Owning rental property is one of the quickest ways to accumulate long term wealth. However, if it was easy, everyone would do it. Being a successful landlord requires time, patience and knowledge that not everyone has. While collecting rents and building equity is great, it is just as easy to get involved in a bad situation if you are not careful. In most cases, it is the little things that landlords do that make all the difference – both good and bad. In order to get the most out of every rental property you own, you need to brace yourself for the worst case scenario. There will be some problems in almost every lease. Make sure you are the best landlord you can be. Here are some steps to help you prepare for them:
Establish a reserve fund: The number one reason that landlords fail is because they do not have funds to deal with everyday problems. Dishwashers break, windows crack and roofs leak. Even having the best tenants does not ensure that your property won’t have issues. Without having money to repair or replace these items, you open up the door for future problems. In trying to put a band-aid on the issue – instead of fixing it the right way – you make for unhappy tenants. Tenants that are unhappy will be slow in paying their rent and not take care of the property like they should. You also open the door for more expensive problems if you keep putting the issue off and delaying the inevitable. You never know when you will need money to cover the mortgage if a tenant walks out unannounced or what will break unexpectedly. Owning a rental property without reserves is like walking a tightrope without a net. Neither is very safe and eventually it will catch up with you.
Have multiple ways to reach tenants: You never expect your tenants to be a problem. In most cases they aren’t, but there are some instances when you need to reach them immediately. It is important that when they sign the lease you get as much information as possible about them. Having just a lone email or cell phone number is not enough. They can easily change or ignore those if they decide to walk away from your property. In addition to a cell phone number, get an email address, emergency contact number, work information and even a social security number. The more information you obtain before a tenant moves, the less likely they will run out on you unexpectedly. If they do, you have numerous ways to reach them. Also, in the event of emergency or if they are away for a weekend, it is good to have many different ways to get in touch with them.
Line up help before you need it: Do you know who to call if the toilet is clogged? How about if you need to change a lock? Many issues associated with being a landlord are minor in nature, but that doesn’t mean they aren’t important. If you make your tenants wait a day or two, you run the risk of angering your tenants. It can also end up costing you money. Instead of using someone you have an established relationship with, you use someone who is available. This will usually be at a higher price with no guarantee of the quality. Before you need to have work done, you should reach out to local trades people and develop relationships. You can always use a painter, handy man, contractor, snow removal company and landscaper. Reach out to them before you need their services and you will inevitably end up saving time and money.
Lease & Insurance: You never know when the unexpected will happen during a lease. Between weather issues, tenant problems and property damage, there are potential concerns always right around the corner. The two items that offer you the most protection are your lease and insurance. New landlords get in trouble by using a basic lease template they can easily find online. You don’t necessarily need a long complex lease, but it has to provide you the protection you need. It is important to spend the time – and in some cases the money – to get the right lease for you and your property. The same is the case with your insurance. You should review your policy every year and make sure you are comfortable with it. You can save a couple of dollars by making changes in the policy, but it may come back to haunt you. All it takes is one slip and fall or one incident on your property to wipe away years of hard work.
Don’t bend your policies: The best landlords are the ones that stick firmly to their rules and policies without breaking them. Before you know it you could have no structure at all and your tenants will walk all over you. If you don’t want smoking in the property, you need to have a strict no smoking rule. The same is the case with pets, parking and anything else that matters to you. It is easy to let the threat of a vacancy influence your decision making. You have to fight the urge to do this. You put rules in place for a reason, and by breaking them you start to lose control.
There is not much that separates good landlords from those that are struggling. It is often the little things that make the difference. Keep these five practices in mind before you make an offer on your next rental property.