1. Acquire smart investment properties
The first piece of advice for success in real estate investment is choosing the right properties. Which will attract the best tenants? Multi-family units are efficient to manage, but single family homes may attract more stable renters.
A good real estate professional will help you sort through neighborhood data, search for appropriate properties, and calculate return on potential investments.
2. Get everything in writing
Oral lease agreements of less than a year may be legally valid, but they’re not a wise idea. For each tenant, you should have a completed application, including references, employers, contact information, and nearest relative. You should also have a signed agreement spelling out the terms of the lease. Many landlords prefer month-to-month arrangements because giving notice is easier than with a periodic lease.
At the time of occupancy, complete a written property inventory. Include a list of appliances and other removable items as well as notes on the condition of walls, floors, doors, windows, and such. It’s a good idea to have your attorney review the forms you plan to use.
3. Be fair (but firm) with your tenants
Keeping good tenants minimizes problems. Keep your properties in good condition and perform regular maintenance. Respond to tenant complaints and concerns in a timely and fair manner.
When tenant-initiated problems arise, talk with your renters about the legal consequences of their actions. For instance, if the rent is late, remind them of the late fee and advise them that if it’s not paid by a given date, you will be giving a written eviction notice
4. Be sensible about property improvements
Keep properties clean, comfortable, light, and bright. A good rule of thumb is to maintain properties to the standard you would expect for your own family.
Survey properties for potential hazards like missing guardrails and unsafe dryer venting. Replace flooring and paint when needed, but don’t overimprove.
5. Budget for problems
Rental properties require more of your involvement than other investments. As you acquire properties, make sure you have enough time and money set aside to deal with potential problems like vacancies, maintenance, and damage. You may need to reserve up to 25% of rents to deal with these issues.
6. Follow your instincts
If you have concerns about a tenant, give notice (subject to applicable law). Don’t allow fear of vacancies to impact your decision.
Don’t let potential tenants talk you into unreasonable terms like stretching a deposit over several months or holding a unit for more than a week or two without payment.
7. Distinguish fact from fiction
Don’t manage your rentals based on information you have picked up from potentially uninformed sources; there’s plenty of misinformation out there. For instance, landlords can’t technically evict tenants. Eviction is a legal process that can only be carried out by the proper authorities.
