My first rental property..how to vet tenants, and what to require

[Ryan Davis]

I am about to close on my first property on October 30th!! (Thanks BP for the inspiration!) 

This is a duplex that I plan to house hack. I have to do some remodeling that will take about a month but I will be ready to rent out the other side by the end of November. I want to make sure I am going about this in the right direction, so here are a few of my questions; 

A) I plan to use BP's smartmove for screening and charging applicants the fee. So I think that part is pretty self guided. 

B) Do you require rental insurance? And if so, how do you make your tenants prove that they have and will maintain this throughout their lease? 

C) I think I read a forum on here a while back that said never let your tenant pay the water bill because if they don't pay, the city can file a lien on your property. Is this true? If so, how do you go about handling utilities? (The property is sub-metered off, so I was hoping to make my tenants pay all of their own utilities.)

D) How do you figure a proper amount to charge for a security deposit? What do you charge up front, first months rent AND security deposit? Am I missing something here? 

Final Question) I will go BP podcast style questioning here; if you had one piece of advice for someone like myself about to be a landlord, what would it be? 

Thanks for everyone's help in advance!

[Tom Parris]

Hi @Ryan Davis,

You have some good advice above. My 2 cents below.

Depending on the property would depend on the length of lease. I'd say the nice ones get a longer lease, because filling it again could be a pain. Lower end ones, go M2M. Please hire a professional to take pictures, they can be used over the years, and pictures sell the property. 

If you do what Mindy says above, you're notified if the rental policy lapses. A big thing in Real Estate is liability. You definitely want them to have renter's insurance. 

As far as my requirements: 600+ credit, they must make 3 times the rent in monthly income, no evictions, no felonies, NO EXCEPTIONS. The minute you make an exception, it will be quick to bite you back later on. Collect 1st month's and security deposit (equal to 1 month rent) at lease signing. Charge a lot for an application, $75-$100. You'd rather someone who doesn't complain about $100 in applications per person. 

I don't mind pets, but my properties are pretty indestructible. But if you do, supply the AC filters, and make sure there's no carpet. Collect a pet fee, not a deposit. (We collect $400 for the year, per pet)

Advice for a new landlord: 

Become friends with an attorney.

Become friends with a Realtor, they have all the connections. (HVAC, plumber etc) 

Make no exceptions.

You're the one in charge, so act like it.

Quarterly or bi-annual inspections. Walk through a couple times a year with your tenant. You don't live there, so let them tell you about the small issues so you can fix them. You'd also find out that something is taking more of a beating than it's supposed to so you can budget for it when they move out.