If you want to be a successful landlord, there are certain principles and techniques you can implement to get ahead.
How to be a successful landlord
#FeatureByGreenresidential: There are millions of landlords in the United States. However, just a fraction of them successfully generate positive cash flow.
Try These six Tips
Success as a landlord is measured in terms of cash flow. You either make a positive cash-on-cash return, or you don’t. There isn’t much gray area in between. There are, however, numerous things you can do to achieve positive cash flow. Here are several helpful tips:
- Know Your Numbers
You don’t need to be a mathematician to be a successful landlord, but you do have to be thorough with your numbers. You can’t just calculate your mortgage payment and rental income and call it a day. You need to know every little number, including property taxes, city taxes, insurance, HOA dues, estimated maintenance and repairs, expected vacancy rate, etc.
When running cash flow projections, always use conservative numbers. In other words, overestimate what your expenses will be and use this to guide your decision-making.
This will keep you safe more times than not.
- Get Serious About Screening
Tenant screening might be the single most important aspect of owning a rental property that consistently produces a positive rate of return. The more thorough you are on this front, the less likely you’ll onboard a tenant who disrespects your property and/or pays late.
When screening tenants, pay especially close attention to things like income, job status, credit history, and referrals from past landlords. You can also run background checks to make sure a prospective tenant doesn’t have a history of being involved in illegal behavior.
- Know the Laws
While tenant screening is important, there are certain laws governing what you can do. This includes the things you say, as well as what information you use when screening.
“In addition to state laws, you should be familiar with federal housing and discrimination laws,” Avail.co mentions. “You cannot refuse to rent to a person based on their race or ethnicity. And unless your unit is designed for a specific group of people, you cannot discriminate based on age or other factors. For example, you cannot refuse a family with children unless your units are specifically designed for the elderly, etc.”
Knowing the laws isn’t optional. A failure to observe state and federal laws as it relates to housing and discrimination could lead to serious offenses and lawsuits. Not only that, but the penalties associated with these violations could sink your investments.
- Create Processes for Everything
Successful landlords find ways to quickly automate mundane and time-consuming processes. If there’s a repetitive task that you perform multiple times in the course of a year, it’s in your best interest to create a process for it. Processes encourage uniformity and consistency, which makes for more predictability for everyone (including tenants).
Not sure how to create processes? Or maybe you don’t have a personality/mindset that functions like this? Hire a real estate management service to oversee this on your behalf. For a low monthly fee, they’ll create (and implement) processes for things like accounting, rent collection, repairs, property marketing, etc.
- Set the Right Expectations
First impressions matter. This is true in every area of life and business, including being a landlord. You want to set the right expectations from the start and show new renters they’re in the right place.
Setting expectations starts with crafting a thorough lease agreement and clearly explaining it to new renters. Give them an opportunity to ask clarifying questions before signing. Another suggestion is to present a welcome package to new renters on move-in day. This package should include information about the property, insights on amenities available in the neighborhood, contact information, and some welcome gifts (like food, gift cards, and other housewarming gifts).
- Encourage On-Time Payments
Successful landlords are skilled at getting tenants to pay on time. This is done by (once again) setting proper expectations and proactively implementing systems that automate payments. Rent collection software is the best option; however, you can also coordinate with tenants to set up direct deposit.
Adding it All Up
Want to become a successful landlord who enjoys a consistent and predictable stream of revenue every month? It starts by implementing the tips highlighted above. If you follow these suggestions, good things will happen for you.
JOIN OUR PULSE COMMUNITY!
Eyewitness? Submit your stories now via social or: