Whether you’re someone who is looking for a new career opportunity, or you simply want a way to supplement your current income, investing in real estate and becoming a landlord is a popular option that yields positive results for those who are willing to put in the hard work. But what exactly separates the successful landlords from the average ones?
5 Things You Need to Do
Every landlord has their own strategy for investing in real estate and managing properties, but there also some common factors that successful landlords seem to have in common. By understanding and adopting these “best practices,” you can increase your chances of being profitable.
1. Invest in the Right Properties
It’s pretty hard to be a profitable landlord if the numbers don’t line up from the start. That’s why the first step is to invest in the right properties.
When looking for rental properties, you need to run your numbers conservatively and account for hidden expenses like vacancy, maintenance, and repairs. If you take the time to crunch the numbers and be realistic with expectations, you shouldn’t have any trouble generating positive cash flow.
2. Screen Your Tenants
While it’s tempting to want to fill your property with anyone who’s interested, a strict and meticulous screening process will increase your chances of finding good tenants who pay on time and respect your property.
Good tenant screening involves multiple stages. First off, you should prequalify people over the phone before even showing them the property. If they pass this first stage, you can show them the property and extend an application. Assuming the application checks out, it’s smart to run a background check and speak with referrals over the phone.
3. Be Proactive
The most successful landlords are the ones who anticipate problems before they happen, rather than waiting for issues to reach a boiling point. Make sure you’re prioritizing tenant satisfaction by being as proactive as possible.
“Send your tenants a message, asking them if there’s anything different you could be doing, or if there are any problems with the property,” Houston-based Green Residential suggests. “Stop by every few months for a personal check-in, and try to make yourself as available as possible. The longer a problem goes without being addressed or mentioned, the worse it’s going to get.”
4. Stay Organized
Whether you have one rental property or 10, you’re going to accumulate a pretty big paper trail when you own real estate and have tenants. In order to protect yourself and stay on top of things, you must stay organized. This means having specific folders for each property and always filing documents away in a designated spot.
5. Stick to Your Guns
Successful landlords are very specific with their rent agreements and policies. They’re also good about sticking to their guns and not letting tenants get away with breaking policies or violating terms. As tough as it may be, you can’t let things slide.
“A major issue with ‘letting it slide’ is that your inconsistent enforcement of rules makes things very confusing for your tenants,” real estate investor Nick Baldo explains. “If you let one tenant slide on late rent, other tenants will expect the same treatment. If you wait to impose the late fee on one tenant but hit another tenant immediately, the second tenant will feel that you are out to get him.”
By sticking to your guns, you can avoid going through these issues and rest easy knowing you’re being fair and impartial.
You Live and You Learn
As a first-time landlord, you’re going to make mistakes. Some of them will be costly. Others will be relatively minor. But regardless of how badly you mess up, make sure you’re treating each error as a learning experience. You live, you learn, and get better over time.