Hello BP! As the title suggests I'm not a landlord yet, but I do plan to be one. Until then I have created my own business plan on how to operate and manage my future properties. https://docs.google.com/document/d/1WdG4zpWFphCEyV.... This plan is more so just an exercise for me to think ahead, and about every aspect of land lording so I can be as prepared as possible. What I ask of you who are landlords presently is after reading over what I have already put down - what would you add, remove, or modify?
Please don't leave anything out! Anything that helps cut costs, raise revenue, or streamlines being a landlord is knowledge I greatly appreciate no matter how small or big the idea may be =D Thank you in advance for sharing your insight, and personal experiences!
Hi Chris, I am a landlord of over 50 rental properties and if I had 1 piece of advice for new landlords, that would be that tenants are people, not product. If you treat tenants like people, they will act like people. If you treat tenants like tenants, they will act like tenants.
I had a landlord say to me, "if you can't have a cup of coffee with your tenants, then you have built the wrong relationship with them, or have picked the wrong tenants". To this day, my tenants all offer me a drink of some sort whenever I drop by. We all smile, and shake hands, and together have a wonderful landlord/tenant relationship. Be nice to the people, but hard on the problems if you face them. Hopefully, you will enjoy being a landlord as much as I do!
You have to learn how to advertise your rental, what is the going rate for your rental in your neighborhood. What type of tenants and the income of the type of prospective you will need. Know the vacancy rate in your local and how long does it take to fill your vacancy? What way do you want to collect rent? You will have to learn how to do credit and background checks. You have learn how to do a rental contract and decide if you want a month-to-month or have a lease. If your home has a HOA, what are their rules and if there is any special rules on rental. This should give you a good start.
Great advice from the above. You need to get to know people. This is a job of people management. After awhile you will be able to Judge a person during an interview on whether or not they will qualify for your rentals. For instance.
- If they drive up to the open house and a bunch of people get out of the car with food and drink and want to tour your home, chances are they will not qualify.
- If an applicant fills out a rental application and wants to tell you a sob story about why they are moving, chances are they will not qualify.
- If they drive up to the open house and park in the neighbors driveway, because your driveway is full, chances are they will not qualify.
- If they want to know why you charge so much rent, chances are they won't qualify.
One tip I've used that is sort of funny, is that I entertain the children at the signing table. I bring little toys, for them to play with, or coloring books. They sit at my table and they tell me all about Aunt Betty and Uncle Joe moving in with them and will be living down stairs. Or they have a pit bull. I just smile and say oh they do!
I have rented to ministers, police officers, sons of doctors, some Section 8 er's, and thought they would be great tenants and they were the worst. I had one Section 8 tenant , however, that I would have loved to keep forever, but as a rule they did lots of damages to my homes.
You should never love your rental homes to the point you view them as YOUR HOME. They are a tool of the trade, just like a hammer is a tool to a construction worker, although a home costs more than a hammer.
The moment you LOVE YOUR RENTAL HOME, the more you will hate landlording, because you will cringe at every nail hole, ever speck of dirt on the carpeting, every dish that is in the sink, and be upset more times than not.
People live in a home to live in a home. Some are as neat as a pin, and some live like a Bachelor. Well you know what I mean....LOL clothes all over the place, The floor is the closet. Some (not all) Bachelors live that way.
I like your idea's and your plan. You should always have a plan and an exit plan. You look like you will do well, but follow these tips we are giving you.
@Christopher Albritton What you've come up with so far is very impressive in detail. I am actually a bit intimidated to be a alandlord, but because I will be buying MFHs that is what I'm preparing for. Everyone provided great feedback. I have little experience as I'm new to this, but do take before pics before placement. You may have included that and I missed it, you were very thorough. At what point do you plan on hiring PMs? Some people use them sooner than others.
Your plan looks good and well thought out. You need to decide if you are going to manage the properties yourself or hire a property manager. Make sure to do background checks on ALL prospective tenants, don't skip this step. Make sure your tenants have enough income to pay rent and all of their bills. When you run a credit report it will provide the minimum monthly payment, add those up so you can see the minimum amount they must pay each month to stay current. Make sure to add money for utilities. It is never fun chasing a tenant that hasn't paid rent because they didn't have enough money that month to cover all of their bills. Another one is a silly question that you put on your rental application. Do you have a vacuum cleaner? It's simple and seems silly, however it will provide you with lots of information. Someone that does own a vacuum is more likely to keep their home clean, someone that doesn't might not care too much about being clean.
It looks like you have a good plan. A few things to think about:
1. You have a RE Attorney listed as part of your team which is great. Just want to point out that there are several different types of RE Attorneys so don't think this is a one size fit all. Some RE Attorneys specialize in evictions, which you may need. Some specialize in setting up your real estate deals if you don't go through a RE Agent. Another type of RE Attorney may help you set up your entity (i.e. LLC, Corporation, etc.). Make sure they specialize in the area in which you need.
2. Did you determine if you were going to operate under your legal name, an LLC, S Corp.? Start researching and thinking about that now.
3. Your packet looks good. Include a Renters Insurance Form for residents to sign stating they understand it is their responsibility to always have renters insurance and that the Landlord is not liable for their damaged property. You should require that all residents have renters insurance in case their personal belongings get damaged. Let them know up front that you don't cover items if damaged because trust me they'll expect you to pay for stuff.
4. NEVER rent to friends or family. This is my personal motto. I want to maintain my relationships with my family and friends so they all know not to ask me if they can rent from me. However, I'll refer them to another Landlord friend.
5. Set concrete criteria for selecting tenants. You never want to be accused of discrimination. Become Familiar with your Landlord Tenant Laws
6. Visit www.mrlandlord.com It's also a really awesome site for fellow Landlords.
7. Hire reputable people to work on your properties. Referrals are the best. Make sure they are insured. Ask them for a copy of their certificate of insurance and ask that they add you as an additional insured. Many small time handymen wont have this and you'll have to make the decision if it's worth dealing with a vendor and the risk of not having it.
I hope that helps. You'll do fine. Just jump in there and do it!
Thank you all for your input so far - you guys are fantastic =D
Corey and Joe thank you for the quote, and the questions that I need to make sure I detail in my plan!
@Nancy Neville - I like those tips n tricks you suggested there =P I also like the bit about rental properties being tools, and to not get attached to them. Landlording is a business - that's it, and that's something I need to always remember.
@Amber Koontz - I'm not sure to be honest. I've still one more year of university before I graduate, get a job, and can really focus on investing (or maybe sooner, who knows!), but I tend to like doing things on my own, and am very organized (I'm one of the few organized Bachelors Nancy was referring to =P). I'd like to say I could wait awhile and do what Mike Butler did and not get PM until I have 70+ properties - especially since the first property I plan on buying is a four plex where I will live in one unit. However, I could absolutely hate it and end up hiring sooner than I thought. The goal for now (or I suppose "will be" are the keywords) is to do it myself, and create as many systems as needed to make it a breeze for me until I get overloaded. When I get to as many properties as Mike Butler did, if not sooner, I might just start my own PM company - just have to wait and see at this point!
@ everyone - One thing that I feel kind of tied up on are the legalities of the business. I'm sure I can just google state approved landlord documents/ leases, and then meet with an attorney to add/ clarify w/e I need. As far as laws go - there are just so many, where do I start with that content? I know the basics about the protected classes/ not discriminating, but what about the things that aren't so obvious? I don't know what I don't know, and I'd like to think that, going back to Corey's quote about treating tenants right, having the leases and w/e other documents are required, and keeping the properties in as best a condition possible would be enough to avoid any lawsuits, but I always like to be prepared. I hate being blindsided. How did you guys go about learning this area of landlording?
@ Marc Manelis - Thank you for the tips - especially the vacuum cleaner one. That makes a lot of sense because I brought my vacuum from Bradenton to Gainesville with me when I moved up there to go to UF, and I keep my unit spotless!!
@Sabrina Baldwin - Thank you so much!! I have thought about how I would hold the property and haven't discussed anything with an attorney but from everything I have read It seems an LLC is the most plausible choice. The Renters Insurance Form is nothing I knew about and am glad you mentioned that! Finally, thank you for referring to me to that site - looks like I'll have lots of info to dig into!
Christopher: Attend some Landlord/Tenant court cases in your state, in the City where your properties will be located.
You see there aren't many laws regarding landlording. Most decision our based on the Judge's opinion.
A Judge must adhere to the 4 corners of the Lease Agreement (The Contract) as long as it has legal wording, which you should really hire a REAL ESTATE ATTORNEY, not a regular attorney to draw one up for you. OR attend a landlord association (highly recommend this) and many members will be more than happy to share their applications and lease agreements with you.
But when it comes to things outside the 4 corners of the Lease Agreement Contract, the Judges need to use their own opinion, because new things are always being done to us, to where there is no law to decide. So the Judges use their opinion.
You will see one Judge say these damages are normal wear and tear, and then another say, no these damages are damages. I have had that happened many times.
I had a case where a tenants kids threw crayons in the heating ducts of the home. Of course the crayons melted inside the heating ducts. They also threw crayons in the ceiling lights, all melted from the hot light bulbs. Plus there was crayons and magic marker picture drawings all over the walls, and the Judge ruled in my favor as damages and lectured the tenant. However, the tenant appealed and that Judge said it was normal wear and tear and reversed the Judgment in the Tenant's favor.
You will know what Judge is pro tenant and what Judge is fair and balanced when you attend some landlord court cases and be a member of your local landlord association.
Your friends and family and others don't understand our business. We need to associate with people who understand what we go through, how we are treated. Sometimes we need that build up.
BP is here for you. But we are not tangible for you to sit down and talk with in person. You need that fellowship.
So hope this helps
@Corey Arnemann makes a very good point and I believe in this as well.
But on the front end you need to screen correctly and be thorough. Proper screening eliminates 99% of future headaches by not placing the wrong tenant.
@Christopher Albritton - there are people here who've been in the game longer than I, and may have better suggestions. But, in my 10 years I've learned a few things:
1. Fun never ends
2. Some properties attract more fun than others - your job is to figure out which is which, and stay away from those assets that are too much of an on-going party, unless you love to party, of course :)
Perspective, not the numbers, wins the day in this sport!
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