Being a landlord can be fun but it can also be tough. Since the purchased of my first rental property in 2005, I have dealt with tenants who pay on time and tenants who didn’t pay, and problems that were big and small. There were small problems as simple as changing a door knob and big problems as grand as breaking down a wall in the bathroom to replace a pipe. Dealing with each problem makes me learn more about how to become a better landlord and allows me to gain knowledge and experience. Today, I am not the same landlord as I was when I first purchased the property, but I still have a lot to learn. Here are 10 lessons that I have learned.
Lesson 1: Screen Tenants Thoroughly
Make sure you look at the tenants’ credit history and check their income eligibility. I have learned to screen tenants very carefully and make sure they fit the requirements. It is important to do a lot of work upfront because the extra checks can prevent many headaches and problems down the line.
Lesson 2: Write Everything in Lease
A lease is a legally binding document and all terms should be defined clearly, i.e. who is responsible for what, etc. For example, my lease clearly states that the tenant is responsible for all the utilities and snow removal on the sidewalks in front of the house.
Lesson 3: Know Your House’s Worth
Do research in your rental property area to find out the average rent and sale prices. This will allow you to come up with a ballpark number for the monthly rent and if you are selling your house, you will be familiar with the asking prices.
Lesson 4: Always Be Prepared
Problems with the house can arise at any moment, so as a landlord, you have to be prepared for anything at any time. It is important to remain calm even if your tenants are not, and buy yourself some time to figure out a good solution. For example, I have received a call at night telling me about a broken pipe and the water was leaking. I asked them to shut off the water and settle their nerves first. Then I asked them some questions to investigate the cause of the problem. Afterwards, I looked up the number of a contractor I had in my phone and send him to the house to inspect and repair the pipe.
Lesson 5: Keep a List of Contacts
A list of contacts will be handy in case you need to reach someone for something. The list should includes all the people that you may need help related to the rental property – from the real estate agent to the contractor to lawyers in case of evictions. It is best to have a contractor near your house, preferably within driving distance to your house in case of an emergency.
I found a contact for repairs/maintenance through a referral, and he lives within 30 minutes of my house. Whenever I have a problem with the house, I would call him and he would usually be able to check out the issue on the same day.
Lesson 6: Inspect the House
When the tenants move out, make sure to do a thorough inspection to access any damages before returning the security deposit. Do a complete run through; make sure you have a check list. If there are any damages, you can take the cost off the security deposits. Take pictures if necessary.
Lesson 7: Shop Around for Mortgage Rates
Before buying a house, it’s a good idea to shop around different banks and compare the mortgage rates. Also, look at different mortgage terms. Find something that is suitable to you. I settled for the 30 year fixed because I was planning to keep the rental property for the long term. But even after the purchase of a house, you, as a landlord should continue to monitor the mortgage rates in case the rates go down significantly. You may have the option to refinance for a lower rate and save money down the line.
Lesson 8: Always Be Active
You have to stay on top of your paper documents and new laws in your rental area. Make sure the monthly rent payment comes on time, and if the rent payment comes late, you should send a notice to the tenants and follow up. The mortgage payments should be paid on time. I have auto payments set up through my mortgage company; the payment is automatically deducted from my bank account every month.
Lesson 9: Be Organized
Make sure you have the lease and all documents pertaining to the rental property in a place easily accessible in case you need to reference any documents. Keep copies of all rent notices and letters to the tenant in folders. I have several folders where I keep all the papers that belong to my rental property, including the mortgage and water bills. I also keep track of all the rental property income and expenses in an Excel document. The Excel document helps with preparing tax documents at the end of the year.
Lesson 10: Talk to Other Landlords
Don’t be afraid to discuss your problems with other landlords. They may already have the experience and give you useful advices. When I was going through the eviction process, I spoke to a colleague and he had actually gone through two evictions. He told me what happened and what steps he took to resolve the issue. You learn a lot by listening to other landlords, so it’s always good to keep an open ear. Sometimes what other people talk about may not apply to you at the moment but having the knowledge prepares you to handle the issue if or when it comes to you.
Do you have more tips for being a landlord? Please share them with us.
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