This makes it onto the number one spot on our list for a good reason.
If at any point down the line there is a legal dispute, or you need to collect on a tenant debt, having good records is key.
Everything from the rental application, to records of emails and phone calls - your rental is a business and as such, it should be treated in a professional manner.
Successful landlords are organized and know to keep all their information up to date and well filed - preferably digitally and backed-up online.
Bad tenants cause big problems. They cause stress, they take up time to manage, and they can end up costing you a large amount of money.
The key to avoiding these terrible tenancies is twofold. The first is a thorough screening of the tenant beforehand, and the second is simply some good old-fashioned customer service.
Respond quickly, solve their problems eagerly and maintain a professional, open and healthy relationship with them. At the end of the day they are living in your property and you are trusting them. They are much more likely to treat your property with respect if you show you respect them.
You aren’t a one-person army. You can’t do everything. Knowing this is the next step to becoming a highly effective landlord.
When I first started out on the road to becoming a good landlord, I tried to do everything myself. Cutting costs by simply being all the people that were required for the running of my property.
What I quickly came to realize was that I, A) didn’t know what I was doing half the time and, B) didn’t have the time to become good at it all. I could find tenants online and show them around, I could draft up legal documents, I could repaint the walls of my rental, I could even be a plumber if I really wanted to. But I would never do the job as well as a professional, and it would take me a lot longer.
Outsourcing to highly skilled people that you can trust and build a professional relationship with is the key. Spending money now often saves you a lot more money in the future.
For example, when renovating, putting down better flooring will likely mean you won’t need to replace it for a fair while. It will also make the home more appealing and increase its value.
You have to spend money to make money. But, at the same time, you need to always make sure you stay on top of your budget.
Once you’ve got your team in place to help you, keeping good lines of communication open is the next step. This becomes a habitual thing. You’ll need to contact your leasing agent every now and again to check up, you’ll be in contact with your key contractors, and you will need to be contactable when any tenant requests come through.
Plus you will, of course, need to maintain good relations with your tenants.
Everyone works differently, but for me, I like to meet people face to face at least once. It makes communicating with them easier if I have a face to associate with a name - and vice-a-versa.
A good team is important and only possible if you get into the habit of keeping good communication channels open.
Your lease needs to be ironclad. If they break the terms of the lease you need to be able to turn to the courts with confidence.
1. Use of premises
Renters (especially younger ones) often take it for granted that they can use their rental as and however they’d like. They’re paying the rent, so it’s there’s right?
This shouldn't be the case. The property still belongs to you and you may want to specify that the property can only be used for residential purposes. This prevents someone from running a business out of it, for example, which presents liability issues.
Another thing to consider is whether or not they can list the unit on home-sharing platforms like Airbnb. This is an incredibly valuable feature for some tenants. However, if you do allow this you may want to stipulate the scope and limitations of their freedom to do so, and be sure that your criteria are consistent with your municipality’s local rules and regulations around short-term stays.
Your lease should also include language around a tenant’s subletting of their unit on a longer-term basis. The lease should explicitly state whether a resident is allowed to sublet their apartment; and if so, under which conditions. Is the subletter subject to the same advanced tenant screening procedures as all of your other residents? Will there be any fees associated with subletting the unit?
Can a resident simply assign their lease to someone else; and if so, what type of notice will be required?
Related: Should you let your tenants sublet?
3: Lease Renewal
It can be helpful to include a lease renewal clause up front - keeping the same tenants makes life easier for both you and them - but the tenant doesn’t want to worry about drastic rent hikes or sudden changes in the lease terms.
One of the most important clauses yet one that is often overlooked by new landlords. Essentially, this clause means that if one part of the lease is deemed to be illegal for any reason, the rest of the contract is still legally binding. You don’t want to end up in a world of trouble because you got a local law marginally wrong.
5: Joint and Several Liability
“Several liability” is often confused with “severability;” as they do sound the same. But they are not in any way the same.
Joint and several liability means that each party to the lease is jointly and individually responsible for fulfilling the terms of the lease agreement. This is important when there are multiple tenants on the same lease. If one of the tenant's defaults on the lease, this provision stipulates that the others are responsible for fulfilling all lease obligations.
After all, is said and done though - when you are creating your lease don’t be unreasonable. Your tenants are people too and what you don’t want to be doing is making people homeless - no matter how awful they are. Make sure there is nothing in your lease that is going to make your tenant's lives more difficult - unless it has to be in there.
Your lease is your protection from bad tenants, so it shouldn’t punish good ones.
Our final note on this point is to know the law, understand your rights as a landlord and the rights of your tenants. Every state has slightly different laws so make sure you read up on yours.
When it comes to any form of entrepreneurship being in the habit of self-education is really handy.
The best real estate investors are avid researchers, podcast listeners and many of them will spend hours every day trawling through seemingly endless streams of information.
Learning can often feel like wasted time - however, if you are focused you can gain knowledge that will vastly improve your likelihood of success. All the information is out there, you just have to find it.
A few areas that many successful real estate entrepreneurs are always learning about include:
This is a broad term - and what classifies as the best differs for everyone. For me, I want a fairly hands-off approach with frequent but succinct reports so I can maintain a good oversight without getting mired in the day to day. My main focus is normally on budgets and financing. Others get really involved in refurbs and then leave the finance side of stuff to their accountants.
Whoever it is though, whether it’s an interior designer in charge of your refurbs, an accountant taking control of your taxes, or a handyman to manage the maintenance of your properties; make sure they are the best you can get (this does not equate to the most expensive!).
Secondly, use the best software and programs. This will allow you to run your properties to a professional level.
Try the Landlord Studio App for an easy way to streamline your property management.
Getting into the right habits will help you follow through and achieve your longer-term goals. If you haven’t already you should set yourself goals that are specific and challenging yet achievable. This will help you keep sight of the bigger picture.
Being a landlord is a long road, but it can be a very good investment and an excellent way to set up a steady income from a passive source as well as make impressive capital gains.
We hope you found this blog interesting! However, do note that it should not be used as a substitute for competent legal and/or other advice from a licensed professional.