There’s no such thing as landlord school.
Most landlords just do a little reading online and dive right in. Which is fine – but it also means many new landlords are ill-prepared for the work of being a successful landlord.
Far too many landlords fail to bring a level of professionalism to their landlording side gigs. Sure, this can lead to some irked tenants, but the person who suffers the most is the landlord — in the form of shoddy returns.
My partner and I teach a property management course to mom-and-pop landlords. Here, we again and again return to a few simple themes. Most of these themes revolve around prevention, discipline, and staying several steps ahead of the irregular-but-expensive events that ruin returns.
Here are five habits that landlords need to develop if they want maximum profits and minimum headaches!
1. The Unflinching Enforcer Mindset
A few months back I analyzed whether you should keep your home as a rental or sell it when you move. The first thing I talked about? Whether you have the disposition and discipline needed to be a landlord.
Tenants will push against your boundaries. Your job as a landlord is to firmly and professionally defend those boundaries.
That means enforcing your lease agreement — to the letter.
Rent doesn’t come in on the first? Send an unofficial late-rent reminder. Rent doesn’t come in before the legally-mandated grace period ends? Send an official eviction-warning notice.
They still don’t pay after the required waiting period? File in court for eviction.
You’ll get sob stories, often with literal sobbing. Many people bend and give their tenants leeway — and then they give some more leeway.
If you do this, you train your tenants to believe that the rent is not their most urgent bill. So why would they ever pay it on time when they have other bills they need to pay in which excuses are not an option?
Enforce your lease agreement and your tenants will know that they can’t get away with whatever they want. They’ll know the rent is their highest priority because you will enforce the late fee and evictions.
If you can’t do that, you will lose all credibility with your tenants. You’re better off investing your money in a REIT.
2. The Discipline to do Recurring, Scheduled Work (Even When it Doesn’t “Feel” Necessary)
Landlords have monthly, semi-annual, and annual work they should be doing.
As we discussed above, every month you need to stay on top of your tenants about rent. Set reminders on your calendar if need be. Every six months, you need to inspect your rental units. Semi-annual inspections should be written right into your lease agreement.
It doesn’t feel urgent. It’s not a frantic midnight phone call about a burst pipe. So, most landlords don’t do it.
But again, it comes down to setting expectations with your tenants. Send a loud, clear message that you care about the property, you care about the lease terms, and (if you do it right) you care about the tenants.
Check that they don’t have unauthorized people or pets living there. Make sure they’re keeping the property clean. Confirm that they’ve changed the air filters.
And use that face time to build more of a relationship with your tenants: Ask about their jobs, their kids, their lives.
Then, every year, you need to raise the rent. Many landlords wring their hands and fret about it, but the alternative is allowing rents to fall below market value — then hitting your tenants with a too-drastic rent hike all at once.
3. Budget Like a Business (Because You Are One)
As a landlord, you’re a small business owner, whether you think of yourself that way or not.
The expenses involved in owning a rental property are largely hidden, because they’re irregular (but big when they happen). Expenses like turnovers, repairs, vacancies.
Here’s what rental property cash flow looks like visually – smooth periods, interrupted by huge spikes in expenses.
What does that all mean for you as a landlord? It means you don’t want to be that chump standing there with his jaw hanging open asking: “How am I supposed to pay for this $5,000 roof bill?!”
Here’s how: by setting aside money every month for these potential expenses. In a word, by budgeting.
And while we’re at it,if you ever want to retire with your rental income, budget your personal finances too. What’s the point of all the hard work building (and managing) your rental portfolio if you’re just going to turn around and spend it all on new shoes and dinners out?
If you want to get ahead, both as a landlord and as a person, get comfortable (and disciplined!) with your budgeting.
4. Think Long-Term to Vanquish Vacancies
Turnovers are where most of the work and costs involved in being a landlord lie.
You’ll have to repaint the unit. Maybe re-carpet it. You’ll have to go through and fix all the little things that the outgoing tenants either messed up or just lived with. Then there’s the lost rent, even as you continue carrying the costs of owning the property.
In other words, you have to spend money that you wouldn’t have had to if the tenants had stayed.
Then there’s the stress and headaches and work of advertising for new tenants, coordinating with contractors, screening tenants, signing a lease agreement, doing move-in and move-out inspections, etc. It’s labor. If you have a property manager, they’ll charge you dearly for that labor.
Speaking of tenant screening, your goal is not fill the unit as quickly as possible with an acceptable tenant. Shift your thinking to the long term, and instead make it a priority to fill the unit with a high-ROI, low-maintenance, long-term tenant.
You want someone who will be low-impact and treat your property with kid gloves. Someone who will pay the rent on time every month so you don’t have to chase them. Someone who will stick around for the long haul so you don’t have to worry about all the costs and headaches involved in a turnover.
5. The Meticulous Mindset: Records, Documentation & Attention to Detail
I’m just going to say it: If you’re not the anal-retentive type, hire someone to manage your rentals who is.
You need to be exacting in your record keeping, your documentation, and your attention to detail. For example, did you walk through the unit before your renters moved in to document the condition with them? Did you both sign the condition statement? Did you take photos with timestamps of every room from every angle?
Then what did you do with the photos and documentation? Is it stored securely on your computer or in your file folder where you can access it at a moment’s notice?
I’ll stop beating this horse; you get the idea. Active landlording is not a good fit for the laid-back and leisurely. There’s nothing wrong with hiring a property manager if you don’t have this meticulous personality type – the important thing is the self-awareness to acknowledge the bad fit and outsource your property management.
You’re in Business — Be Professional
Effective landlords have effective habits, that revolve around thinking long-term and embracing minor headaches today to avoid massive headaches tomorrow.
Keep a friendly but professional distance from your tenants; they’re your clients. Set a budget for expenses like you’re a professional, because you are. Set recurring reminders on your professional calendar, and then follow through actually execute them!
Catching a theme here? The landlords who succeed are the ones who bring professionalism to their rental management.
And if you can’t be professional, hire a professional.
Source: Bigger Pockets