Expected Air Date: 11/12/18
In the last show we talked about short term rentals. Today we are taking a more traditional approach with a discussion about landlording. I’ve owned and self-managed dozens of rentals properties over the years and I’ve also hired property management. I’m going to share with you the top 35 things I’ve learned so far. I’m pretty sure there’s always more to learn which is why I use the words “so far”. That’s coming up in a bit.
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Topic: Top 35 Landlording Tips from Roger B
- Pennies become dollars. The Rent is Priority. Wait a minute and suddenly they owe you 3 months.
- Inches become miles. You set the rules and you must enforce them. Everything goes better if you are known as tough but fair.
- Puppies become dogs. Address known problems immediately while they are relatively small.
- Screen thoroughly. Don’t be afraid to say no. Choose wisely
- Know the fair housing rules, and train your team with them.
- Apply the same rules to all rentals.
- Know your local real estate laws.
- Rehab for durability, with the bottom line in mind.
- Collect payments through YOUR method, not theirs.
- Never accept cash and make it a part of your written policy.
- Never accept a partial rent payment.
- Consider setting up ACH or other automated system for rent collection.
- Pass the handling charge (up to 3%) for credit cards on to your tenant. They should pay for that convenience not you.
- Create and communicate clear policy for collecting past due rents.
- Incentivize good tenants and good tenant behavior.
- Discount if in office by 5pm on the 1st.
- Lower or no rent increases if previous 12 months ON TIME.
- Use Property Management software- One lost repair receipt can be one less tax deduction and one misplaced lease can cost you months in eviction court. Using technology can help landlords streamline necessary tasks like listing their property, screening tenants, signing leases, collecting payments and handling maintenance requests. The last thing a busy landlord needs is to be bogged down with excel spreadsheets and hard copy documents, wasting time and potentially money.
- Require renters insurance. Have your ownership entity named as an additional insured on the policy.
- Go to their policy first if damage is done by them.
- You’ll be notified if their policy is canceled.
- Own in an LLC. Engage in asset protection in your entity setup.
- Conduct thorough move-in and move-out inspections. Document everything.
- Conduct regular inspections. Notify tenant 48 hours in advance.
- Communicate often with tenants
- Hold security deposit money in a separate account. Don’t touch.
- Create and maintain your own system of hold-backs so you can pay taxes and insurance.
- Repair promptly.
- Have a clearly stated and enforced pet policy.
- Keep cash reserves (2 months for each loan) to allow you to screen thoroughly.
- Listen sympathetically, then enforce the rules. Soft hearts lose money.
- Consider cash for keys rather than eviction. Cash for keys is a faster alternative to an eviction if the tenant agrees to it. It’s a private agreement between the landlord and the tenant. The landlord agrees to pay the tenant to vacate the property and return the keys. Landlords do this to avoid the often time consuming legal process of filing an eviction with the court which can take months.
- Never rent to family or friends unless you are willing to let them live there for free. Don’t mix family and friends with your investment property business. No matter how wonderful it may be in the beginning, those close to you will expect more for less when renting from you. If the friend can’t afford to pay rent one month, it now eats into your cash flow and puts you in an awkward predicament. Let them know it’s nothing personal, it’s just your policy to never rent to family or friends.
- Use Legal Shield or a local real estate attorney to create a lease that is enforceable in your state.
- Consider landlord insurance. This insurance helps to protect your investment from the expense of lawsuits and/or property damage. Landlord insurance should cover the structure, as well as lost rental income and personal injury occurring on or around the property. The policy differs from the policy on a primary residence since the investment property is a business.
- Take advantage of the tax deductions available to you as a landlord. Consult with your tax advisor. If your tax advisor doesn’t have more than one tax benefit for you, consider hiring a different tax advisor.
- Treat this like a business. Because it is.
- Consider the factors that will determine when or if you should hire a Property Manager
- Your schedule
- Your attention to detail
- Your bottom line
- Your investment goals.
- Set your goal to grow large enough to hire management.
Comment Line calls and Questions
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- Audrey, Monticello, GA, “Do you think about selling your rentals? How would you decide on this? I’m moving away and I’m not sure I want to keep the two rentals I have here in town.”
- Sanders, Pittsburgh, PA, “My tenants moved out and for some reason just one wall in every bedroom needs to be painted. It’s the wall where the bed was. I’m not sure of the cause, but I’m wondering whether I need to paint the entire rooms, meaning most of the house of can I just paint the one wall in each room?”
- Andrew, Alexandria, VA, “When will your latest FlipStarter event be available as a video series?”
Motivational Thoughts for the day
“I don’t make up jokes. I just watch the government and report the facts.” -Will Rogers