The next step after you purchase your investment property is to rent it. Time to prepare yourself for Tenants and Toilets! Most investors like the idea of rental income from real estate but they don't want to go through the motions of selecting tenants, moving them in, collecting rent or fixing toilets. Here is an outline that you can use to minimize the headaches!
1. Prepare the home for renting. The better condition your rental property is in the better chances you have of getting good renters. Think to yourself, "What type of person would live in this house?" If the house is in poor condition you will probably get renters who are in poor condition, ie. poor credit, poor job (if any), poor rental history.
2. Selecting tenants. Always use an application. Have the prospective tenant fill it out and return it to you. If they do not pass this step then chances are they won't pay rent on time either. Call their references, do a background and credit check. Make sure to ask them why they are moving and when they plan on moving early on in the process.
3. Moving in. Use a move in check list and take pictures of the property prior to the tenant moving in. This way, if there are damages, there will be no discrepancies in the stories.
4. Use a Home Manual. Have a home manual for each property, outlining what to do in case of an emergency, how to check for simple problems like a tripped breaker, phone numbers for utility companies, policies and procedures. This can eliminate those 1am phone calls about not having hot water, when it may be as simple as a tripped breaker.
5. Lease Agreement. When at all possible get a year lease or more. Have a good lease drawn up and make sure all your bases are covered and that it complies with the Landlord and Tenant Act https://www.revisor.leg.state.mn.us/statutes/?id=504B. For Bemidji City codes check out www.ci.bemidji.mn.us
6. Collect a Deposit. It is a good rule to collect a deposit in the amount equal to one month's rent. Keep it in a separate bank account. You will be returning it to the renter when they vacate if there are no damages.
7. Collect Rent. Have a clear rent payment policy in place of what forms of payment you accept and where it is to be sent or dropped off at. If rent is not received on time charge a late rent penalty fee.
8. Retain Residents. If you had good renters, try to retain them for another lease period. This can save you a lot of headaches by not having to select new tenants.
9. Have a list of preferred contractors. It doesn't always pay to be a DIY'er! In the long run you will probably save more in time and money by hiring a professional rather than trying to do all repairs yourself. However, you should have a general knowledge of how the home works.
Follow my easy steps and you will be on your way to being a successful landlord. And, if you buy an investment property from me, I offer FREE advice and resources to help you get started!
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