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How To Find The Best Rental Tenants

Tenant screening is the most important step you can take to ensure you are renting to quality tenants. While nothing you do will ever guarantee good tenants you always want to give yourself the best possible chance. By taking the time to screen your tenants and ask the right questions you can eliminate many bad tenants that may fall through the cracks. All it takes is one bad tenant to put you behind the eight ball and impact your business for the next several months. By being willing to reject suspect tenants and focus strictly on solid ones you greatly reduce your risk of running into trouble. Here are a few tips to help you find the best tenants for every lease.

  • Strict Screening System. Lenders don’t give out loans to every borrower that asks for them. As a landlord you should have a similar mindset. You can’t be willing to rent your property out to the first halfway qualified person that comes your way. This can be difficult when you are nearing the end of the lease and staring at eviction. However, by implementing strict screening you are protecting the long term life of your property. Screening starts with sending every interested tenant an application before they even see the property. The more you go back and forth with showings the more likely you will get frustrated and end up letting your guard down. Your initial application really only needs to be a few questions long. You need to have some idea of their current employment, current residence, previous residences, criminal history and any personal references. Make it known that this step is needed before you show the property. If there are any red flags at this point you need to make the applicant aware and move on to the next tenant. The longer you go back and forth the less time you have to look for your real tenant.
  • Pictures & Photos First. There are many more property marketing options than ever before. In the past if you wanted to rent a property you most likely put an ad in the local newspaper. Interested tenants would call about the price ask the address and schedule a showing. While newspaper can still be effective you now have dedicated rental websites as well as social media at your disposal. In order to streamline the process, save time and eliminate the window shoppers you should have quality pictures and videos readily available. For a relatively low cost you can even set up a website strictly dedicated to your rental property. This website can include pictures, videos, frequently asked questions, lease information and more. By doing this you save time but you also funnel serious tenants to you. There are many would be tenants who will not take the time to fill out an online application or follow up through by email. Those that do you know have a real interest in the property and are more likely to work out for you. They already know the rules and expectations as laid out on the website. They may have a few random questions but most of the bigger items are already answered. At this point it is all about whether or not they like the property and can fit your timeline for moving in.
  • Contact References/Previous Landlords. Having an application only makes sense if you are willing to follow up on it. While there are many great tenants there are also some serial property abusers. They may appear nice but on closer inspection are a disaster. The only way to know is to make some phone calls and do some legwork. Start with their current employer. Make sure that the phone number listed matches up with what you find online. It is not uncommon for bad tenants to provide the number of a friend or family member that poses as the employer. When you call ask for the human resources department or if the company is small enough the owner. Explain who you are and why you are calling and verify employment. You also want to verify the number of hours listed on the application. If employment checks out you should also reach out to any previous landlords listed. A prospective tenant probably won’t come right out and offer up that they were recently evicted. A call to the past landlords should provide this information. You need to be a little careful in taking their word too strongly. You never know if they held a grudge for how the lease ended or if something happened during it. If there were no problems at all you should feel confident that you have a strong tenant.
  • Expectations & Guidelines. It is important that you get out as much information as possible before your tenant signs the lease. Your tenant may look great on paper and have an interest in the property but before you lease is signed you need to tie up any loose ends. Go over the lease and point out any items of particular importance to you. If you are set against pets or smoking in the property you need to let them know any consequences for breaking the rules. Regardless of what is on the lease you need to reiterate the guidelines for the maximum number of people in the house, parking rules, payment options and what utilities they are responsible for. If your tenant has any questions now is the time to address them. Even if it takes a few extra days or even a week to sort everything out it is better to do it now rather than have to deal with things in the middle of a lease.

By going the extra mile you give yourself the best chance at finding good tenants. This process may seem long and tedious at times but is the most important thing you can do for your rental property.

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7 Items That Every Lease Needs To Have

As a landlord your lease is everything. Without a well written lease for your protection you leave yourself open to liability, litigation and financial loss. It is not enough to use the first lease you find online. Your lease needs to be tailored specifically to the property, the market and your personal preferences. Anything that you find important needs to be stated in the lease. It may be too late to settle a dispute or enforce a policy after your tenant is already in the property. Before you get too far in finding your next tenant you should take a minute to review your lease and make any changes you feel necessary. Here are seven items that need to be addressed in every lease.

  1. Pets. Whether or not to lease to a tenant with pets is one of the more debated topics among landlords. On one hand pets can cause subtle damage to the floors and furniture in addition to leaving a lasting smell that is often difficult to get rid of. On the other hand pet owners account for nearly 40% of all potential tenants. Ignoring this market can dramatically decrease the pool of renters. Whatever your stance on pets is you need to address it on your lease. Certain pets can be more problematic than others so it is ok to restrict which pets you deem acceptable. If you are against pets of any kind in your property it should be stated clearly on your marketing and highlighted throughout your lease.
  2. Smoking. Over the years the number of smokers in general has declined by a significant margin. That being said it is still something that needs to be addressed on your lease. The first thing you need to figure out is what kind of tolerance you have for smoking in the property. Much like pets smoking leaves a lasting odor that can impact the rentability for several years. Many owners do not allow smoking of any kind in the property at all. There are some owners who allow for certain designated locations outside of the property. With this they clearly indicate where and how the butts must be disposed.
  3. Noise/Complaints. Each tenant has their own unique set of issues and problems. When renting to college students and younger tenants in general you need to make sure you have something in your lease regarding noise and complaints. If you are constantly getting calls from the neighbors, town officials and local police you need to have a policy in place that can terminate the lease. This can be based on a certain number of times you get called or if the complaints are severe enough. A popular remedy for this is imposing a three strike policy. If there are three documented complaints you have the right to enforce action. It is very important that you make this clear with any new tenants and that it is stated on your lease.
  4. Condition. As a landlord you walk the fine line between giving your tenants privacy and making sure your property is in good standing. It is certainly well within your rights to call for monthly periodic walkthroughs of the property. As long as you give your tenants fair warning there should be no issues. On these walkthroughs if the condition is alarming you need to have something in place to force action. You should have something on the lease that gives you the authority to terminate the lease if there is severe property damage.
  5. Expenses. Who is going to pay the water bill? How about the snow removal? Are you going to cut the grass? Every expense on the property needs to be clearly defined on the lease. Something as seemingly minor as the garbage removal bill can be an issue with your tenant. You need to also make it known what bills will be in their names and if there are any restrictions on usage.
    Insurance. The insurance on a rental property is often a confusing item for tenants. As the owner you have homeowners insurance that offers protection in the event of damage or liability. This insurance is solely for you and not your tenants. If your tenant wants to protect their personal items they need to acquire specific renters insurance. They do not need to have this to live in the property but if there is damage of any kind they will not be insured. This section of the lease should not be glossed over. The odds are that nothing will happen during the lease but you should always prepare your tenant for the worst case scenario.
  6. Security Deposit/Move Out Condition. Before your tenant moves in you need to clearly define the move out policies. As you get closer to lease end your tenants will ask about their security deposit and how quickly they can have it. By law you are allowed up to 30 days after the lease to release these funds. In most cases you will send them out much quicker but only after you are comfortable with the condition. It is too late to take action if you find a hole in the closet a week after your tenants moved out. Make it clear to that you will not issue the security until after the lease is over and you have time to inspect the property.

Going over the lease line by line can be tedious and sometimes frustrating but it is often your last line of defense if something unexpected happens. Whatever you want on your lease needs to be on it before anyone signs on the dotted line.

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5 Steps To Rental Property Ownership

Most new investors realize the benefits of rental property ownership. Just one well performing rental property can completely transform your portfolio. There is nothing wrong with quick flips and rehabs but there should be some balance to your business. A rental property will not only generate monthly cash flow but can offer tax breaks and long term appreciation potential. Buying a rental property is very similar to that of any other purchase except there are a few minor tweaks along the way. Understanding the subtle changes can make all the difference between a home run rental property and one that becomes a burden to deal with. If you are interested in rentals but aren’t quite sure where to start here are five steps to rental property ownership.

  1. Start With A Plan. Ok, so you want to buy a rental property. The first step is to develop a plan of attack. You can’t just make offers on every new listing that hits the market. You need to determine a firm set of criteria that will act as your guide. Do you have a specific market that you are interested in? How many units are you looking for? How long do you plan on holding the property? What type of capital do you have for improvements or upgrades? You need to know what you want first before you start looking at what is on the market. A property may be great to live in but may not make the best rental property investment. The goal of any rental property is to attract tenants for as long as possible. If the property is located in an area of low demand you will have trouble finding tenants. Before you do anything else you need to visualize what you want from your rental property.
  2. Understand The Numbers. Owning a rental property is very much like running an individual business inside of a bigger business. Like any other business you need to fully grasp all of the numbers associated. From the outside it may appear that cash flow is simply your rents received minus loan repayment. This is certainly a start but far from the final number. You also need to factor in specific utilities, lawn maintenance, snow removal, vacancy reserves and unexpected repairs. Many times these numbers will throw your monthly bottom line for a loop. A property that would appear to have positive cash flow may actually turn out to be negative when all is said and done. If you are friendly with fellow investors in the area you should reach out to them and ask about specific numbers and variables they face. Certain towns are more difficult, and expensive, to own in over others. Numbers are the backbone of any business and certainly a driving force in any rental property.
  3. Financing. At this point you may think you are ready to start looking but you first need to secure financing. There are many different ways to finance a rental property. Because of the long term nature of rentals many owners start by searching for traditional bank programs. With these programs you can take advantage of low interest rates but you also need money for the down payment. Depending on the borrower credit profile and the specific lender the down payment amount can be anywhere between 20-25%. Once the closing costs and property tax escrows are thrown in buying a rental property takes a large financial commitment. Another option available is to seek a hard money loan. Generally speaking hard money loans work best for short term flips and rehabs but can work for a rental property in the right situation. Regardless of how you plan on financing it needs to be firmly in place before you make any offer.
  4. Sit Down With A Real Estate Agent. Rental property success is based on buying the right property. As obvious as this may seem many new landlords fail to acknowledge this. It is difficult not to jump at every new listing you see. You want to get started so badly that you end up pursuing the wrong property. To avoid this you need to sit down with your real estate agent and review your game plan. You should discuss exactly what you are looking for, where you want to buy, how much you can afford and what condition the property should be in. A good real estate agent will let you know if your vision is realistic and what is available in the market. Discuss the timeframe for buying and what time works best for showings. The more your real estate agent knows exactly what you want and how you want it the easier it is for you to get the property you really want.
  5. Stay Firm With Your Offer. A rental property is an investment not only for the short term but for the long term as well. The price you pay for your property will impact your numbers for years to come. Every dollar that you increase your purchase price has an impact on your cash flow. At a certain point the property no longer makes sense. This is important to remember with every offer you make. You need to stay disciplined and not get caught up in a bidding war. The goal is not to take ownership but to buy a property that generates income. There are times when you need to walk away, as hard as it may be. By doing this you will lose out on some properties but the ones you obtain will be much stronger.

As you are making offers you can start to assemble your rental property team. If you are using a property manager now is the time to reach out to them and discuss exactly what they offer. You will also need a good handyman and possibly electrician, carpenter, painter and more. Rental property ownership is available to all investors. Don’t be intimidated by the process.

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5 Things You Should Do To Your Rental Property Every Year

To maximize rental cash flow you need to stay on top of your property year round. It is not enough to list your rental and wait for tenants to pour in. Even if the property doesn’t necessarily need updates it is always best to be a step ahead rather than a step behind. In competitive markets your property will be compared to every other one in the area. Often times it is the little touches that can make the biggest difference. You don’t need to give your rental a complete makeover every year but you should stay on top of it. Here are five things you should do to your property at the end of every lease.

  1. Paint. It is important to look at your rental through the eyes of a prospective tenant. Even though the walls may not be in terrible shape they are probably more beat up than you think. If you are like most landlords you use lighter paint colors for the high traffic areas. White or eggshell colors retain every handprint and stain throughout the course of the lease. You need to hit the walls with a fresh coat of paint at the end of every lease. You don’t need to be a professional painter to paint a bedroom. For less than a hundred dollars you can buy everything you need to paint a room or two. This may take you a few hours but will make a tremendous impact on the appearance of the property. A prospective tenant can often tell how well the property is maintained strictly by how clean the walls are. Take a few days every year and keep the walls looking fresh.
  2. Preventative Maintenance. Not everything you do to your rental is to attract tenants. A rental property should be treated like an investment. If you want your investment to hold its value you need to take care of it. There are several things you can do to keep the property as healthy as possible. Start with the major items like the furnace, water heater and oil tank. The furnace and oil tank should be serviced every year. You need to change the filters, run the lines and find any potential issues before they turn into larger ones. Not only will you keep these items running longer but they will also be more efficient. You should also take inventory of your appliances. The washer, dryer, dishwasher, refrigerator and stove won’t last forever. Even if you have great tenants they will not take care of these items the same way you do in your house. Take a look at if there are any lingering repairs that need to be made or if they are due to be replaced. If you put a band aid to get you through the year you should prepare yourself to purchase something new.
  3. Floors. Tenant’s eyes go to the walls and floors upon entering a new property. If you are willing to paint the walls you need to do something with the floors. Instead of replacing the carpet every few years you should spend the money to have them professionally cleaned. A good steam clean can make them look brand new. The same is the case if you have hardwood floors. Instead of steaming there are plenty of inexpensive cleaning solutions that you can do yourself. Even if the floors are run down and scratched you can restore them and give them a good shine. The look of old, dirty hardwood floors compared to clean ones is night and day. This is the first impression that your tenant has. The rest of the house may look great but if the floors are run down your tenant may look elsewhere.
  4. Landscape. The floors and walls are important once your tenant enters your rental but what about the exterior. It is entirely possible that your tenant may form a negative opinion before they step food in your property. The curb appeal is a much bigger factor than you may realize. You don’t necessarily need the outside to be pristine but it can’t look like a jungle either. Any bushes and shrubs should be trimmed and neat. If there are weeds in the driveway you need to pull them up. A fresh layer of mulch is a must in the spring. The property should be free of any leaves and long grass. The next time you pull up to your property make a note of how the exterior looks. Anything that catches your eye will probably catch a tenant’s eye as well.
  5. Odds & Ends. You may be surprised at just how many little things impact a tenant’s decision. It is not an exaggeration to say that the little things can make all the difference. The little things can mean anything from replacing the shower curtain to cleaning out the garage. Something as seemingly small as a new welcome mat or updated switch plates can be what a new tenant remembers from the property. Many of these minor items are less than the price of lunch but will separate your property from everyone else. It is a good idea of have your spouse or someone you trust walk the property with you and tell you what stands out to them. If it stands out to them it will stand out to a tenant. Focus on these items before you start your new tenant search.
    Even the best properties need a little work at the end of every lease. By spending a few hundred dollars you can attract better tenants and keep your property running as efficiently as possible.
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