Landlording 101

I decided to write a post for beginning landlords or people looking to buy their first investment property. This is a very basic and simple post to help people with the job of property management.

With that being said, the first thing that comes to my mind — as should come to yours if you’re looking to attract those first tenants to your property — is deciding how, where, and who to allow to rent your property. Obviously Fair Housing laws should always be followed (and that goes without saying), but other than that, once you have a potential tenant you should do the following:

- Ask them to submit a full application with employment history, banking information, previous landlords information, and referrals. Other relevant questions include their intention to have pets occupy the property, how many people they intend to have living there. In some states, there are occupancy laws — only so many people can live in a property depending upon number of bedrooms or total square footage.

-Do a credit check on the potential tenants. You will have to disclose your intent to do this when taking the application.

-Get financial documentation to verify all information given the application: W-2’s, bank statements, a current pay stub, etc. You don’t want hand over the keys to your $200k or more investment based on information that could be false. Make sure that all the numbers match. Check the current pay stub with last year’s W-2. Does it add up?

-Check ALL referrals. Call and speak with the previous landlords as far back as you can go. Ask them about the condition of the property during your potential tenant’s residence period. Ask about on-time payments. Ask about how difficult this person is to deal with.

-I always take an application fee when taking an application so that I do not have to pay out of pocket to get the credit report. If this tenant is not a viable candidate for my property, at least I was paid something for my time to do all the work necessary to evaluate the potential tenant. A typical fee of between $35-$75 should be enough.

-Don’t rush this process. Take at least 24-48 hours to get all important information and to allow for callbacks from referrals etc.

After you have decided to allow the potential tenant to occupy your property, the next thing I recommend (besides getting first months rent, security deposit, cleaning/pet fees, etc., up front in the form of a cashiers check or money order) is to get 12-24 pictures with good detail of the property prior to the tenant taking possession. I will also have them initial on the lease that these pictures represent the true condition of the property prior to their occupancy. This will save you a lot of trouble should you ever have to go to court for an eviction process or seek damages. You now have proof of the true condition of the property prior to that tenant moving in.

Another good policy is to save all receipts for repairs or preventative work done on the property. Also, always give the tenant a receipt for rent payments and keep a receipt for yourself. I always like to do inspections once a month. When I’m picking up the rent, I’ll bring an air filter (which, in Tucson AZ should be replaced at least every 30 days) and then install the new air filter. While doing this, I will evaluate the interior of the property and ask questions. “Any problems with the home?” “Anything not seem to be working properly?” Asking these simple questions might remind the tenant of a problem they had three weeks ago that they forgot to call you about, and might end up saving you tremendous cost because you caught the problem early and addressed it vs. allowing it to become a much bigger, more expensive problem.

If you are looking to buy your first income (investment) property or you would like to add additional properties to your portfolio, my team and I are very experienced with locating, and evaluating investment properties for client’s needs. I have owned multiple investment properties for several years. I understand how to help my clients with the process of locating solid investment properties and using skilled negotiation to get the best deals and opportunities possible. Contact me via email or phone at (520) 579-SOLD (7653) for additional information about investment properties.

This entry was posted on Thursday, October 11th, 2007 at 12:39 pm and is filed under Investing. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.