5 Tips for Any New Landlord

It is not a stretch to say that a quality rental property can instantly transform your business overnight. All it takes is one good rental to provide valuable cash flow. As apparent as this may seem, many new investors are intimidated by some of the rental property horror stories they have heard. Between excessive property damage, chasing rent and worrying about evictions, owing a rental certainly has its share of challenges. However, these problems are the exception rather than the rule. In most cases, you find good tenants and collect rent every month with little to no issue. You shouldn't be intimidated by the downside of a rental. As long as you know what you are getting into, the risk is often worth the potential upside. Here are five important tips every new landlord should know.

• Find Good Tenants: The number one, indisputable key to successful rental property ownership is finding good tenants. There are many stories of overexcited new landlords filling vacancies with the first tenant that shows interest. It is only a few months later that they begin to see the error in their ways. Rent starts to creep past the first of the month, maintenance requests pill up and your phone will be filled with texts and calls for minor issues all night. As excited as you are you need to do your diligence on every prospective tenant. Start with something as basic as an application and if you want to take it a step further you can reach out to references and run a credit check. It may take a handful of tenants before you find the right one, but you will be glad you did once they are in the property. If your tenant stops paying or you have to battle with them every month it makes owning a rental completely unbearable.
• Put Systems In Place: The best landlords run each property like their own separate business. They have unique systems for everything they want to do. They have a dedicated marketing process for finding new tenants. They do the same application for every tenant that shows interest. When they commit to a tenant they have a formal lease they go through with a walk-through checklist. They make it clear which items are covered in the lease and which are not. Finally, they have a system for moving out and collecting security deposits. There is almost nothing that is overlooked and slips through the cracks. By instituting and following systems you can run every property like a business to maximize profits and make things as simple as possible on your end.
• Do Work Before You Need To: There are many different philosophies associated with rental property ownership. Some will tell you to focus solely on cash flow and squeeze every last dollar from the property. Others will tell you to treat the property like an investment and spend money before you have to. I would advise being proactive rather than reactive. If you know that you are going to need a new refrigerator or washing machine don't try to put a Band-Aid on it and cover the problem up. Sure, you may be able to get a few months, even another year, from it but all you are doing is kicking the can down the road. You never know where you will be financially when it is time for a new furnace or the roof starts leaking. Dealing with these items out of necessity can cause you to make decisions you regret or overpay based on need. If you plan on keeping the property for years, do work a step ahead rather than a step behind.
• Know Your Limitations: With proper screening, you greatly increase the odds of finding a good tenant. That being said, even with the best tenants you will need to be available from time to time. You never want to make a tenant wait to fix a running toilet or even answer a simple question. Before you commit to ownership you need to know your limitations. Are you available to leave work if there is a problem with the property? Can you handle simple maintenance requests? If you answered no you may need to hire a dedicated property manager. This will eat into your cash flow, and ultimately your bottom line. Know your strengths and weaknesses with the property and what you can and cannot do.
• Find A Good Attorney: Local real estate laws and guidelines change all the time. Without a good grasp on the legal side of ownership, you can find yourself in some hot water. At a minimum, you need a quality lease behind you. There are many places where you can find a generic lease you can use in a pinch. However, these leases aren't specific to you or the property and can leave you unprotected in the event of an accident or a tenant conflict. Not only will a good attorney produce a good lease, they know local real estate laws and any recent changes. It is not hyperbole to say that this can literally save you thousands of dollars if there is an issue. The few hindered you spend on a lease is often the best investment you can make in the property.

Don't be intimidated by what other investors have gone through with their property. With the right location, right tenants and right lease in place, you can have success with your first rental property.