I’m looking to invest in my first rental property in the next year or two. I’d like to learn a little bit about being a landlord before I do so I’m compliant with laws and tax requirements etc. The rest I’ll probably learn by doing. By what are those key things that a first time landlord should know. I’m based in Minnesota, so not sure if things are different depending on the state? Thanks!
Welcome to BP@Joanne Hanson
Laws are different by state, but being a landlord is the same.
You're going to need to start reading forum posts, listening to podcasts, reading books, watching videos, going to REIAs, networking, and educating yourself. You can't just come on BP, and expect experienced landlords to dump everything you need to know in one post.
Learn to use the search feature on BP. There are over 4,000,000 forum posts that have already answered questions like you've just asked here.
If you want to be compliant with taxes, hire an accountant.
If you want to be compliant with laws, hire an attorney.
@Joanne Hanson My favorite source for a beginner is Every Landlord's Legal Guide by NOLO. It's a big book full of practical advice from marketing, screening, leases, collecting rent, etc. It is written by attorneys and includes the law, not just opinion. It has links to your state laws so you can (and should) read them for yourself but it also includes summaries of important laws like how to handle security deposits or evict tenants for failure to pay rent. It also includes common forms that you can edit and use.
Their web site is a free resource with links to your state law but I highly recommend the book for some of the practical advice they provide.
@Joanne Hanson I would suggest you speak with a local real estate attorney who handles landlord-tenant law. Ask about housing laws, the eviction process, statutes and laws that a landlord needs to be aware of. Even a consultation fee would be worth the knowledge you gain.
@Nathan G. Thanks Nathan. I’ll get a copy of that. I appreciate your tip as I literally don’t know where to start. So thanks!!
@Dan Barli . Great thanks Dan. Good tip.
@Tim Swierczek recommended a book to me called "The Landlord’s Guide to Minnesota Law". It is awesome and available here:
Also, @Brandon Turner 's book on managing rental properties is a fantastic read. These 2 will give you a good foundation to start with.
The other thing to do is to call the city in which you are looking at rental properties and ask if they have any licensing requirements. Each city has different requirements and hoops to jump through. Some are more landlord friendly than others...
@Steve Hall . Thanks Steve. I wasn’t expecting anyone to brain dump their entire knowledge of being a landlord in this post. Rather o was just looking for some key pointers of critical things I’d need to know so I can go and learn more about them. Also tips on where to go learn is also helpful. I am new to the forums, but I’ve been listening to the BP podcasts now for months, and reading books. Thanks for the advice though. I’ll go and look into the forums for past materials on the subject.
@Scott Jensen . Thanks Scott. That’s great! I’ll get it!!
One of the most important things to to properly screen all prospective tenants and don't be quick to accept someone that doesn't meet minimum criteria.
@John Underwood . Great tips. Thanks John. I’ll add that to my list do things to learn about.
@Joanne Hanson Congrats on looking to invest in your first rental property! You've definitely come to the right place for questions and advice. I think some of the first things you should know, is that there are lots of online tools and information for you to use to get the best tenants and the most out of your rental properties. Screening your tenants is one of the most important things to know because you want to know that you are letting someone trustworthy live in your property! Also, having the proper lease will be important starting out so you won't really have to change it for other properties. If you visit Law Depot you can find ones specific to your state laws! Hope this helps and best of luck!
In regards to tenants, when you're just starting off you will get a feeling that you want to be friends with them and feel bad when they have a long story about their lives and why they're in the position they're in.
1. Be friendly, not friends
2. The longer the story is, the more you should be nervous about having them as a tenant.
3. Don't make their problems your problems!
@Taylor Roeling thanks Taylor!
@Tyler Rasmussen . Good advice thanks Tyler.
Protect your personal assets. Insurance and using an LLC can provide you with great protection(keep you from losing big if any legal issue ever comes up) and is affordable even when starting out(even potentially free for the LLC part).
I would second what others have said about knowing your state laws. Landlord-tenant laws are state and sometimes even city dependent. Research your local laws regarding security deposits, late fees, notice for entry, and evictions. Hopefully you won't ever have to evict, but it's better to be prepared.
Having a rock-solid lease is essential to protect yourself and your investment. Outlining your expectations for your tenants (and communicating those expectations well) will save you a lot of trouble down the line.
A common mistake for first-time landlords is to be overly lenient, especially when it comes to on-time payments. Be fair, but firm. If you allow tenants to consistently pay late, it can easily become a habit. Having a written lease is great start, but the key is enforcing the lease consistently so that tenants know what to expect. This also makes you a more professional landlord.
Document, document, document
Everything in writing
Try not to exchange tenants skill and labor for rent and keep to your list of hired professionals. For some reason if you do, get it in writing!!!
Best advice has already been said, be firm but fair
Fear no tenant
@Joanne Hanson Between now and when you purchase take the time to build up your cash reserves and learn the ins and outs of the different markets you want to consider buying in. The latter will allow you to hit the ground running once you decide to actively pursue properties which could be a major determining factor in landing a deal in an area you desire.
@Joanne Hanson I am not a landlord, but I have helped my mom with her properties, and seen plenty of mistakes. I have also read several books on land lording, and my favorite one so far is Mike Butler's Land lording on Autopilot. He has some great systems that streamline the process. One tip he gives that I think is very valuable is to not identify yourself as the owner. Introduce yourself and negotiate as the property manager. This prevents the landlord vs tenant scenario, and keeps the tenant from trying to negotiate with you. He also gives a process of showing property without even having to be there. He screens tenants in a very clever efficient manner. His system is almost completely digital too. When I do become a landlord I am going to implement several parts of his system. Hope this helps .
One property won’t make you rich. Class C properties are a pain in the behind. Make sure if you’re evicting someone to use a 3rd party and follow your state’s procedure to the tee. Don’t hire a property manager until you have you nailed down your own management style. Tenants lie, thoroughly run a background check. I just ran into my last tenant I evicted and I said hi to her - learn to let things go.
That’s my advice, hope it helps! I’m
@Joanne Hanson , BiggerPockets has a set of leases that are state specific. (Actually 50 sets of lease documents.) This is a great place to start, along with Brandon Turner's The Book on Rental Property Investing.
Learning your state's Landlord Tenant Laws will go a long way toward your success. And of course, spending time here on the site.
@Jordan Moorhead , do you still host the Investor meetup in Minneapolis?
Start by visiting local property managers. Tell them you are in the process of buying rental units and need a manager. Let them know your business plan. Good managers will shoot holes in your plan or validate it based off their experience. They are a wealth of information.
Second, ensure you have a strong lease agreement. Consult with an attorney with a focus in real estate. They may be able to provide you with a lease agreement and then you can tweak it to add/remove clauses.
Third, never shortcut your background checks, paycheck verification, and recommendations. For instance, one individual used their “old landlord” as a reference.... come to find out it was the guys brother. However, most tenants are great and will reciprocate how you treat them.
Best of luck!
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