There are a number of things that experienced landlords know — because they experienced them themselves. Sometimes the end result is an inconvenience, and sometimes the end result is a significant expense.
But getting a degree from the School of Hard Knocks is a terrible way to learn.
Why go through all that pain, hassle, and cost if you can just learn from others’ mistakes?
Hmmm, if only there were some website you could go to for advice about real estate investing…
Here are some of the top tips I’ve compiled from our forums — things that might not seem like such a big deal, but can actually be a VERY BIG DEAL.
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Upfront rent is almost always NOT a good thing. Sure, it sounds awesome, collecting this giant lump sum in the front end of the lease. Now you don’t have to worry about your tenant not paying rent.
But what do your state laws say about collecting upfront rent? Some states limit the amount of money you can collect up front. Others make you pay interest on that money.
Another thing to consider is why they have that much money just sitting around. Did they come into some money and wish to prepay their rent because they are bad with money? If this is the case, it’s almost a sure thing that you’ll be chasing them for rent at the beginning of the 13th month.
Are they hoping to pay up front and then never see their landlord again for nefarious purposes such as a grow operation or a meth lab?
Yet another option for prepaid rent is so they can operate a short-term, furnished rental out of the property.
Of course, there are exceptions to every rule. If you are offering student housing, the parents are paying the entire lease up front, and they co-sign for the lease indicating they will take responsibility for any damages done by their students, it may be easier for the parents to just make the entire payment at once.
2. Tenant Screening Sneaks
Mr. Brandon Turner wrote a very lengthy piece titled “Tenant Screening: The Ultimate Guide.” It’s an excellent read, and you’ll have a better understanding of what you need to look for once you’ve finished it.
Related: The Top 8 Mistakes Made by Rookie Landlords
But I’ve picked up a few more tips from the forums that can help you get the absolute best possible tenant in your property:
- Walk them out to their car. Once they are at your property and have taken an application, walk them out to their car and take a peek inside the vehicle. Does it look clean? Is it a massive disaster? How they treat their car is a good indication of how they will treat your property.
- Ask them how many animals they have. Don’t ask IF they have animals — assume they do and ask how many. People who do not have animals will correct you, but many times if they have them, they will answer the question truthfully, assuming you already know.
- Do not accept people who have pets that will “live somewhere else.” That animal isn’t going to live anywhere else.
3. Advertising Rentals
A very common Craigslist scam is for someone to take your listing pictures, create their own listing from it at a reduced rate, and insert their phone number into the new listing. They typically create a story where they are “out of the country” and need to have someone lease the property immediately, which is why they are offering such a great deal on the rent.
Frequently, they encourage the tenant to hire a locksmith to change the locks on the door and just deduct the locksmith charges from their first month’s rent. They were in a hurry to move out of the country (always a positive reason, such as a dream job offer) and cannot send the keys to the new tenant in time.
They take the security deposit over wire transfer, then disappear off the face of the planet.
While you don’t have any legal liability to these tenants who were taken advantage of, it is still your property that is being used.
Watermark all your images with your phone number. This is one of the best ways to keep someone from stealing your images.
Never post the actual address of your property, only nearest cross streets. Posting an actual address will only make it easier for those scammers to steal your listing. Explain why in the ad, and when people call, you can share the address with them after you’ve screened them and they sound as though they might fit.
Have a solid lease. That barebones basic lease you found online doesn’t cut it — it’s free for a reason and gives you exactly zero protection. Keep in mind that what you are putting into the lease must follow the landlord-tenant laws of the state in which the property is located. You can’t put clauses in your lease that go against the landlord-tenant laws of your state.
However, not everything is covered by those laws. Smoking, pets, and parking are just a few of the thousands of things you get to decide about your property. Spell out everything you want your tenant to know. A good lease isn’t a one-and-done thing. It evolves as you encounter more scenarios.
Related: How to Be a Rockstar Landlord: 6 Tips for Success
Always have an attorney check any additions to your lease before you have tenants sign it.
Make time to go through the lease with your tenant. Walk them through each section, explaining exactly what it means, and get initials after you’ve explained it. Should they have a complaint or problem down the road that you address in the lease, it is so much easier to prove that you told them with their initials next to that clause.
5. Tenant Communication
If you have something you want your tenant to know, put it in writing. There is much less confusion if you put it in writing.
At the time of publication, texting is not a legal method of notice. This doesn’t mean you can’t text your tenant, it just means that it doesn’t count as legal notification, so you can’t text them a 3-day pay or quit notice.
Email is considered legal method of notification in my state, but I’m not sure if it is legal in all states.
The U.S. Postal Service IS a legal method of notification in all 50 states plus Washington DC, so send anything important in a letter through the mail. For added protection, you can send it first class, return receipt requested.
6. Record Keeping
Keep a journal. Most of your tenant interactions will be smooth sailing — especially if you’ve properly screened them. But you want to establish a habit of recording conversations with the tenant every time you interact. I don’t mean audio recordings. I mean writing down a summary of everything that was discussed.
Chances are very good that you will never have to use this journal. But it takes a short amount of time to record what you have discussed, and your extensive record keeping will come in very handy should you ever have to prove anything in court.
Things to note are any notice of late rent, any failure to pay rent, any contact initiated from the tenant for repairs or complaints (and your resolution to the issue), and the results from your regular inspections. Also note if the home was in disarray, with garbage piled up, etc.
Don’t Re-Invent the Wheel
Someone has already learned all these lessons for you. There is no reason to re-invent the wheel when it comes to landlording.
Learn these lessons the easy way. BiggerPockets has more than 625,000 members, with a collective 96 trillion* years of experience. You’re in the right place.
*Not actually, but probably pretty close.
What is the top thing you’ve learned through experience?
Let me know what you’d add to this list with a comment.