Sometimes property owners forget that they are essentially running a business. As a property owner it should be your goal to maximize income and lower costs, while keeping your customers happy, much like the local grocery store or any other service business. In this case, your "customers" are your tenants.
There are seven sure ways to fail in this business and, on the flip side, seven ways to succeed.
- Fail to Thoroughly Check Prospective Tenants
By far, the biggest financial and emotional disaster for a landlord is a bad tenant. A tenant can bad for many reasons, including being late on rent payments, disturbing other tenants, and making unreasonable maintenance requests.
There are two situations in which a landlord is likely to end up with a bad tenant: 1) when they are in a hurry to generate income by renting their property quickly; 2) when they feel sorry for a prospective tenant.
To avoid these circumstances always perform a thorough background on all prospective tenants. Or let Lingsch Realty do it for you. A thorough background check includes a credit report, as well as references from past landlords and employers.
- Fail to Check the Property
While you may think your tenants report all maintenance problems to you (maybe report TOO MANY problems!), chances are there are problems tenants ignore because they don't notice or they aren't bothered by them. In some cases, these are the items that can cost you money in the long run as they go unnoticed and cause more damage to the property.
By making an annual room-by-room check of your property, you can remedy problems and expensive fixes before they become a problem for you or your tenant.
- Failing to Raise the Rent
As a rule of thumb, raise the rent every year. Your costs rise every year, but you may not raise the rent because you don't want to lose a good tenant. If you are renting a property for $1,000 a month, a five percent increase would be $50.00. Certainly a tenant will grumble, but they probably couldn't afford to move for $50.00 per month.
If you don't raise the rent each year, in five years you will find yourself behind market rents. Now in order to catch up, you would need to raise the rent from $1,000.00 to $1,250.00. That may be reason for a tenant to move. It's called "rent shock." Keep good tenants by raising the rent a little every year, not as a last resort.
- Failing to Maintain the Property
This goes right along with #2 and #3. If you let things go, it ends up costing you more in the end. The result of a poorly maintained property is that good tenants move out and bad ones move in. It's a vicious cycle: the property gets progressively worse; good tenants move out; you can't get higher rent because your property isn't well maintained; less desirable tenants move in and pay lower rents; you can't afford to fix what's wrong; the property gets even worse and even worse tenants are the only applicants you get.
- Failing to use checklists
You can't remember everything. The most efficient way to make sure you remember is to use a checklist. Make checklists for:
- Tenant selection
- Move-In Procedures
- Maintaining the Property
- Move-Out procedures
- And more.
- Failing to Use a Written Rental Agreement
It is important that tenants know exactly what is expected and required of them. That way there can be no misunderstanding, as long as you don't accept activities that violate the agreement. Make sure the rental agreement is up-to-date (Lingsch Realty's is!)
- Failing to Update
Maintenance is one thing; keeping your property new and fresh is another. An updated apartment can generate an extra $100 or more per month in rent. Don't update the property and the property looks shabbier and shabbier, limiting your capability of keeping the rent on par with other properties, and consequently attracting less desirable tenants.
Doing the opposite of "how to fail" will guarantee you success in the landlording business. As always, the choice of how you run your business is yours, but while investing money in your "business" may seem objectionable, it is the only way to protect your property and continue to attract the most desirable tenants.
