(This post is part of our “Landlord Basics” series, which seeks to help the new landlord / investor understand some of the basics of tenant relations and property management. You can view the rest of the series here.)
Being a new landlord or investor can be overwhelming. Trying to get the most for your rental, while handling maintenance and tenant issues, all while trying to see a positive return on investment! It can all be very daunting!
Keep these three things in mind while you go about your business, as a way to stop yourself from falling into the red.
1. Improper or No Tenant Screening – Making sure you have a rental application with full, complete, and accurate information is important. Be sure to verify all references and employment history, including previous landlords. In addition, you may want to run a criminal background check and credit check. There are many services that will screen tenants for you for a fee, however the services and cost vary widely. If you go with one of these services, be sure you know what services they offer. Ask a local real estate agent or investors club who they use.
2. No Personal Liability Protection – You should consider at the very least carrying additional insurance on your properties to cover your personal liability. Many investors choose to title their properties under a LLC or Limited Liability Corporation. Speak to your accountant, lawyer, or tax preparation professional for more information on the tax benefits as well as the personal liability protection that an LLC can offer. Beware services that offer the ability to get lines of credit, mortgages, and vehicles under an LLC name – credit is something that needs to be earned and not just divined!
3. No Record Keeping System – Do you know how much your tenants know? Can you find the information at a moments notice? What about utility bills, tax payments, mortgage payments, titles, surveys, and all the other paperwork associated with your properties? Having a standardized, easy to use file system will help you stay organized so that you can find the necessary paperwork when the time comes. Keeping it easy will prevent you from letting paperwork stack up before you actually take care of it. An ounce of prevention is worth a pound of cure in this case. The five minutes you spend once a week filing can save you an hour down the road when you don’t have to search through stacks of paperwork!
These three tips are simple things that often get overlooked at the beginning, but can save you a lot of time, money, and headaches later on as your business flourishes. No one has ever claimed being a landlord or investor is easy, but you shouldn’t make it harder than it has to be!
You’re so smart.