If you tell your friends you’re considering investing in real estate rental properties, you’re likely going to hear a wide assortment of reasons why you shouldn’t do it. Most of these reasons will follow the typical horror story—tenants can make life challenging. They might trash your home, or pay rent late or not at all, they might drive you up the wall with calls at all hours of the night.
While these can be the occasional truth, they’re not the majority. The fact of the matter is, if you do your due diligence, you can end up with a very successful investment and a long-term, qualified tenant. For those new to being a landlord, here are five tips that will help you to avoid the stereotypical nightmares and put you on the path to a smooth riding investment.
When it comes to being a landlord, you need to go into it with a good solid foundation of knowledge. Understand the industry and the market surrounding you, learn the laws, and figure out what type of tenant will work best for you. Research communication styles and know what red flags to look for in a tenant. It may sound like a lot of work, but a little research before diving in will help keep you from drowning in the long-run.
If you’ve never organized a filing system before, you’re going to want to start now. Developing an organization system before a tenant is even in place will help you to avoid any missed payments, overlooked notices, or forgotten maintenance. Putting systems in place when you purchase your first property will help you to ease into managing two properties, six properties, and so on.
Don’t Skimp On Rent!
When it comes to rent collection, don’t overlook a missed payment. One missed payment can turn into six missed payments very quickly, and before you know it, you’re behind on your own bills and having to undergo an expensive and time-consuming eviction process. If you’re not going to be utilizing a property management company to collect your payments, ensure you put an electronic system in place to allow tenants to make their payments easily.
Don’t Be a One-Man Shop!
While it may be tempting to do it all yourself, understanding when you should outsource a project is vital. In addition to showing the tenant that their repairs are credible by using a licensed and insured professional, outsourcing maintenance and repairs can give you the balance you need in your private life as well.
Never Rent to Family or Friends!
If you purchased your rental property to incur a monthly cash flow, renting to family or friends could put a damper in this concept. It’s seldom a good idea. Just as they say you shouldn’t loan money or go into business with family or friends, you should probably never rent a property to someone you want to continue a relationship with.
While being a landlord can have its downs, it’s not as scary as the stereotypes make it out to be. Sure, you may come across a bad tenant here or there, but if you’re careful and approach everything with a little bit of caution and a lot of research, you’re going to be just fine in this industry.