You’ve dreamed of owning your first or second (or tenth) rental property. The exhaustive search of dozens, if not hundreds, of properties brought you down to the top two or three, and you made an offer. You get the price worked out, the negotiations for the perfect house are done, and the deal is locked down. The inspections have a few snags, but you work through those, too. Maybe termites are found, or maybe there are some minor plumbing issues to deal with. You talk it through with your agent, your partner, your spouse. Everything is either worked out, deal-with-able, or you simply already knew it was an issue.
The title company sends you an email, and the closing docs are ready. Your private money lender or banker call, and they say they are ready to fund the deal (or you are ready to just send the wire from the cash stash you’ve been saving up). And voila! Your deal is closed.
Rehab time! We do a serious rehab. We want to do everything we can (within reason) to bring the value of our property to 95-100 percent of its maximum potential ARV (after repair value) while staying in our buying and equity capture criteria. If you are going to buy a rehab house and then make all the needed repairs to create a home for someone to live in, you must think carefully about how you are crafting the picture your future tenant is seeing.
Whatever picture you paint through the kind of rehab you perform, the quality of materials you use, and the skill they are completed with will be equal to the kind of tenant you will attract.
This doesn’t mean you need to put expensive tile on the kitchen floor or install the super-plush, amazing carpet in the bedrooms. It just means you need to be conscious of your product from a standpoint of what the outsider will see and feel when they walk into your property.
So, you did all that stuff. You made your house awesome. The contractor has finally finished up, you’ve put the final touches on all the paint, and fixed the few little cleaning things the maid missed. A few nice-smelling seasonal diffusers are plugged into the walls, giving off a cinnamon spice scent or whatnot, and bam, you go to market your property for rent.
Of course, you poke through the various competing properties near yours, and yours is definitely the nicest. The pictures of your property look amazing, the write up about it is great and gives the facts the tenant needs to know, and the whole description gives a good and real overall picture of the property.
The flood of emails and calls starts coming in, and you start booking appointments to get your new potential tenants to see the property. One by one or two by two, they walk into your property.
“Man, this place is beautiful.”
“Johnny’s bed could go right here.”
“Dad’s grill would be PERFECT on this awesome deck.”
Ah yes, they are picturing their perfect place to live, and you are just about tasting the money finally rolling IN instead of OUT.
There are a handful of folks who come in and out of the property and then hand in applications. Out of the group of showings come several great candidates, and all have met the initial financial requirements, so you ask to run their credit, background, and rental histories. And of course, they oblige.
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Think Back to What You’ve Done So Far
So, you researched your home before you bought–the neighborhood, the rents, the ARV when you’re done. Then you spent your money buying the house. The best contractor you knew or found was hired, and you spent more money, time, and research. And then, after all that, you spent more time and money cleaning your house and preparing it to be rented.
You’ve called the perfect applicant and explained they have met all your criteria, and you would love to have them as a tenant in your property. You’ve worked out the lease details, received deposit you requested, and completed whatever else there was to do. They agreed with every detail, and you guys talked through a move-in date and a time to sign the lease. It’s all working out.
Here’s the Part That’s So Important
You BETTER tell them exactly your expectations. Here’s my well-rehearsed speech.
You: Joe and Betty, I’m so excited you guys are going to be renting from us, and 123 Main St. is an awesome house, right?
You: Great. There are just a couple things I want to make sure are 100 percent clear. As you can see, I’ve put a lot of time, energy, and money into this home, and you love it because it’s beautiful and well done, right?
Tenants: Yes. The kitchen is so beautiful. It’s the nicest home we’ve seen.
You: Exactly. And we want to keep it that way. Here’s my job: We rehabbed it and fixed its problems, and I will be here to take care of any issues you have with the house. And you have two jobs: To take care of this home, YOUR new home. And two, TO PAY ON TIME. I want to make sure it’s abundantly clear to you that we have ZERO tolerance for people who don’t pay their rent on time. Our policies are laid out here with our late fees and how you could get evicted if you don’t take your part seriously. Are we clear on this?
Tenants: Yes, yes we are clear. We will pay on time.
You took all the time in the world to get your property ready and prep your contract with what you wanted.. You better make sure you do the same thing for your tenants. It doesn’t mean you will never have an issue with a tenant who doesn’t pay on time, but it DOES mean you’ve made sure they understand the rules.
You do what you say you’re going to do, and you hold them to the same standards. Real estate is an awesome business. Make sure you keep up with what is happening, start to finish, buy to rehab to rent–and beyond.
How do you communicate with your tenants when they move in? What’s your move-in or lease signing speech?
We want to hear it. Leave a comment below!