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.
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There are many ways on how to find and keep good tenants in our property to maintain our good investments. You just have to explore and be resourceful.
I think these are some good tips. Having a written lease is extremely important when dealing with tenants. Without a lease, you’ll be stuck with whatever state law says regarding your dispute, which is often pro-tenant.
The one thing I would add is that if you have a significant number of properties it may be worth having an attorney you can call to handle eviction and collection efforts for situations when your tenant vetting process hasn’t performed well.
We currently rent to someone we know. I wouldn’t call her a friend but she used to be our babysitter and we have had a really good experience. I do think that trusting your gut leads to the best results which is what we did in this case. With that said, even doing everything ‘right’ isn’t insurance you will be problem-free. It’s a risk no matter what.
I am real estate agent in Spain and we rent out apartments on short and long time, we always take photos of the furniture and the apartment’s condition which we attach to the contracts signed by the customer.
I think that’s a great system you got down Marbella. Taking the time to snap some photos before hand can save a lot of headaches down the road.
Renting out your property can defintiely be a challenge sometimes depending on the type of tenants you can get. Like you said, sometimes you have to be stern in laying down your rules and enforcing them. Not renting out to friends or family is also a very good decision. Although on the other hand, there are less unknowns with doing that also, which can be a positive. Again, it’s another thing that can vary.
-Jean
Good tips. What do you think of families as tenants?
I do generally rent to families. Most of my units have three and four bedrooms which is what families need. Dogs generally do more damage to my properties than kids do. And people with kids are usually past their partying days, meaning that they are quieter and usually cleaner (although that is not always the case).
I read your article, and I think I understood it pretty well, and a lot of it makes sense (e.g. the written walk-through with the prospective tenant, etc.), but I’d be curious if all of the steps you’ve given came easily to you? Or do you feel like you had to go out of your way to put your foot down on some things? (I’m curious because I have a friend who is a agent for commercial property, and he’s got amazing social skills — something I feel I can never have enough of).
No, none of these things were instinctive. I had to learn the hard way. When I first began doing this, confrontation came hard for me. Now I am able to say what needs to be said. I generally set the tone with my tenants the minute we sign the lease so it is rare today that I have to get in someone’s face. The key is to not be afraid to stand up for what it is right.
nice tips. I like the making 3x rent rule, it’s an easy rule to implement and screen out a lot of riff raffs.
Here (Juneau, AK) the market is hugely in favor of landlords. Rental prices are very high, leases with one-year minimums/no-winter move-out clauses are the standard, the vacancy rate is low, and almost no apartments allow pets. All but one of the leases I’ve seen have violated the state’s landlord-tenant law in one or more ways. After dealing with two bad apartments I’m one heck of a tough tenant and won’t put up with bull.
How you as the landlord take care of your property determines to a large extent how I will act. If you don’t fix major problems I won’t care about maintaining the property. If you treat me like crap I’ll do my best to move out with the minimum legally required notice. If you won’t kick out the couple that smokes weed inside and plays music till 3am all you’ll be left with is like-minded party goers. You won’t keep good tenants like me. Remember that your reputation matters too.
If on the other hand, you make sure a property is well-insulated, well-lit, landscaped and my neighbors are nice I’ll even chip in to clean up around the place. When you have a vacancy I’ll tell my coworkers and you won’t even have to put a posting on Craigslist or in the paper. You’ll do fewer apartment showings. You’ll get better renters.
Want good tenants? Maintain a good property, enforce your own rules, and kick out the troublemakers. Sure you can be a slumlord and still make money, but you’ll have to put up with a lot more crap doing things that way.
These are really good tips. I’d add (as a great renter) that the way to attract good renters is to have a good ad. It should be very specific and detailed to show that you are serious about your property.
When I see a very short ad (one or two lines, with no preferences mentioned) then it makes me think the landlord won’t take his/her job seriously which will be a problem for me. Those who say what they will/won’t tolerate make me feel better about renting from them.
Thanks for the tips! I was renting out my condo for a few years before moving back there myself temporarily, but I used a property management company since I was too scared to get screwed by a tenant and I was also leaving the country for two several-month trips. Your previous story inspired me to try to get more rental properties in the future, but the property management company takes too much in fees and I am still not comfortable finding tenants myself. Maybe these tips will help.