5 critical tips to self-manage tenants for first time investor
If you are just starting your journey in the world of real estate investments, then Congratulations! You’re a baby landlord! You might find yourself already overwhelmed after completing the purchase process, which can very well be compared to a root canal. Weeks – if not longer – of proving to a bank that the property you would like to purchase has indeed cash flow, collecting information from every vendor involved in the property, organizing your own personal finances, putting down a ridiculous down payment, the eternal back-and-forth from with your title company/attorney, and BOOM, you are officially an investor and a landlord.
Now what? NOW, comes the hard part. The decisions you make at THIS very point in your journey could make the difference between you creating generational wealth or a FLOP. Your investment can very well add to your life, in many ways, or steal your peace. Luckily, there exists a magical map, consisting of just 5 key points, that will provide you the tools needed to develop a long-term healthy relationship with your investment property.
Strong partnerships are important. Romantic, professional, family, you name it. Personally, I rather wait around for the right tenant versus signing a lease with just anyone only because I don’t want any vacancy. Similar to how I was patient and waited for my wonderful husband versus marrying just anyone simply to avoid “vacancy.” Focus on the goal, which should always be LONG TERM success.
Tenant screening is the most important part of being a landlord
This brings us to TENANT SCREENING. Like marriage, let this be personal to you. Maybe tenant screening means following your gut instinct from a phone interview with a potential tenant. Or maybe you require a bit more information, i.e. good credit, no criminal background, no past evictions, etc. Data can be collected with websites such as RentPrep, First Advantage or TransUnion. JMK has created a personalized application suited for our business model and we use (AppFolio) to run background checks. However you decide to manage this part of your adventure, just note, that you need a responsible tenant that can pay their rent and is committed to their lease. Someone that makes good choices and will improve your community by bringing a good vibe to your place.
Tenant should be responsible for any repairs below $200 in cost
Some tenants want the landlords to be responsible for absolutely everything. “I have an emergency! The shower rod in my shower fell!” Or “There’s hair in my shower drain,” (from a tenant that’s lived in the place for 1+ years). My favorite is when tenants call to demand we change their light bulbs. To avoid needy tenants, look to your lease for help. First thing we do is stipulate that a landlord is responsible for anything over $200.00. Anything under is considered an everyday living expense to be covered by the tenant. We also add notes onto the lease, which include but are not limited to making the tenant responsible for changing the air filter on a monthly basis, calling a locksmith should they lose their key, changing their light bulbs, plumbing emergencies caused by incorrectly flushing anything other then toilet paper, etc. A lease essentially becomes not only a contract to lease a unit, but a tutorial on what a tenant can expect from their relationship with their landlord. Remember, you can be an amazing landlord, but you’re not a concierge service!
Require rentals insurance from your tenants!
Peace of mind is priceless, unless your tenant is purchasing renters insurance for $70.00 year. In which case, your tenant just bought you some peace of mind for 70 bucks. JMK encourages and most times requires all tenants to show proof of rentals insurance prior to signing a lease. Something so quick to do and inexpensive can help in securing your assets and that of the tenant’s for the entirety of your lease contract. We love using Lemonade and often guide our tenants to do so.
Use automatic payments to streamline rent collection
Life is short. Enjoy it. Do not spend your valuable time driving to and from your tenants, the bank and your accountant. Not only are you wasting valuable time that you could be using to scout other potential investments, but you’re risking misplacing a check or money order. Do yourself a favor and adopt one of the many accounting apps that can provide you with a rental payment platform. For example, Avail, Azibo or Apartment.com previously known as Cozy. Shop around for the app that better suits your needs. There are even some that will provide a forum for your tenant to email you, send you work orders and other requests directly to your phone.
Protect your interests with last month & security deposit
We’ve learned in the past few years that the universe is really getting creative with the surprises it’s throwing at us. We can’t know when the next pandemic will hit, or the next market crash. All we can do is be somewhat prepared – just in case. One way of securing your investment is by collecting the last month and security deposit from your tenant at the beginning of your lease. These two months of rent can get you from point A to point B should a tenant stop paying rent for any reason. The eviction process does not usually take more than 3 months. You’ll be able to pay your mortgage and hopefully secure a new tenant without having to go months without receiving a rent payment.
“Landlord land” is a tough world, but it can be very rewarding as well. It is up to you to create the investment you want to manage, and the community you want to build! And the best news, if you’re not happy managing your property, there are companies (*cough – JMK) fit to do it ALL for you so that you can focus on refinancing and purchasing more!
(wink : wink)
We can help you buy/sell, manage and/or remodel your property. For a free consultation click here.
Jessica Nasib Khachani
Office: 605 Lincoln Rd Suite 250 – Miami Beach FL 33139