Many investors are wary of the idea of renting property and the responsibilities that go with it. Unfortunately, this keeps them out of a profitable investing arena.

Following is a basic guideline for good rental management effectiveness and profitability.

Choosing Tenants

Your primary responsibility is to the maintenance and use of your property. Select your tenants carefully. It's unlawful to discriminate against an applicant because of race, national origin, religion, marital status, sex or physical disabilities. Beyond this however, it's still your property and you can pick and choose who you want living there. Never rent to the first person through the door. Prospective tenants will be shopping around, and you should too.

Make sure all applicants completely fill out an "Application for Rental" form. Forms like these are available at stationary and office supply stores.

Perform a thorough check of each applicant. Call the applicant's employer to verify employment, contact the landlord of the applicant's current or previous residence. This is the most important phone call of all. Check credit references if necessary.

"For Rent" signs and newspaper ads are not the best ways to attract trustworthy tenants. If this is how you advertise for tenants, make sure you screen them well. It's usually best to find a family or a person that can be recommended by a current tenant of yours. You may offer your current tenants an incentive for recommending strong prospects.

When writing a newspaper ad to rent your unit, make sure to give accurate descriptions. This includes the monthly rental amount, any deposits if required, description of the property or unit, and any restrictions that you maintain, such as children, pets, number of occupants, etc.
Don't be overly eager to get a tenant in. Indicate to all applicants that they will receive full consideration. Select a tenant that meets your requirements.

Collecting Deposits

Even though most tenants do not like paying deposits, it is in your best interest as a landlord to collect the last month's rent in advance. If the tenant fails to live up to the terms of the agreement, this deposit will help you to defray some of the costs of evicting the tenant. Defraying the legal costs is the only reason for this payment or deposit. You can also collect a cleaning deposit and a security deposit. These deposits are applied to any damages that occur while the tenant is occupying the unit.

Returning Deposits

If a tenant has in any way damaged your property beyond what would be considered normal wear and tear, you have the right to keep funds considered as security deposits and/or cleaning deposits. Try to use good judgment when determining what is and what is not normal. Normal use will age any property to some extent. Don't attempt to keep a tenant's money merely for this sort usage. You should, however, use the funds in these deposits to repair any damage caused by the tenant and/or to clean the property sufficiently so as to have it ready to show.

Inspection

A good rental agreement should have the tenant give a 30 or 60 day notice of vacating the property. Include a statement in your rental agreement that requires an immediate inspection at the time the tenant gives notice of his leaving. An immediate inspection helps you plan your strategy early if the property is not in good condition. It also lets you tell your tenant right up front what will be necessary in order for you to return his or her security/cleaning deposit. Include a final inspection the last day the tenant occupies your property.

Unannounced Entry

There has been an increasing number of restrictions put on unannounced entries in the past few years. Do not trespass unlawfully. Enter to make emergency repairs if you have to, otherwise wait until you get approval from the tenant for all other work. Don't abuse your privilege, you could end up with a legal battle.

Setting the Rental Amount

Your main consideration for determining the rental amount is based on rents of comparable rental units in the area. Common sense dictates that similar units rent for similar amounts.

Make sure your tenants know exactly when the rent is due. If you extend a grace period, make sure the tenants do not exceed that date for payment. Make it clear that you expect prompt payment.

Non-Payment

Even though you carefully selected your tenant from all the other applicants, things can go wrong. Job loss, illness, divorce, all kinds of things can hinder someone's ability to make timely rental payments. You may want to go easy on a tenant with a good payment record. A new tenant who can't pay, however, you should want to evict immediately.

Converse with your tenant. Try to determine when the rent will be paid. Tell your him that it's not personal, but a matter of operating your business. How long you wait to collect your rent is up to you. Clearly, the sooner the better.

Eviction

When all attempts to resolve your tenant problems fail, you must evict.
Select your best course of action. Do you need an attorney, or can you start the process yourself for less money? If you choose not to use an attorney, you may want to use a "Notice to Pay Rent or Quit" form. This is used only to recover unpaid rent. The notice tells the tenant that he has only three days to pay the rent or leave the premises. If the tenant pays the rent within that three day period, things revert to business as usual. You collect the rent and the tenant doesn't have to leave.

A tenant with chronic offensive behavior may be served a "Notice to Quit" form. Use this form to begin eviction of a tenant who is disturbing and constantly breaking the rules. If the tenant is in violation, you have the right as the property owner to reclaim your property. The tenant must be "served" in person or by registered mail. Both of these notices are available in stationary and office supply stores. Consult an attorney to obtain knowledge of local, state or federal laws, alternatives and his professional advice.

Crowd Control

The more people who live in a unit, the more wear and tear, noise, damage, etc. One way to keep the crowds down is to limit the number of tenants per unit. Have this stipulated in your rental agreement. You can also stipulate an additional charge for each extra person occupying one of your units. If booze and drug parties, loud noise or music, or property destruction occurs, you may have grounds for eviction. Other than that, try to select the best tenants to avoid problems. Do not interfere in your tenants lives. Rent to them, reject them, evict them, or deal with them.

Maintenance

To determine how much maintenance will be required for your properties, just multiply the number of rental units you have, times the number of headaches associated with each unit. You must be proficient in repairing cracks in walls, painting, plumbing, yard work, electrical, etc. You will save a lot of time, money and stress from tenants if you can do this work quickly and efficiently.

If you can't do this work yourself, consider a good handyman. A really good handyman may be hard to find, but is well worth the search. Make sure the person you hire can be on call when you need him. Make certain the work is done well and is competitively priced. A good handyman can make you a better landlord.

Pest control is the landlord's responsibility. Shop around for the best combination of service and price. If there is a pest problem due to unsanitary conditions caused by a tenant, you have the right to demand that they clean up or otherwise correct the unsanitary condition.

Conclusion

Always start with good tenants. Use common sense and good judgment to avoid future, costly problems.



Source: the Real Estate Library

 

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