A couple of weeks ago I told you about the 5 things a landlord should never do. This is the companion article to that one. If you haven’t read it, click the link, and then come back. Always do these five things and you’ll do much better.
- Always Buy Value. Even before becoming a landlord, you need to take the time to evaluate the deal. Walk away from any that doesn’t cash flow. Even though you might not be looking for a monthly paycheck right now, you can’t have a property that runs in the red.
- Know the Law. Right or wrong, you are expected to be more knowledgeable of the law than your tenants. You are expected to know how to navigate the rules of fair housing, emotional support animals, notices to quit, evictions, and the list goes on. Read up so you know how to deal with these things before they become a problem.
- Follow the Rules. This is different from #2. This is talking about your rules. The ones you made and put in the contract you and the tenant agreed to and signed. Don’t do things like set up a rent due date and then ignore it over and over when your tenant fails to pay. Don’t ignore your policy about hanging political signs in the windows or whatever you have in the lease. When you become lax on one thing, tenants believe you will be lax on others. The place you invested in can easily get wrecked.
- Keep Records. This one seems obvious, but so many people fail to do it. Every lease and agreement that is signed should be saved in a file folder representing the property. These need to be kept for 7 years. You never know when you will want to look back and find out when you repaired the furnace or leased to a certain person. Better yet, do all of these things electronically.
- Treat Everyone the Same. It’s very important that you don’t give one person a better deal than another. This could be seen as discrimination and get you into hot water. Even a discount on rent could be shown as favoritism. The best thing to do is to give everyone the discount, or tie it to something measurable, like reducing water use.
- Bonus: Keep a Capital Expenses Fund. We are all guilty of failing do do this. We need to be ready for unexpected repairs. Sure, we have insurance, but there is usually a gap between what you need and what insurance will pay. This might be just the deductible but it could be much more. Wise landlords hold back 5% of the rent on a new place and up to 10% on older ones in reserve for just these issues.
Do these things and you’ll me much more likely to have some great income properties while you sit on the beach in retirement.