What Does a Landlord Need to Know Before Renting
Congratulations! If you are reading this, you most likely own your first rental or you are thinking about it. Being a landlord can be an exciting thing. After all, it’s one of the proven paths to wealth and passive income. Rent comes in month after month, hopefully, year after year and you don’t have to do much. Easy money, right?
Well, not quite.
Property management is not easy if you don’t know what you’re doing. Rookie landlords make expensive mistakes
A rent price that’s too high can leave your property vacant for months. A lack of tenants can make you desperate to get anyone into your rental, and the wrong tenant can cost you thousands of dollars! Don’t forget, you may have to chase down rent and evict bad tenants.
That’s just the tip of the iceberg.
Now that I have your attention, you might be thinking:
That sounds horrible! Why in the world would I want to do this myself? Isn’t that what professional property managers are for?
It’s simple. You are the best manager on earth for your property. No one cares as much about it as you do (or as you should). You’ll also save money and keep all of the control.
If you have only one or two properties, learn to manage them yourself first. After you know what’s involved, you can hire a manager in order to grow your portfolio. If you would like to know how to find the best property manager click here to read our guide.
I am an investor and a professional property manager who has overseen hundreds of properties. This guide is a crash course in managing your own property and it will help you deal with everyday problems as a landlord.
Step-by-step, I’ll walk you through the entire process, including topics like preparing your property, marketing, screening tenants, moving in, tenant relationships, and moving out.
I’ll share stories from my experience, avoidable mistakes (that are all too easy to make) and, most importantly, countless tips to make you a successful landlord. Throughout this guide, you will find convenient checklists and links to downloadable forms.
Let’s get started.
Table of Content
- Preparing Your Property for Rent
- Property Marketing: How to Reach Potential Tenants
- The Good, the Bad and the Ugly: How to Screen Tenants the Right Way
- The Lease Agreement: Protecting Yourself & Your Property
- Move-In Day & the Walk-Through
- The Keys to a Good Tenant Relationship
- Seven Tenant Problems & How to Deal with Them
- Moving Out: 4 Hassle-free Tips
Preparing Your Property for Rent
Your first step when renting any property is to prepare it for the tenant. This means restoring it to a suitable condition, much like if you were going to sell it.
If it’s a newly acquired rental, this is your first step. If you’re re-renting a property, this is still your first step.
Both professional property managers and accidental landlords too often skip this step because “it’s just a rental.”
That is a huge mistake! Your property’s condition directly affects the type of tenant you attract and how a tenant will treat your property.
That is a huge mistake! Your property’s condition directly affects the type of tenant you attract and how a tenant will treat your property.
A poorly maintained property sends a message to the tenant that you don’t care.
If I don’t care about my property, why should you?!
Like attracts like. Crappy rentals attract crappy tenants. High-quality rentals attract high-quality tenants.
Clean well, make repairs, replace or upgrade necessary fixtures and appliances, landscape, and prioritize safety.
Property Marketing: How to Reach Potential Tenants
Once your property is ready, the applications will start flowing in, right?
Nope. You have to tell the world about your available rental. In other words, you have to do some marketing.
Finding and screening tenants are the most time-consuming parts of property management. In this section, we’ll lay out the steps you need to get high-quality tenants interested in your property
The Good, the Bad and the Ugly: How to Screen Tenants the Right Way
It’s tempting to take the first tenant that applies to your property. I understand. You’re ready to earn rent income ASAP. Please, please, please, don’t make this mistake!
Screening tenants is the most important step in renting your property. A bad tenant can cost a lot of money. Therefore, your screening process can determine the success or failure of your business.
The Lease Agreement: Protecting Yourself & Your Property
If you only remember one thing from this chapter, please make it this:
Put everything in writing!
When it comes to your lease agreement, everything—I repeat, everything—should be included in writing. This includes the monthly rent price, security deposit, nonrefundable fees, rent due date, how late payments are handled, and what the tenant is and isn’t allowed to do.
This is the only way to avoid misunderstandings and protect yourself and your property.
Though you can download a standard contract template from online, it’s best to look for a lease that’s a result of many years of fine-tuning based on real experience with tenants and problems that come up.
You can find a Lease Agreement below.
And as always, continuously update your lease agreement as experience teaches you new things.
Move-In Day & the Walk-Through
The most important moment in the tenant-landlord relationship could arguably be the first-day walk-through.
On the first day, it’s important to set expectations. We guide the tenant through the property and show how everything works, how to keep it maintained, and what are the consequences if our rules aren’t followed. It usually takes us 2-3 hours to do but it eliminates a lot of headaches and expenses later.
Conducting a Property Condition Check
Your property condition assessment should include photos and videos. This is a good time to check the smoke alarm system, appliances, sprinkler system and to carefully document all existing defects and the general condition of the rental.
If we ever have to go to court because of a security deposit dispute we have photos and video evidence to show the judge.
Give Tenants a Welcome Letter
The welcome letter (tenant handbook) should explain your rules and policies in plain language. Some of the items you should have in the welcome letter or a tenant handbook are:
- What is an emergency and what to do in case of an emergency.
- Who they need to call when they have a maintenance issue.
- Where is the water shutoff valve.
- Contact info for all the utilities, mailbox number, and location, parking, etc.
- What to do in some often encountered situations: garbage disposal jams, the electrical outlet stops working, etc.
- What are your procedures if the rent is late. Tell them that you don’t make exceptions. This is very important because it sets the tenant’s expectations from the beginning.
- Go over Condo or HOA rules if any.
- Finally, remind them about what they need to do at the end of their lease.
The Keys to a Good Tenant Relationship
- Keep It Professional
- Set Your Availability
- Inspect Rentals Regularly
- Handle Problems Immediately
- Create Goodwill with Your Tenant
Property management doesn’t end after you sign a lease. There are ongoing duties that need to be taken care of during the rental term. Here are my top tips to maintain a good tenant-landlord relationship.
Keep It Professional
Always keep your tenant relationships professional. You are not friends. That being said, you can be friendly. Just remember that you are running a business. You and the tenant should have a business relationship. In our experience, once the landlord and tenant become friends, the tenant starts to ask for special favors like free repairs and payment extensions.
Set Your Availability
Contrary to what most people believe, you don’t have to be on-call 24/7 for your tenants. You need to set availability expectations from the beginning and continuously enforce those boundaries throughout the residency.
Much of your time can be wasted responding to emergencies that you can’t do anything about. That’s why we recommend creating an approved list of vendors that your tenant can call directly for specific emergencies. This removes you as the middleman and saves you time. Post your vendor list somewhere in the property where the tenants can reference it.
For non-emergency problems, tell the tenant to keep a list that can be reviewed monthly. Fixing non-emergency things one-at-a-time costs more than fixing them all at once. If your tenant becomes too bothersome with non-emergency issues, explain how an excess of cost, time, and attention can lead to unavoidable rent increases.
Handle Problems Immediately
When problems arise, be nice but firm. It’s not personal; it’s business. Always tackle problems as soon as you know about them. Waiting or avoiding confrontation only makes the problem worse.
Create Goodwill With Your Tenants
We like to throw in extra perks for the tenants that also help maintain the property. For example, we might give them a free carpet shampooing or professional deep cleaning every year. It creates goodwill with the tenant and keeps the property in excellent shape.
Inspect Rentals Regularly
Every six months you should inspect the property. Regularly checking your rental prevents any small problems from becoming massive liabilities. You can do this yourself, hire an inspector, or train your vendors to do informal inspections each time they visit your rental.
Seven Tenant Problems & How to Deal with Them
- Late Rent Payments & Non-payment
- Constant Complainers
- Unauthorized Pets and Animals
- Unauthorized Occupants
- Domestic Issues
Many issues could arise during a tenancy. If we can, we try to help the tenant, but sometimes the best solution for both us and our resident is for them to move out.
Late Rent Payments & Non-payment
Many issues related to not paying rent or not paying it on time can be eliminated through a good screening process. Sometimes, though, life can throw a tenant unexpected curve balls and cause an otherwise great tenant to have problems paying rent.
It’s very important to set expectations from the beginning on what will happen in late or non-payment situations. We cover these consequences (what the tenant can expect from us; what we expect from the tenant) with tenants during our initial walk-through on move-in day.
Not only do we tell our tenants, but we also give them a handbook that details our procedures and consequences when rent isn’t paid on time. In a nutshell, this is what it says: Rent is due on the 1st of each month. If it’s received after the 3rd, we apply a late fee. If rent goes unpaid until the 7th, we serve a 3-day notice.
If a tenant is having issues making the rent payments, letting him or her out of the lease contract to find a more affordable place to live is the best possible approach.
The tenants must make a payment within 3 business days or else vacate the property. We communicate that we do not make exceptions, regardless of the tenant’s situation.
If we make exceptions only for some tenants, this could be considered discrimination because we are treating tenants differently.
It’s not only important that we tell the tenant this, but that we also enforce it. Some tenants will test you by saying “it’ll only happen once.” But you can’t give in. This is where many landlords fail. They feel bad for the tenant. What should be a 30-day eviction process turns into months of lost rent.
Please don’t make the same costly mistake. Tell tenants what you will do, then do it. If you feel empathy towards the tenant’s situation, consider this: If a tenant is having issues making the rent payments, letting him or her out of the lease contract to find a more affordable place to live (without an eviction on his or her record) is the best possible approach.
We have had tenants who fell on hard times. We arranged for them to show the home while they were looking for something more affordable. They then moved out, and the new tenants moved in.
There was no loss of income for the landlord and no eviction for the tenant. Locking tenants into a property they can no longer afford is just as bad for them as it is for you. Instead of facing his or her financial reality, the tenant continues to live in denial while you suffer the losses. So, act fast when this happens, and the tenant will be grateful that you helped out.
The first step when dealing with a complainer is to listen and try to solve the problem immediately. We avoid making any initial judgments on if the complaints are legitimate or a symptom of something else.
If—after exploring all the options—you determine that there is no legitimate problem, you likely have a tenant who complains for other reasons, such as wanting out of the lease.
The best solution is to have a frank conversation with the tenant. We ask directly if something else is going on and how we can help. This approach usually brings out the problem: They want out, and they are trying to force your hand by complaining. In this situation, we advise you to make the tenant a deal. Let them show the property and clean up after leaving, then let them go. Everyone wins.
Our only BBB complaint came from the one-and-only time that we didn’t look deeper into the tenant’s problem, assuming the tenant was a complainer: The tenant had been complaining about a higher water bill. We sent someone to check for leaks and to check the sprinklers. We told the tenant that no problems were found, and everything appeared to be working properly. The water bill was higher but not unreasonably high for watering a lawn, and we decided the tenant was just looking for something to complain about. Boy, was that a mistake!
After the tenant moved out, we discovered that the sprinkler system was defective and had been watering the lawn more than it should have. The tenant’s complaint had been legitimate, we had dismissed it, and as a result, the tenant left. Now, we send two vendors to investigate a problem, so that we get two professional opinions. Sending two vendors is cheaper than having a tenant move out.
Unauthorized Pets and Animals
Dealing with pet issues is tough. Most people aren’t willing to give them up. If we find that tenants have unauthorized pets, we do either one of two things:
(1)Send them a notice to move out. We do this very rarely. This decision is largely driven by our insurance policy. If the breed is not allowed on the premises, we have no choice.
(2)Ask for pet insurance and a larger deposit.
Because we have a county ordinance on where farm animals can be kept, when it comes to chickens and other farm animals, a move out notice is the only solution. As a result, we have added a farm animal policy to our lease agreement.
Don’t assume that because your tenant is great, the new boyfriend or girlfriend will be as well. Tenants don’t screen their better halves, but you should. The same screening criteria that apply to the original tenant should also apply to anyone who is added to the lease at a later time. We need to know who the other person is, and we run background checks on any added tenants who are 18 years or older.
Domestic issues are not that common when managing properties, but they do sometimes happen. We recently had a couple separate, and one of the partners moved out. The partner was worried that the tenant who stayed would stop paying rent.
This hasn’t happened yet, but if it does, we have no option except to file for eviction and enforce the lease for BOTH partners. Because we cannot help them with this situation, we referred them to a lawyer who is better suited to mediate.
Do not get involved in family problems or take sides. Just enforce the lease as the landlord and act according to your local state laws.
Roommates are all jointly responsible for the lease. If a roommate wants to leave AND the one staying has enough income to qualify to live there alone, we modify the lease to reflect the changes. But if the remaining roommate doesn’t qualify, we ask the tenant to leave or to find another roommate.
We need to have some control over how a property is used and by whom. Subletting removes that control (we can’t screen the subletter, for example), so we don’t allow it on any of our properties.
Moving Out: 4 Hassle-free Tips
No tenant will stay with you forever. Eventually, they’ll move out and on to something else. For these situations, we have some tips to make your next move out as hassle-free as possible.
Include a Move Out Notice in Your Lease Agreement
You want to have advance notice of the tenant’s intention to move out. This should be included, in writing, in your lease agreement. Since marketing and screening for a new tenant takes anywhere from one to two months, we recommend that as a starting point. This greatly minimizes your vacancy time (a.k.a time you spend not earning rental income).
The move-out notice may be regulated by your state laws.
Once you have a move-out notice, it’s time to start the property management process from the beginning, starting with property preparation. Do a deep cleaning, make repairs, and update necessary features before the new tenant moves in.
Make Move Out Expectations Clear
A few weeks before a tenant’s move-out date, we give them a written explanation of what is expected of them and how the move-out process will go.
We require that the tenant leave the property in a “broom clean” condition, simply meaning nothing left in the fridge and no furniture or belongings left in the home. We specifically ask that the tenant does not touch up the wall paint. That’s something we will take care off.
Because the tenant had previously paid a non-refundable cleaning fee, there’s no need for the tenant to do a deep cleaning. This is easier on us and on the tenant.
Document Damages with Photos & Notes
Once the tenant has moved out, do a final walk-through to document any damages, and decide how much of the security deposit will be returned to the tenant. We deduct any damages that are not part of normal wear and tear, like holes in the drywall or doors. Document damages with photos and notes, especially if it reduces the tenant’s returned security deposit.
Mail a Deductions Statement Along With the Returned Deposit
We mail a deductions statement with the returned security deposit, and the tenant has 30 days to challenge the notice. This statement, along with photos, will help protect you if a tenant decides to take legal action over the decision.