Since owning rental property for the past 23 years is what allowed me to retire at the age of 45, I can offer some tips on how to rent to decent people who will pay their rent on time and won’t trash your house or apartment.
Before I share those tips, let me first tell you that owning and managing residential rental property is not for the weak of heart. There are times you will be required to be confrontational. You will have to say no. You will, in some cases, have to evict your tenants. You will have to take money from their security deposit to cover damages and they will fight you on this. If you don’t stand up for what is right, your tenants will walk all over you.
I learned this the hard way. In the early years I absolutely had to have tenants in the two apartments that were below my part of the first tri-plex I owned. I couldn’t make my mortgage payment without them, so I pretty much ignored red flags and rented to anyone and everyone. I went against what my gut was telling me about some tenants, since they were waving 100 dollar bills in my face and I needed that money. Sometimes I got lucky, but more often than not, I didn’t. This is not a smart way to do business. Below, I offer the following list of tips on how to become a successful landlord.
Trust Your Gut
The number one reason I have been successful is because I now trust my gut. I can tell within the first 23 seconds of meeting a prospective tenant if I want this person to rent one of my properties. If the people I am showing a house to won’t look me in the eye, they are hiding something. If I ask them how their credit is and they hesitate before they answer, or if they say it ‘should’ be good, they are likely lying. I KNOW my credit is perfect and I won’t hesitate to tell you so if you ask me. If they work in a convenience store and tell me they are making $3000 a month, they are probably not being truthful (unless they are the owner or manager). My gut has never been wrong.
In my experience, if I rent to people that my gut tells me are bad, I am likely to lose rent money and the tenants are likely to cause damage to my property. I also have to spend my valuable time re-doing the apartment.
NEVER rent to friends or family.
I don’t even rent to my friends’ families anymore. I promise this will strain the relationship. It’s hard to be a tough landlord when you have a personal relationship with a person.
Always sign a lease with your tenant.
Make the lease very specific. My leases are now five pages long. Every time I have gotten screwed in the past, I add it to my lease. The laws are very pro-tenant and the lease is the only thing that will protect you in court should you find yourself facing one of your tenants there.
ALWAYS do a written move-in and move-out inspection with your tenant.
I won’t give my new tenants a key until they have done the move-in inspection with me. You must have proof of damages caused by THIS tenant in order to deduct anything from their security deposit. The only way I know to obtain this proof is to have a tenant signed walk-through. If the damage isn’t written on the form when the tenant moves in and signs it, that means you have proof that this tenant caused the damages. The judge will then side with you should your tenant challenge your assessment in court.
Make sure your prospective tenant has a job.
This is huge. I will not rent to a person who has a job lined up to start next week. They have to have a job NOW. I also require that they earn three times the amount of the rent. In my experience this will allow the tenant to comfortably pay their taxes, their rent, their utility bills and any other bills they may have. I won’t budge on this.
Collect at least one month’s rent and full security deposit UP FRONT.
I never allow a new tenant to pay a part of the first month’s rent or a part of the security deposit after they move in. If they don’t have the full amount due at the time they sign their lease, I won’t rent to them. If they move in owing me money, I am setting the stage for late rent payments later.
I could go on and on about this topic, but these are the most effective tips I learned through the years. After doing this for decades, I learned the hard way to never, ever make exceptions to these rules. Making exceptions causes me a lot of grief and costs me a lot of money. I am a tough landlord, and this makes me successful. My tenants know what I expect from them and they know what they can expect from me. Following these rules set a solid foundation for a mutually respectful relationship between the tenant and the landlord.