When investors buy residential rental properties, such as duplexes or multi-family buildings, they take on the role of landlord. However, success as a landlord is not merely a matter of putting tenants into the properties and collecting rent from them. Instead, being a successful landlord requires as much diligence in the management of the tenants as it did in the selection of the property.
Just as investors must take precautions to minimize the risk of buying properties that do not fit their real estate investment plans, they must take precautions to avoid difficulties with their tenants. These are some of the key steps that diligent landlords can take to reduce the occurrence of tenancy problems.
Screen Tenants Adequately
A landlord needs to have as much relevant information as possible about the people who want to rent a unit before agreeing to rent to them. Of course, this means verifying the prospective tenant’s employment status and ability to pay. It also involves finding out from previous landlords or rental agents what type of tenant the prospect was.
With careful questioning, the landlord can find out if the prospect constantly missed or delayed rent payments; if the prospect’s rent checks bounced; if the prospect often hosted loud parties late into the night; or if the prospect or someone in his or her family has a history of physically assaulting others or of damaging apartments or the common areas of the buildings.
Be Wary of Tenant Excuses
By adequately screening tenants, a landlord reduces the likelihood of nonpayment or late payment of rent. If such a problem later occurs, the landlord must not readily accept a tenant’s excuses for failing to pay the rent on time. If the tenant has been a good renter but is temporarily having difficulties, the landlord may want to work out an interim payment schedule with the tenant. Nonetheless, this type of sympathetic display should be the exception, not the rule, in the landlord/tenant relationship because the renting of residential space is a business transaction.
Use a Solid Lease
Along with screening a tenant, the most effective way that landlords protect themselves is by using a written lease. The lease must be drafted carefully; a poorly worded lease or one that includes provisions that are outside the bounds of the landlord/tenant laws of the state will make it extremely difficult for a landlord to evict a problematic tenant.
The landlord must decide whether a form lease with boilerplate language covers the conditions and scenarios that may occur during the term of the lease. One source for up-to-date form leases and related information is the local landlords’ or apartment owners’ association. The landlord may instead decide that his or her particular circumstances are better served by a lease drafted by an attorney.
Keep up with Rental Property Maintenance
A poorly maintained property performs poorly. A property with an inadequate heating system, cracked walls, vermin, or tattered, stained carpeting will cause good tenants to move away and discourage good prospects from taking their place. It should come as no surprise that a poorly maintained property will neither provide adequate cash flow nor sell for a good price, which will scuttle even the most carefully crafted real estate investment plan.
Landlords also must realize that problems ignored – such as water leaks in the basement or through the roof – will become larger and costlier to fix. This is why it is essential that landlords honestly assess the condition of their rental properties, keep up with the maintenance of those properties, and encourage their tenants to report even seemingly small malfunctions or defects as soon as possible.