within a few days of not receiving the monthly rent payment. Start with a phone call, but don’t let the problem escalate. Buying property and renting it out is an old way to make money. Like everything, do your homework and be careful. By following these tips, you will be ahead of the game and on your way to making profit!