What does it take to run a streamlined, profitable, hassle-free landlording business? When followed consistently, these tips will help you get there.
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13 Principles for Being an Incredible Landlord
1. Commit to taking your landlording seriously.
Landlording is the business of protecting and growing a real estate investment through the careful placement and oversight of tenants. All the work to acquire rental properties means nothing if you don’t manage correctly—because great landlording is how you protect that investment from failure and how you help it grow to become more valuable each passing year.
Landlording is not for everyone; it’s for the special few who are willing to take up the mantle of responsibility in an effort to make a brighter financial future for themselves and their family. It’s for those willing to work hard, think creatively, and accomplish dozens of different, changing tasks. Does that describe you? Are you willing to do the work needed to preserve and grow your investments? Have you fully committed to the success of your landlording business?
2. Run your business like a business.
Landlording success is not a mystery. Those who succeed at landlording do so because they treat their business like a business, not a hobby. But it’s not enough to simply run a business; after all, most businesses fail. Successful business owners set themselves apart with their commitment to eight specific principles:
- Business owners create systems and repeatable processes that help them build a “machine” that runs smoothly.
- They continuously improve their business, looking for small and large ways to tweak their operation to make more profit while simplifying the tasks that need to be accomplished.
- They are firm but fair when dealing with their customers and clients.
- Business owners outsource and delegate tasks in their business that others can do with better results, focusing on the tasks that only they can do to grow their business.
- They maintain strict financial control over their company, knowing at all times how much money is going in and how much is going out, and they are able to document every penny.
- They focus on customer service, knowing that their business relies heavily on their reputation.
- Successful business owners maintain a solid understanding of the rules and laws that govern their industry, always seeking to work within the law to create the best business possible.
- And finally, successful business owners ask for help when needed, knowing that they don’t have every answer in the book but are willing to seek knowledge from other business owners and through books, podcasts, and other educational sources.
Related: 3 Tales of Landlording Catastrophe—And the Invaluable Lessons They Teach Us
As you read that above list, ask yourself this question: Does your landlording business look like this? Do you follow those eight principles? Are you prepared to treat your landlording business like a world-class business?
3. Prepare your business before signing your first lease.
Before you sign your first lease, you must build a solid foundation for your landlording business. By using asset protection, buying proper insurance, and setting up a bank account, you are able to keep your investment secure no matter what life (or a tenant) throws at you. By preparing documents and creating a policy binder, you’ll “get your house in order” before accepting rent and dealing with questions from tenants, leading to a more simplified landlording business.
Getting to know the neighbors can help you keep a physical eye on your investments, while great bookkeeping will help you keep a financial eye on the same. Additionally, making sure your property is in the right condition to rent will be key to attracting the best tenants, so don’t skimp on the condition. Finally, before renting out a property, you must determine the best rent to charge to maximize your profit but minimize your vacancy. All of these steps can be done before you open the doors for business and will help ensure a positive experience right from the start.
4. Be mindful of Fair Housing.
Much of your landlording business will deal with these federal, state, and local laws. If you want to avoid fines and possible jail time, don’t discriminate against any of the protected classes (race, color, religion, sex, national origin, familial status, disability, and other locally protected classes). Be careful in the language you use in your advertising, on the phone, in person, in your documents, and anywhere else in your business. And maintain good records in case someone ever wants to bring a case against you for violating the Fair Housing Laws.
5. Find incredible tenants through smart marketing.
Peaceful landlording is a result of having great tenants. But great tenants are not standing on the side of the road with a sign that says, “Great tenant!” Instead, you need to go out there and attract the best tenant using a variety of marketing techniques. Newspapers, yard signs, flyers, the internet, and other people can all be great sources. Part of your business will be finding
the most effective means to reach potential tenants in the most cost-effective way. Are you prepared to go out and search for the best tenants, rather than waiting for them to approach you?
6. Pre-screen to eliminate duds.
Once potential tenants begin getting in touch with you, you are going to hear from a lot of bad apples. Therefore, before taking an application (and before you even show a property), it’s important to put on your pre-screening goggles and try to sift through the options. Pre-screening begins during the advertising period and continues throughout every interaction.
Not only are you trying to get a feel for the tenant, but you are also trying to let them get a feel for you and your company. Setting and stating your minimum qualifications are a large part of the pre-screening process, as many of the “duds” will leave before taking up your time because they know they won’t qualify. When you meet the tenant in person, they’ll have a lot of questions that you should be prepared to answer. But you should also have questions ready to get to know them better.
7. Use your application to screen for amazing tenants.
When a potential tenant decides that your property is going to be the best option for them, they must fill out an application. The application is designed to give you an inside look into their life and help you make a quantitative decision, not one based on your gut. The application should be thorough but not so overwhelming that it turns off the good tenants.
When the prospect applies, it’s important that you run a thorough screening of the tenant that looks at their criminal history, their credit history, their rental history, and their income stability. When a tenant passes all your minimum qualifications, accepting them will be a joy because you know you are placing your investment into the hands of someone well-qualified. When you deny a tenant, however, you must be careful in what you say and do, as to avoid any complaints about discrimination.
8. Sign a solid lease.
You’ve done all the work to find and acquire the best tenant, so now it’s time to make it official (and legal) through a lease agreement. Lease agreements should be state-specific and thorough, carefully spelling out the duties and responsibilities of the tenant and the landlord. The lease will become incredibly important should the business relationship between you and your tenant go south, which it may. So don’t cut corners; instead, make sure your lease—and the signing process—are as flawless as possible.
9. Train your tenant from day one.
In a perfect world, tenants would read every word of the lease and abide by every statute, but this is just not the case. Tenants must be trained to follow the lease and become great tenants. They also must be trained to respect your office hours, pay rent correctly (and on time), and communicate effectively with you. In return, you must manage your properties efficiently and effectively through routine inspections and prompt communication, which will also keep your risk of getting sued to a minimum.
As a landlord, you should always be looking for ways to increase your income and reduce your expenses, helping your business to generate more profits over time.
10. Handle problems carefully and effectively.
No matter how well you train your tenants, you will have problems. Tenants will pay rent late, they’ll get in fights with neighbors, they’ll break their lease, they will complain and make demands, and sometimes they will need to be evicted. In addition, your property will break down over time and need to be repaired, so you will need to have a system in place to deal with these issues.
These situations are entirely normal for a landlord—they are simply part of the cost of doing business. You can choose to freak out, get stressed, and shut down because of these problems, or you can deal with them swiftly within your landlording system and navigate a crash landing successfully with minimal (or no) stress.
11. Have a system for dealing with contractors.
Dealing with contractors is one of the most important—and most frustrating—parts of a landlord’s job. However, by having a system in your business that deals with contractors, the process can be streamlined. This begins with finding and screening the best contractors, which is not a mystery but a process. Then, the way you manage those contractors will help you determine how well they work, so manage effectively.
12. Keep organized.
Being organized will help you achieve greater freedom, stay legal, and increase the profitability of your rentals. Organization encompasses your entire business, from the way your office is set up to the website you use to showcase your properties. Always seek to become more organized and more professional in your business, and your business will thank you with greater profits. Additionally, remember that good decisions are made when you have good data, so keeping accurate records is vital to the continued success of your business. Create a system for bookkeeping and stick with it.
Not only is it helpful for knowing how your rentals are financially operating, but it will also make tax time a much less stressful event.
13. Transition tenants out carefully.
Your tenants will not stay forever, so you must have a system in place for dealing with the turnover of tenants. Turnover can be one of the most costly expenses for your business, so minimizing the time a unit sits vacant and maximizing the condition of that property is incredibly important. This begins with setting clear expectations for your tenants through the delivery of a Move-Out Packet, continues through the proper disposition of their security deposit, and ends when you get a new, incredible tenant to take
This list is by no means comprehensive. What tips would you add?
Let’s talk below!