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How to Be A Landlord: Top Ten Tips for Success

by Brandon Turner on December 9, 2012 · 101 comments

  
How to Be a Landlord

Sometimes I don’t like tenants.

Okay, that’s a lie. A lot of times I don’t like tenants. I’m sure individually those tenants are decent people. However, as a whole, I don’t always like tenants.

When I first wanted to enter real estate investing – I heard time and time again all the reasons why landlording is a terrible idea. I’m sure you’ve heard them too:

  • The tenant won’t pay rent
  • The tenant will trash your house
  • The tenant will make you go bankrupt
  • The tenant will make you clean toilets at 2 am
  • The tenant will drive you crazy

These generalizations are not unfounded. Many investors become landlords and quickly find they are overwhelmed by the amount of work it takes to manage tenants – especially in low-income areas or in multifamily properties (both which I own.) These landlords often find themselves burned out because they never learned how to be a landlord.

Over the past five years I’ve made a lot of mistakes, learned a lot of lessons, talked with a lot of other investors (both successful and not), spent a lot of time on the BiggerPockets Forums, and read an absurd amount of books. During this time I’ve learned a lot of “hacks” from these sources that have made landlording much easier to handle. I finally feel Like I know how to be a landlord – and can help others feel the same. Some of these might work wonders for you – others may not work at all. However, these are all tricks that have helped me manage dozens and dozens of properties and still love investing in real estate.

Like a new puppy or a new employee, tenants need to be trained to act the way that fits your business model. Many of your tenants are coming from a background with terrible landlords who let them do whatever they want. Unless you want the same problem – you need to train your tenant to perform the way you want.

How to Be a Landlord: Top Ten Tips for Managing Tenants

10.) Be Knowledgable

To make landlording an easier task, you need to be well equipped to handle the problems that you will face. The best way to do this is through education. Books, courses, and mentors are all great ways to improve your abilities. When you have questions – don’t just shoot from the hip. Head over to the BiggerPockets forum and ask your question in front of thousands of seasoned investors to learn what works and what doesn’t. Listen to podcasts, talk with other investors, and teach others what you know.  Education doesn’t end with high school or college – it simply becomes more important. (Click here to tweet this quote!)

9.) Create a Policy – Stick to it

If you are running your rental business off the top of your head, making up the rules as you go – you are opening yourself up for a lot of hassel. Tenants will know if you are making rules up on the spot (no – you cannot pay rent in quarters) so having a written policy – that your tenant has – will make life much easier. Rather than trying to explain why a certain action is not allowed, you simply can refer to the policy. “I’m sorry Joe – our policy states that rent must be paid by a Cashiers Check or Money Order.” People tend to not question “policy” even if you are the one who created that policy. Once that policy is created – don’t deviate from it.

8.) Quality Product = Quality Tenants

While this isn’t a hard and fast perfect rule, in general the quality of your tenant will depend largely on the quality of the home you are providing. I’m not suggesting that you offer granite counters in your Section 8 rental – but providing a better-than-average home you will set a standard for the kind of tenant you attract and keep. As a landlord, your product is not only the renal itself. Your business is part of the product, and the way you run your business will affect how your tenant views your product. Fix repairs promptly (hire it or not,) maintain strict professionalism, and stay organized.

7.) Set Office Hours

Do you want to fix repairs at 10:00 at night? How about receiving phone calls at 6:00 am? As a landlord – you get to set your own hours. I publicly let all my tenants know that I was only available between 10am- 4pm on weekdays. Of course, I have a cell phone that will ring anytime. Tenants don’t need to know that though. When they do call outside of office hours – I will always let the call go to voicemail. If it’s important – they’ll leave a message. If not – it probably wasn’t important. The main exception to this policy is when trying to show a unit. I try to answer calls anytime – but that’s up to you.

6.) Get a Google Voice Number

A neat tip you can also try relating to the previous tip is to sign up for a free “Google Voice” account – which supplies you with a phone number that is forwarded to your own cell phone. Give all your tenants this number and set up a business voicemail on that line. All business related calls go to that number but your phone (or multiple different phones) will ring and can be answered. On our “business voicemail” line I include my personal cell phone number for “Emergencies only” but have never had a problem with tenants abusing this. By having a Google Voice number – you can set a schedule of when the phone will ring and when you want it to simply go to voicemail.

5.) Know When To Outsource

Many repairs can be easily fixed. Many more cannot. If you are extremely handy with construction and tools you may be tempted to do all the repairs yourself. While this might be a good idea – it also may not. Just because you can do something doesn’t mean you should. In order to be a successful landlord – you need to balance cost savings with enjoyment. If you hate fixing things – don’t fix things. Hire it out. There are too many ways to make money in this world than to be trapt doing something you hate.

4.) Be Organized

Have all the forms you need organized neatly in your file cabinet, have your procedure written down for all common problems (vacancies, repairs, etc.) and keep your maintenance contacts organized neatly for easy retrieval. Keep current with your accounting. Have a clean office. These, and many other organization tools, may seem small and trivial but they are one of the most important ways you can keep your business a business that succeeds. Don’t underestimate organization.

3.) Always Charge a Late Fee

It may seem cruel – but I always charge a late fee – and I make it known ahead of time about this policy. I don’t know how many times I’ve had a tenant call with a claim of not being able to pay the rent on time but as soon as they discover I’m going to charge them a late fee – somehow they always seem to find the money. Most tenants make a lot more money than just what rent is – but not enough money to live each month. As such – they must constantly prioritize what gets paid and what doesn’t. By being strict with late payments – you place “rent” higher on the priority scale than other obligations. Additionally -the extra income when rent is late is a nice compensation for the stress of not getting rent on time.

2.) No Family/Friends

Not a month goes by that I don’t get a call from a friend or family member asking if I have any place available for rent. My answer is always the same: no. As part of my “Seven Deadly Sins of Real Estate Investing,” renting to family or friends is one of the most common but most disastrous mistakes many new landlords make. I didn’t know this when I first began and rented to several close friends and even some family – each time I was faced with a choice: Get screwed over or lose the relationship. Every time I chose to get screwed over in order to preserve the relationship. I finally had enough and “put it in the policy.” No more stress from those relationships.

#1.) Don’t Be The Owner

Finally, my number one tip for being a successful landlord: don’t be the owner. This is especially true for those of you who, like me, are peacemakers and non-confrontational.  As a landlord – you are going to face a lot of tough decisions and awkward conversations. When you are the owner – the blame is on you and as a result you will often make decisions based on convenience rather than common sense. (After all – you better not be the owner. The owner should be a business entity that you set up with your attorney.)
Instead, from this moment on, you are no longer the owner. You are simply the property manager.  “I can’t move my 200lb dog into this studio apartment!?”  “no, I’m sorry – the owner doesn’t allow dogs here.” Additionally, you can tell the tenant “I need to talk to the owner about this” to buy yourself time to think about odd requests.  Instead of the tenant being upset with you – they are now upset with the mysterious “owner.”  Feel free to play this up all you want:

Me: “Sorry, I tried talking the owner into it but he is a stickler for the rules.”

Tenant: “Ugh, I hate that guy”

Me: “Yeah, me too…”

What About You?

That’s all I got for now! I hope you enjoyed my tips. Each of these tips have become a huge partner with me to make landlording much less of a headache than it is for others.

What are your favorite tips on how to be a landlord? Or which is your favorite tip from above? Leave me a comment below!

Also, if you found this article helpful – please do me a favor and share this article on Facebook, Twitter, Google+, LinkedIn, or any other social network you use! 


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Photo: Amanda Yepiz

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{ 101 comments… read them below or add one }

Nick Johnson December 9, 2012 at 10:43 am

I love the last one.. Almost like “go ask your mom.” There’s no reason to let them KNOW you are the bad guy!

As always, Brandon, thanks for this and I will surely be using your tips some day soon.

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Brandon Turner December 9, 2012 at 2:45 pm

Exactly Nick! It seriously works so well. It has been a lifesaver for me, time and time again!

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Jarred December 10, 2012 at 6:06 am

Brandon,

How would this work in a situation where the business entity has your name in it? How could you be creative in hiding the obvious fact that the landlord is the owner? For example, if your company was “Turner Properties”, would you maybe just say that it is a family business and you just work there? I always liked this strategy of not being the owner, but I wonder how it can apply here.

Thanks! Great tips here
-Jarred

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Brandon Turner December 17, 2012 at 8:51 am

Hey Jarred,

The way I would overcome this is to simply change the name of the LLC – or create another one to be the “property manager.”

Jeff Brown December 9, 2012 at 10:57 am

That last one, Brandon, is the big winner. It’s worked for me since the mid-80s. I haven’t dealt with tenants for quite awhile, but when I did, that one piece of advice was akin to a magic wand.

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Brandon Turner December 9, 2012 at 2:46 pm

Thanks Jeff, glad to see that technique worked for you as well! Now I just need to become a note guy like you and get rid of tenants once-and-for-all! :)

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Dennis December 9, 2012 at 3:19 pm

Let me add “Never rent to single woman if you are a low income landlord” find a legal way to reject their application (that will not be hard). I know this is advice is going to cause some to accuse me of discrimination, but if I didn’t discriminate I would rent to anyone that could fog a mirror.

If you are really smart you should start young buying and learning to manage your own properties until you have good cash flow, then hand all of your properties off to management company. Don’t be cheap find the best company and pay them accordingly.

Next keep buying properties because owning them will be a breeze if someone else is doing all the dirty work and for peanuts (10%). This way you get your life back, keep your day job until you become unemployable. When you achieve massive cash flow you will understand what I mean by unemployable.

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Joshua Dorkin December 9, 2012 at 3:49 pm

Dennis –
Can you elaborate on the logic behind your statement? You certainly know that what you’re endorsing is illegal for landlords to do, don’t you?

And to anyone reading it, please be sure to ignore the advice, as following it is a fast way to find yourself in violation of Fair Housing Laws!

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Mary Hammett December 10, 2012 at 4:07 pm

I cannot disagree more. Not only is this a totally illegal and unethical approach – it’s simply bad business. ANYone who qualifies (based on income, job security and most importantly referral from former landlord) is welcome to live in my apartments. I DO discriminate based on how the potential tenant handles themselves at the showing. If wearing gang attire and acting like a gang-banger, or they lie about anything, I won’t rent to them. If they present themselves in a neat and polite manner, and they are truthful even with unpleasant admissions, then I give their application as much consideration as the others. I have had many single moms who have been fantastic tenants.

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Greg Turnquist December 11, 2012 at 9:27 am

I would listen to this opinion more if there was an ounce of justification provided. But it sounds as credible as “don’t lease to people that wear yellow shirts.”

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Sharon Vornholt December 12, 2012 at 6:20 pm

Dennis with no last name-

That is the most absurd comment I have ever heard. Bad tenents are equally divided among both sexes. I’m pretty sure it was a man that parked his motorcycle in the living room of my rentals. I hope you have a good attorney on retainer. It’s only a matter of time until you need one.

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Shaun December 15, 2012 at 2:10 pm

I agree with everyone else on this.
Both illegal and has no basis.
In fact I have had many single women and they have all been good residents.
The single moms getting assistance have all been model tenants.
I’d love to know the rational behind that thought.

steph May 27, 2014 at 5:33 am

I think we should really stop giving him such a hard time. I can see where he is coming from, appearance and attitude does matter when you are looking for a renter…..However, like the other posters have said, single mums usually make great tenants. They pay on time and have a vested interest in keeping the property ship shape.

Irving February 21, 2013 at 4:38 am

Um, excuse me, Dennis,

What you just said is putridly indicative of the kind of illegal discrimination that gets us in trouble and makes it unduly difficult for perfectly acceptable tenants, who happen to be single women, to find suitable housing. It kind of makes me wonder what punitive advice you would have given for those who are not only single women, but single women with a child or two. Your “never” statement is not only evidence of ignorance of housing laws and the latest legal precedent that is gaining more prevalence across the states, but it shows that you totally overlook the fact that more single women than ever actually OUTEARN their male counterparts–especially when you talk about African-American women, many of whom are attorneys, paralegals, or in some type of mid-level management. You’ve got explicit gender and familial status discrimination here, and implicit income source discrimination–please get a clue.

What you’ve written here is pretty ignorant and distasteful and I hope everyone on this board will ignore you.

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Larry Weingarten December 9, 2012 at 4:00 pm

Landlording is NOT the place you want to learn by making mistakes, as I did early on. There is a book I particularly like called “Landlording”, by Leigh Robinson. I’ve used it for years to keep out of trouble. It’s steadily updated, both in written content and forms it provides and is now in it’s 11th edition.

Tenants can be like precocious children who need rules to reign them in. This book provides the rules in an evenhanded and creative way.

Good post on a potentially difficult topic!

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Brandon Turner December 9, 2012 at 11:00 pm

Hey Larry, I haven’t read that one – I’ll check it out. And I agree- making a lot of mistakes can be tough on a new landlord. Hopefully these tips will help others avoid the ones I made! Thanks for the comment!

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Sumatra Chuedalounkhone February 21, 2013 at 4:49 am

Hello Larry,

I think you have a point with the statement about how tenants can be like children. I think the important thing to remember though is that “can be” is the key to not getting above ourselves just because we are in a position to rent something, forget that we are yet dealing with adults, and start behaving in a parental (i.e. one-up/superior/authoritarian) manner. We still need to give people respect. A property to rent and rules don’t make us intrinsically better than them.

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kyle hipp December 9, 2012 at 4:03 pm

Great post Brandon!!

I think being knowledgable in the field is of vital importance. Nobody likes dealing with somebody that doean’t know what they are talking about.

I have a hard time with not being the owner and just a manager. I pick up the rent myself each month as well as have made improvements in all of my properties. My tenants see me often and I provide excellent service by making repairs as soon as possible and handling any issues calmly and quickly. I guess my biggest problem with this approach is that I cannot stand to perpetuate the myth that all business people are greedy and a heartless bad guy. I strive to put out a superior product and show how it is a great value for them.

My best tip has been to explain the different costs to the tenants. I will update my tenants on any tax increases, property assessment changes, utility rates or spikes. I explained to a tenant how a water bill spiked when they left the water running outside for kids to play. When the city adds yearly charges for garbage or recycling services I let them know and how much it is. I recently had some sewer and water work done on the street by the city and I was billed $1920 for the work done, the tenants were shocked to find this out. When I update the windows or furnace or anything else on a property I always check with the tenant on their energy costs before and after. When they say they saved $50 or $100 a month and increased comfort and estetics they have no problem when I increase rent a similiar amount where they still come ahead each month.

I guess one trick would just be using numbers. If my property taxes increase from $2,200 to $2,310 that is a 5% increase. So I can say my costs being property taxes increase 5% this year and I am raising your rent only 4% from $600 to $625. Of course I always point out any improvements as well as explain that I have looked at other rental rates in the area and these are still slightly below market and my service pushes it over the top as many tenants have either had bad landlords in the past or know someone who has..

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Brandon Turner December 9, 2012 at 11:02 pm

That’s a great tip, Kyle – letting tenants know about your numbers. I think many tenants think the landlord gets to pocket all that money. Little do they know about all the costs! Thanks for the tip!

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Esther Owen December 10, 2012 at 2:40 am

Spot on, practical advice. Thank you!!

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Brandon Turner December 10, 2012 at 11:14 am

Thanks Esther! Feel free to share it! ;)

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JoshuaMacias December 10, 2012 at 5:26 am

Brandon – this was very edifying for me as I have been at this for over ten years now and do not normally collaborate with other investors often. I have done all but one of the things your recommended just because it made good business sense to me. I plan in implementing the other this week!

Joshua Macias

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Brandon Turner December 10, 2012 at 11:18 am

Hey Joshua,

Very cool! Which was the one you are gonna work on? Just curious!

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JoshuaMacias December 11, 2012 at 6:21 am

For me it he policy bein written. Many times I has stated “I’m sorry but it’s policy that I send out a five day pay or quit and charge a late fee.” But I have not written it down and handed them a copy I have just relied upon the lease to dictate that. Good stuff thanks

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Brandon Turner December 17, 2012 at 8:52 am

Awesome Joshua! Good luck and hopefully it helps a lot!

Alex December 10, 2012 at 6:13 am

Brandon,

Great advice! I particularly liked the #1 about not being the owner, it certainly serves two purposes as you outlined; the decision filter and the legal shield. Some tenants even feel more comfortable dealing with the manager and not the owner, as they perceives the manager as the facilitator and the owner as the bad buy. Also liked the #6 about the Google Voice number, I will go ahead and grab one now.

Thanks,
Alex

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Brandon Turner December 10, 2012 at 11:19 am

Thanks Alex. #1 works so well for guys like me who are too “conflict shy” :) And yeah – Google voice is amazing.

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Jose Gonzalez December 10, 2012 at 7:38 am

Hi Brandon,
Great tips, I only want to mention that point of no family/friends in the properties… I just leased one of my single family homes to a friend (not close though) but I washed my hands stating that the management company is the one that would have to verify the application, accept it and then take control of the rent. It appears to be working very nice, and if I ever recieve a phone call from them, Ill just say that the policy states that not even me as the legal representative of my LLC can interfere with the management company as for rent collection or other issues.
What do you think of this?

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Brandon Turner December 10, 2012 at 1:31 pm

Hey Jose – Thanks for the comment. I think that if you are going to rent to a friend – that is the best way to do it. Get yourself out of the equation. I’ve had to do that with a few friends (or tenants who have become friends.) You can also site a “partner” who makes the calls. Good luck and let me know how it goes!

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Bryan Jaskolka December 10, 2012 at 1:25 pm

Thanks so much for the great post, especially #5. It took a long time for me to realize that I don’t have to, nor should I have to, do every single maintenance job on my units. Once I did, I became a much happier landlord. Who, I hate to say, also often doesn’t like tenants.

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Brandon Turner December 10, 2012 at 1:31 pm

The same is true for me, Bryan. I’m much happier now that I’m not fixing toilets!

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Ian December 10, 2012 at 10:56 pm

I think it is very important to keep the tenants at arms length. Don’t ever get too friendly with them. I dont have many now, I tell them don’t phone me as I am a bit deaf, but email me. That way I can think about the reply. it is a hard game. I could tell some stories.
Good luck

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Brandon Turner December 12, 2012 at 6:08 pm

I agree, Ian. I wish I could do more email – but most of my tenants don’t even have a computer! (I live in a weird area!)

Thanks for the comment!

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Jose Gonzalez December 11, 2012 at 7:52 am

Brandon, your post just made physical impact in my properties…
I have a crew of 8 people with a manager that have been doing all my rehabs the last 3 months. I decided this because with the same money that I used on contractors, now I can make a much better job with better matterials.
Yesterday I went to review some properties that are in the process of detailing the make readys and actually quoted your comment “Quality product = Quality Tenants” you know one of the worst impacts in any properties that I have seen is the carpet quality. In every house that I install laminate/wood/tile floors I lease them at LEAST 2 weeks faster (2 of the properties that we are working right now are already leased mostly because of this)
From now on… we are going to be installing laminate wood-like floors in all the houses. It will average $1,000 – $1,250 more per property (in-house work of course) but will have a great economic impact in how quick the houses will actually rent, and I wont have to deal with changing/cleaning carpets in the future.
Sometimes we summarize the things we read and stay with just a few things… yours made impact already. Thank you for that!
Jose

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Brandon Turner December 12, 2012 at 6:10 pm

Thanks Jose! That means a lot! I’ll caution you on the use of laminate – I know a landlord who installed brand new laminate and the next day, when the tenants moved in, they drug something across it and it left a gouge all the way through. I haven’t noticed this problem with higher-end laminate though. Just a warning!

Thanks for the comment and keep in touch!

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Shaun December 15, 2012 at 2:29 pm

I have laminate in most places.
Much better than carpet.

That stuff is pretty Hardy! I would guess anything that would have left a big gouge would have torn up a carpet too.

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Jose Gonzalez December 17, 2012 at 11:36 am

I agree, this week I have been anylizing several kinds of laminate… We will make some tests with industrial kind… it looks like wood still and is resistant to water and scratch.
Do you have any experience with industrial laminate floors?
Thanks for the comment!

Sharon Vornholt December 12, 2012 at 1:27 pm

Great article Brandon.

One of the first things I learned was to never be the OWNER; always be the property manager. One of my mentors says that you have to teach your tenants exactly how you expect them to act. Always enforce your policies whether it is to charge late fees or do move in/move out inspections. If you are always consistent, you will completely avoid a lot of hassles down the road. If they know you will waver, they will test everything.

Another thing my mentor said is that he tells his tenants, “these are the office hours”. If you have an emergency call 911. Anything else can wait until the office opens. Like you, there is someone on call in case of something major happens.

I agree completely that the quality of your rental determines the quality of tenant that you will attract.

Sharon

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Brandon Turner December 12, 2012 at 6:12 pm

Hey Sharon, did you learn that from Mike Butler?

Either way, I think that’s where I first read it. His “Landlording on Auto Pilot” is my all time favorite book on being a landlord. I saw him post on your blog once, so I figured you must be acquainted. He sure knows his stuff!

Thanks for commenting, Sharon and adding your advice!

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Sharon Vornholt December 12, 2012 at 6:22 pm

Yes it is. Mike is a friend of mine, and is the past president of our local REIA. And you are right; his book on landlording is one of the best on the market. It should be required reading for every landlord.

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Brandon Turner December 17, 2012 at 6:44 pm

Agreed! Someday I’ll have you introduce me to Mike ;)

Tracey December 13, 2012 at 1:05 pm

Brandon,
Awesome write up!
I think the only thing I do in addition is to enforce the 3 days notice, once the rent is late.
My top pick is the google voice. I have had mine for almost two years now and I love it! it rings both on my cell phone & house number ( I learnt about it from our REIA meeting sometimes ago)

The last page of our lease includes – “Our office hours are Monday – Friday from 8am to 5pm and we are close on all major holiday” and I always have then initial beside it.

Tracey

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Brandon Turner December 17, 2012 at 8:47 am

That is a HUGE tip Tracey! Being a stickler for the rules trains tenants to be the same. We are very strict with our 3-day notices and have very little problem with late rent or evictions.Thanks for the comment!

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Marie Smyth December 13, 2012 at 5:13 pm

I’ve been a client side property manager for over 20 years and a Landlord too during that time. I’m never the owner. When it comes to saying no, it’s always the Landlord/owner who is the bad guy, not me but I will always ask the ‘owner’ and get back to the tenant with an answer if isn’t already policy…… Excellent article

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Brandon Turner December 17, 2012 at 8:44 am

Thanks! I sure love that trick. I’m so non-confrontational, it really makes my life a lot easier!

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Jason Lam December 17, 2012 at 7:17 pm

Great article as always I am learning so much!

Rule Number 1 ! I immediately jumped out of my seat and called my parents to see if they did anything of that sorts, Would the LLC be only for investor or should the LLC be fore any landlords in general?! I am going to talk my parents into creating a llc for it.

I also googled alilltle bit about LLC and was wondering if your do your LLC per property or is all property under 1 llc.

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Jose Gonzalez December 18, 2012 at 3:44 pm

Good point… I would like a comment from you Brandon if you dont mind of how I decided to go with mine…

What I did is what my lawyer adviced me to.. It depends on every investor/landlord in how much risk he wants to put on each LLC, lets say for example someone will think that 1 property per LLC (which can be a lot of work if you are considering buying several properties since you need one bank account per LLC) if this person has a very low-risk profile.
What I decided (also with the advice of my lawyer and accountant) is to create a holding LLC with 0 properties, but who will be the owner of the other LLCs… this also is very helpfull for accountability, and to get a General Liability insurance and a Umbrella in the top of everything.
As for the LLCs that own the properties, I am creating most of them around 6 properties wich can add in value between $500,000 and $800,000. I also have one with 13 properties, so now that I am considering to sell investing packages, I will give the option to buy 2, 5, 7 , 13 or whatever ammount of properties a potential client might want.
Again, the whole purpose of the LLC is to limit the liability of the whole value that relies on it.. and separate it from you as an individual!

What do you think Brandon?

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Brandon Turner December 18, 2012 at 3:56 pm

Hey Jose,

I’ll be the first to admit I’m no lawyer or tax guy. I think the way you have it set up is also the way I’ve always heard is the best. I created an LLC for each “big property” but I grouped some of the smaller ones, for convenience. So it sounds pretty good to me, but again – this is my weak spot!

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Brandon Turner December 18, 2012 at 3:58 pm

Hey Jason – Generally, I think LLCs are great – but the exact structure you set is gonna depend on your goals, position, property size/type, the color underwear your attorney is wearing, and one of a hundred other options! So, be sure to check with a good attorney or accountant on the exact structure.

This is also a topic mentioned quite a bit on the BiggerPockets forums, so check there also for ideas on LLC stuff!

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Paul Kulling December 19, 2012 at 10:23 am

Great website! I’m about to take the plunge for the first time and all this information is great.

I would particularly like to comment on #2: No Friends of Family. My sister made the mistake of renting her condo to the daughters of relatives. The were attending college and this was their first time on their own. Unfortunately they were brought up with maid service and were basically incapable of even rudimentary house care. The result was disastrous. I promise to adhere strictly to rule #2!!

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Brandon Turner December 19, 2012 at 10:43 am

Thanks Paul!Definitely get connected over on the BiggerPockets Forums for a lot more great information!

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Jim Hoffmann December 21, 2012 at 7:19 am

Brandon, Great tips. As a fellow multi-family owner operator I would like to add this:
Take advantage of the NAA’s education opportunities. The Independent Rental Owner Professional (IROP) course is offered on-line. By earning this designation, you will become a better owner/operator/landlord. More importantly, you will look at this as the small business it really is, which most new landlords do not.

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Brandon Turner February 23, 2013 at 9:48 pm

Thanks Jim! I’ll have to look more into that!

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Cooley Scupper December 27, 2012 at 2:06 am

With public and online property records, a landlord can suddenly be labeled as very dishonest when tenants discern the landlord is the property manager (via one LLC) and the property owner (via another LLC). Although the landlord is protected, try explaining to tenants why your name is on both LLC annual reports … Technology makes hiding more difficult these days, although I would still suggest to hide your home address, P.O. Box information …

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Brandon Turner December 27, 2012 at 4:04 pm

That’s very true, Cooley. Though most tenants, I think, wouldn’t ever bother to go so far in checking. If they did – they probably already had the suspicion. And even if they did see it, most tenants aren’t going to understand the complexities of who is on title (or even what a title is) so I’d like to think it wouldn’t come up. Thanks for the comment Cooley!

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darrell simon January 6, 2013 at 10:25 am

I think that eventually the advice to potential landlords becomes distillable to more-or- less the advice in this article. I will add my advice with the caveat that it may be a bit contraversal. My experience? been doing this now for about 20 years, about a total of 8 properties give or take. That is to say I am a relative…. newbie if you have been doing it for 20 odd years, a wisened old sage if you are just considering the occupation and fair to middlin to all else haa. I will only add stuff that I have not seen said elsewhere and proof there of. Hope this helps, take it for what it is worth: This advice and subway fare will get you from point A to point B on the A train….thats a fact.

A) Your first emphasis if you are going to look to be a landlord is to find a great honest property manager and/or contractor. If you can swing it hire a property management company and when you do? Really really do a lot of research and soul searching….this is where your time should be spent…. This hire will make or break you. Consider partnering with a good property manager because they are worth it.
a) Once you get a few properties with a great property manager? get a great attorney. Use the same dilligence.
B) Tenants? I love my property managers but 9 times out of ten? I get little shit tenants with perfect credit scores and a lot of letters written by previous landlords who are glad to get rid of them. I have picked countless tenants, never looked at a credit score and NEVER had a bad tenant that I selected. If you are good judge of people interview a tenant, if not? find someone who is and watch out for tire kickers (“I don’t know about this paint….” etc etc). If someone loves the place thats a great start. I just rented an office and the girl obviously loved it (a great sign) she went to a great school which I know and she had a great sense of humor….Rented, next? Obviously make sure they can pay for it but you heard that in landlord school 101 I am sure.
C) Did I say hire a great Property manager? can’t emphasize this enough,this is where you do your work! A property will show itself in the numbers….If you pay 10 dollars for a widget maker and will get 2 dollars to rent it…well? If you make about 2 to 300 a month with all expenses accounted for then that is your profit…. If it were Me? I always find property which is ridiculously profitable….why not? whats the rush? find a place that is estimated to take 100K in repairs and….if you have a great property manager who hires contractors hourly you get a discount and can do the work for 50k meaning that you start out with great profit potential…did I say a good property manager could save you money? a bad one will cost you a fortune BTW.
D) Your relationship with a tenant is complex…Home is more than a house and a tenant is using your house as a home…. This is a great responsability. Learn to show a respect for the tenant and not go legalize at the first provocation. Funny story: Our apartment? they throw notices around like paper mache….so we called in a housing inspector, giving them a taste of their own medicine. The horrible property manager took the bait and insulted us (slander) we have that letter here now. Point? legalise sucks…if you use it expect it back.

I have found the best way to deal with difficult tenants is to give some ground. Some of my tenants pay late….you know what? So what? The problem with a lot of landlords is they have never dealt with a really bad tenant….and no I take issue with the contention that you can dictate to a tenant how to behave with the rules….Try it with a seasoned San Francisco or New York City tenant (we have property in San Francisco)….Seasoned Mitchell Lama tenants shut down the most profitable landlord in New York City…. It is best to have a relationship with a tenant where rent comes in, you both are satisfied…. It really is not worth it sending a notice for rent that is a little late, you can get really screwed and not get rent delivered for a few months which will make a difference!

Hope this helps.

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Brandon Turner January 6, 2013 at 1:13 pm

That’s great advice Darrell. While obviously we differ on a few things, I think every landlord eventually settles into a strategy that works fo them. Thanks for taking the time to comment – that was a killer long comment and I love those! :) Thanks and keep in touch!

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darrell simon January 6, 2013 at 2:22 pm

It is a pleasure.

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Jose Gonzalez January 7, 2013 at 7:54 am

Darrell,
You mentioned preety good stuff about how you manage the tenants and emphasize in how important is the property manager. I actually hired a project manager to have my own crew by the hour so they make the make readys and attend the repairs of the leased properties, which call my property manager and then let us now.
One thing that you mention about the tenand about “sending notice that they are a little late”.. I have done that at the beggining and found that it only encourage them to repeat this process through the months… So my property managers adviced me to send the late notice and then the eviction notice… which the tenants didnt really hear, they thought it was a joke since they usually payed late… Well they did get called to court, together with my manager… they agreed to pay in full every 1st of each month…. and guess what? They are happy tennants, with no complains and pay every month in time! I guess they just need to know that you are a good landlord but they have to pay on time..
Let me know what you think!
Thank you!

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darrell simon January 10, 2013 at 8:07 am

Your management people are psychologically well schooled…..a very important attribute. Tenants, like the lot of us, come in different flavors (so to speak). A classic situation is one where you, the owner have to decide what kind of psychological profile you are dealing with. In this situation the right call was made….the great thing about it is that you are often allowed second chances…If you get a tenant that constantly pushes and pushes….sounds like the one you describe actually…. then you set limits.

The reason I would consider this decision to set limits carefully is that some property markets, like San Francisco where I am located, have very strong tenant protection laws. When legal action is initiated by one side then it becomes a legal matter and it is officially an escalated situation. This means that the “poor poor tenant” you had the nerve to threaten with the big bad lawyer gets free legal council, a tenant advocacy group to make you look like the Grinch who stole christmas…etc. Funny fact here: my lawyer in the Bay Area for these situations? he has to be one of the nicest people I have ever met! Some of the tenants I have dealt with? would take a lolly from an orphan! so much for stereotypes….Stereotypes which are used in actual written materials put out by many tenant protection groups in the Bay Area! clever clever!

I should say here that I definitely can see the need for limit setting at times. Most of us believe that people either start out needing limits, or that they start out having been acculturated into adulthood…I always told my wife when we were tiolet training my first boy, “honey if he isn’t ready by the time he goes to college we got a problem, otherwise relax!” Yet everyday there are parents (dare I say most are moms?) who cannot fathom the notion that little Johnny has not made that milestone yet.

Take two landlords with opposite views of human nature and they will both be right about setting limits half the time haha. What separates the men from the boys, so to speak is something you did which is very important…..you (at least partially) deferred to another when deciding what kind of tenant situation you were dealing with. I tend to do the same….I know I am a soft touch so I always run my approach by the resident hard ass on the team…..before I even speak to the group as a whole….Everybody’s time is valuable and If I am totally off, I would rather know before I waste everybody’s time.

What I constantly emphasize in my business is the value of team building for these scenerios with any problems. When dealing with the type of money, legal and psychological issues that landlording engenders the sooner one can get a team together the better. We all can easily get angry at tenants… they are at times trained button pushers! All of us can be offtrack in how we are profiling a situation with a tenant…..”I know if I gave her next month she would pay back all the rent from the other six months!! I just know it…”

Sometimes tenants do indeed need limits. That is as much a fact as the fact that the sun will rise tomorow.

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Derek January 7, 2013 at 5:08 pm

Hi Brandon,
Good stuff. Helpful. Google voice number, I have to try it. Quality product-quality tenants is the golden rule I follow. Never evicted anybody because of this simple rule. Quality rehabs are expensive. You have to find balance on how much quality you want, to get better tenants. That’s, perhaps, more art than science ;)

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darrell simon January 10, 2013 at 8:20 am

This is a very important consideration. One of the best ways to start a real estate portfolio
is to get a place with a decent and small in law. Why small? because with a bit of sweat equity you can make really nice improvements to that space….instead of flooring for a 2000 squ foot condo you can pick up some scrap and do the floor for a 550 squ ft studio apt. The improvements can all be made with great materials, you can learn about property and….when you finish, even if you do have to have a few things fixed by a contractor, you will have a quality unit. Now you should attract quality tenants with the place. A guy named Pedro at Home Depot talked me through my first bathroom installation… I almost burned a few studs down doing a weld……but hey! Live and learn.

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Angela Fay January 15, 2013 at 3:43 pm

Thanks for this article, I am considering renting/leasing homes. However, I have not begun simply because of the negativity from relatives. Most people think that I should have started earlier in my 20’s and 30’s. Nevertheless, I am going to step out there and go for it…..

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Brandon Turner January 15, 2013 at 3:51 pm

Thanks Angela. I appreciate the comment! I don’t think there is an age limit to finding financial freedom :) Stick close to BiggerPockets – and especially the Forums – and you’ll do great. You can run potential deals past hundreds of eyes, ask questions when difficulties arise, and make some great friends in the process. Be sure to send me a colleague request!

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Kay February 2, 2013 at 7:55 pm

My husband and I just inherited a couple of rental properties from my father who just passed away. I am 25 years old and have NO IDEA how to be a landlord. I enjoyed your tips and liked the number one tip but was wondering what is someone says they want to speak to the owner. Then what would you say? I have a feeling I will be on this forum a lot in the next few months. Thanks for the advice!

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Brandon Turner February 2, 2013 at 9:46 pm

Hey Kay, thanks for the comment! Landlording can be a little bit overwhelming when you first start out, but hopefully this post has given you some guidance. Also – be sure to check out my 2 newest posts, “How to Rent Your House” and “Tenant Screening: The Ultimate Guide

And never hesitate to ask questions over on the Forums. BiggerPockets is a community of thousands of landlords and other investors more-than-willing to help you through any of your tough times. Things aren’t always easy – but they are manageable when you have good advice. Keep in touch!

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Kristin Ward February 13, 2013 at 12:55 pm

“Yeah, me too” lol priceless. I confess separating the two hadn’t occurred to me. I will have to do that once I get the new building up and running, still in the repair stage. Thanks for the advice.

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Irving February 21, 2013 at 4:54 am

Thanks Brandon. The one about not renting to family and friends is my absolute favorite–vintage! It’s like Don Corleone the 2nd said, “Friends and money; oil and water.”

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Brandon Turner February 23, 2013 at 9:48 pm

Thanks Irving. Great quote!

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Laura February 23, 2013 at 9:49 am

Great advice, thanks so much Brandon.
I had to laugh at the “don’t be the owner”. I am just in the beginning stages of becoming a Landlord, but, I have been actively running my own business for 12 years. I have a partner and we ALWAYS play good cop/bad cop. Dealing with clents, employees, sales people, the standard answer is ” i will have to talk with XXX and get back to you” . If the answer is not the one they want, I just blame her, lol! It never fails that peoople will catch you off guard and you end up agreeing to something that you immediately regret. Just having the time to think about it , without giving them an immediate answer is invaluable.
Lots of great other tips, thanks!

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Brandon Turner February 23, 2013 at 9:49 pm

Hey Laura – so we think alike! (Great minds!)

Thanks for taking the time to read and comment! I appreciate it a lot!

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Jennifer March 1, 2013 at 12:14 am

WOW! Great to know about the “fake owner” entity in order to feel more confident being the landlord.

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Brandon Turner March 1, 2013 at 12:19 am

Thanks Jennifer- just don’t tell my tenants! ;)

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Jeanie June 12, 2013 at 8:05 am

Hi, Brandon: My husband and I have also been landlording for five years. We’ve made a lot of mistakes too, and try to learn from each mistake. We offer quality housing, are very good at screening, and currently have really good tenants. I found that most of the time going with my “gut” feeling has gotten quality tenants. But, I need to get better at enforcing “policy”. My tenants don’t seem to read the rental contract, and get me to pay for things that specifically say “tenant responsibiltiy” in the contract – like pest control when they brought in the roaches. One tenant always pays late, and I never collect the late fee. I have a relative in another house (three years) – so far, it’s working out, but I can see the potential for trouble, and will not rent to another relative or friend. I have become friends with my tenants, but in the future, I will make our relationship strictly business. And, with your advice, with future tenants, I will be the property manager, not owner, or make my husband be the “bad cop”. Overall, I really enjoy being a landlord, which always seems to surprise people when I say that. There’s never a dull moment.

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Brandon Turner June 12, 2013 at 2:17 pm

Thanks for the comment Jeanie. We have the same problem with tenants not reading/understanding/caring about the contract. We tend to have tenants initial all the really important things, and then send them a highlighted copy when they argue with one of the points. Good luck on your future landlording!

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Gerardo July 16, 2013 at 9:46 am

Thanks for the tips Brandon, really useful.

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Brandon Turner July 27, 2013 at 9:32 pm

Thanks Gerardo!

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eddie July 27, 2013 at 5:02 pm

Hi Brandon I am new to member of your community and i want thank you for sharing your knowledge with all of us and become more successful at becoming landlords. To me the two most important tips that I just learned are:
1. Never be the owner ,only the manager.********
2. Set up a google business number .
3. Always charge a late fee
4. Never rent to family or friends.
Thank you Brandon for your tips.

eddie

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Brandon Turner July 27, 2013 at 9:31 pm

Hey Eddie, thanks so much! Good luck!

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Fred Pusants December 19, 2013 at 5:54 am

Brandon,
you brought up some very good points, I will be buying the book about landlording. I see many points from a lot of people, I mean no offense with anybody whatsoever, but I tend to analyze websites and their content before I add to their visitor number or participant number. The topic started excellent and somehow many people started talking about grouping properties and also introducing friends, my point is, how can a newbie like me (in Real State), get to the information needed if is embeded between 1000 words of non-helpful information.
I had an experience which I am sure will be appreciated by many, and which also can help many prevent errors, since I believe that was the purpose of creating this blog. I just bought an appartment complex, one of the units had a tenant which was section 8, and had an agreement from 10 years ago, the previous owner had made a new agreement because she was disturbing other tenants and having other relatives live there…little that I knew about section 8 tenants….usually they are people with low income, no mannerism or ways of asking question, very rude and also expect the best. I read before about section 8 being the best and the rent is on time…my point for bringing this up…quality tenants are really hard to spot or find, it only takes one bad encounter with the tenant to break that landlord-tenant relationship no matter what kind of tenant you have. Most of the topics in this post are about complains like me, but I have not yet seen somebody actually posting a solution (not to be rude). For example, any suggestions about screening a tenant? what kind of credit are you looking for? what if the tenant had a bad experience with a landlord and he/she misbehaved, is that a reason to blame it on the tenant? how about emergency months, a relative died, or lost jobs? how about providing a handy man? how about the names of management companies? How much percentage is good to increment the rent by? or better yet, how often should you increment the rent? How about giving the tenants a $25 gift card for christmass? how about making up for a “bad day or argument” with the tenant?. There are many essential questions that I have not seen answered here…..I have read a lot of people talking about how many more properties they want to buy or when to buy or about being landlords for 10 years, I believe we need a bit more substantial information. I am pretty new at the business, all I have found out so far is that a tenant is another human who will not pay you rent for 6 months if you give them an eviction letter, or who will not answer you right back if you set call schedules, remember there are many savy tenants and you have to expect a return to your actions. I was a renter myself, and if the faucet broke in the middle of the night and I needed to brush my teeth in the morning, I would not forget when the time to pay the rent came. I believe a few words when I called the landlord, despite of time, would have made a difference. By the way, somebody mentioned having his private lawyer, I would tell you please think twice before going into a lawsuit vs a tenant, most likely you will lose, even if the tenant is out (time, stress, money and a drestroyed property).
Look forward to reading a bit more substantial information the way this blog started :)

Fred.

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Tadd Hale August 9, 2013 at 7:38 am

Brandon,

Another great article. Just joined a few days ago and I have no prior experience investing in RE. I’m thinking more and more I want to start out investing in muilti-family units though. It seems like every fear that I have for getting started is explained in an article or a forum post. I am definitely learning alot and taking away alot of good information.

Thanks

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Jeff October 3, 2013 at 7:02 pm

Branden,
I am thinking about investing on property in a college town. I know you get more bang for your buck and most of the time the parents are paying. The town has it’s own landlord/tenant contract for college students which pretty much states all the the things college kids do that they are not allowed to do. I of coarse will have my own contract for them sign. Do you have any experience being a landlord in a college town and what are the pros and cons? Or should I really be asking if you feel this is a good investment. Please tell me if I am wrong. Thanks for you time in reading this and writing this forum. I learned a lot

Jeff

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Diana Cruz November 14, 2013 at 9:02 pm

Good article Mr. Turner and I will keep that in mind. I’m hoping to be a landlord soon and you reminded me I have to have the house rules in order too.

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Jenny Shaffer December 8, 2013 at 3:12 pm

Need some advise if possible ..
I am looking into trying to start buying houses to rent out but I don’t have good credit after a long life of raising 4 kids on my own. No excuse that’s just the way it is. I have managed two buy two houses. I own them totally. I have a part time job because I’m trying to run a small business cleaning out houses after people move out and fixing things for people on their houses but I don’t charge a lot so I am not getting far. I want to buy more houses so I can rent them out. I’m in NE Ohio so houses around here are going cheap. Any advise?

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Bill Kress January 14, 2014 at 9:04 pm

Brandon,I read every bit of this thread and enjoyed it.I plan on retiring soon and will be purchasing some rental properties Condo types in Florida.I thought it would be a good way to keep a steady income and also keep me busy,painting,and doing minor repairs etc…I don’t think I would care if the tenant knew I was the landlord.I have worked most of my adult life as a manager of union employees and I am used to confrontation,and it’s not always bad,I kinda of enjoy it.I do believe though you can’t be friends and socialize with tenants just as I never really believe in socializing with my employees.I like what you said about setting ground rules and expectations…I hope to follow up soon to let you all know how it turns out for me….Thanks Bill

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IJ January 17, 2014 at 3:03 pm

Brandon please help!!
Can one set up LLC for rental property or properties that still have mortgage on them or do the properties have to be paid off free and clear?

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Adam February 25, 2014 at 10:10 am

Good article. I disagree with #2 as a blanket policy, but agree with it as something to be particularly cognizant of. I have successfully rented to family and friends many times. It really comes down to boundaries and clear expectations. Otherwise good stuff.

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Tosin March 9, 2014 at 4:29 pm

I would recommend doing a better job of editing. I seem to always find spelling and grammatical errors in articles that are otherwise great.

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Jeff Brown March 10, 2014 at 12:36 pm

Thanks for my morning chuckle.

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Chad March 16, 2014 at 10:43 pm

May I have your advice, I’m 30 years old. I started buying investment property at 19. My properties have great cash flow, and I make a comfortable living. my question is being young should I put more twards principle ? I never set a property up over 10 year note. So if I only pay the payment I still retire at 39… I would love to cut that intrest. But at same time this is my main income. What would be your advice?

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Greg March 17, 2014 at 2:36 pm

Sounds like you’re off to a really great start. If you’re already eleven years in with investment property, then you’ve probably learned a lot.

One thing to check, do you have enough cash reserves? While people will debate the benefits of paying off the notes faster or spreading the cash flow into other properties or opportunities, don’t get behind on having enough cash flow to back yourself in case something goes bad. For example, what would you do if you had no tenants for six months? Or half your units vacant for a whole year? Does that frighten you, or are you covered for such a catastrophic circumstance? Make sure you can sleep at night if that were to happen before extending the spare cash elsewhere.

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Joshua Macias March 17, 2014 at 8:05 am

Chad – in my humble opinion I would let the tenants pay your mortgages for you and reinvest your efforts on new challenges. It’s apparent if your cash flow is significant to love off of you can expand your horizons to other endeavors which interest you. As an X gener myself in early half retirement mode myself I have found my time and abilities can be used in other ways. From a purely fiscal direction if you where speaking to a financial advisor about this they might encourage you to fund other investments with any overage you have and strengthen the other side of your portfolio in insurance, stocks, bonds, businesses, etc..
Hope this helps!
Joshua Macias – PhD Candidate

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Michelle April 29, 2014 at 2:47 pm

Read and will be using some of your tips. My husband and I are fairly new to the rental business, less then 5 years. We have purchased our second rental property. What I didn’t see much talk about on this site is the LLC. aspect. Do you have a site or book to reference when setting on up? Do the advantages of using a lawyer outweigh the negative of doing on your own? Any helpful advise would be appreciated. Also if managing your own properties, what do you do when out of town on vacation or any other reason?

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Michelle April 29, 2014 at 2:56 pm

Also, just came to mind. In our lease it has our actual home address, as from what I read must be supplied to the tenant. I don’t feel comfortable with this at times, is there a clever way to handle this?

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Shaun April 29, 2014 at 5:52 pm

Where are you?
Might be the law but usually you just have the mailing address official correspondence needs to go. Can be your home, a PO Box, an office or your property managers business address.
For example if you owned a property with a partner. Who’s address do you put?

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Dan June 7, 2014 at 3:02 am

As an experienced landlord I absolutely agree with rule #1 Don’t Be the Owner. Blaming things on ‘the owner’ is a great way to avoid conflict as well as put yourself on the side of the tenant. A person needs to use caution though, and not abuse this wonderful tool. One abuse I see is when people jack up rents too high and blame it on ‘the owner’. To me that is an evil abuse of the tool. Owners should always strive to keep rents well below market rates as this tends to create very loyal tenants who stay for years and years and rarely complain. Less turnover. More profit. Everybody wins.

Dan

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Mjai July 13, 2014 at 5:26 pm

Brandon,
Great relevant content to help landlords successfully run there business. I love your suggestion about implementing policies & having tenants/residents adhere to those policies. No one ever argues with policies.

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Janna Rubright August 6, 2014 at 11:16 am

Wonderful article. Lots of great info I plan to use. Especially the last one!
Thanks!
Janna

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Jonathan Roylance September 8, 2014 at 10:04 am

Love the list, especially the point of not being the “owner”. I’m definitely going to use that one. Seems like many others agree!

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Brian Watson October 15, 2014 at 7:09 am

I totally agree about separating the fact that you are both landlord AND owner. Can’t tell you how many times I wished I had kept that fact from tenants

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Carrie October 20, 2014 at 3:43 pm

Setting hours can make your life much simpler as a landlord. Of course there are the after hours of calling a plumber or fixing the alarm system, so I would just go with hiring a property management team :) The upfront costs will save you time and sanity as you grow your investments.

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