Not everyone is cut out to be a landlord. Those who aren’t often find this out the hard way. However, most former landlords learn valuable lessons along the way. New landlords can use insights from these experiences to become better landlords themselves.
The following are seven key lessons and tips from former landlords:
1. ALWAYS Have a Lease, and Make Sure It’s Detailed and Comprehensive
It can be tempting when renting to friends or family to forego the formality of a lease. Former landlords advise strongly against this. The lease offers the opportunity to spell out important rules in writing and obtain a signature so that everyone is on the same page. Whether the tenant is a stranger or someone familiar, a detailed, comprehensive lease is a must.
2. Enact a Late Fee – And Enforce It
Former landlords also strongly advised toward having a late fee policy and always enforcing it. Not doing so sends the message that it’s OK to let rental payments slide, and some tenants abuse this and keep paying later and later. The late fee must be reasonable and in compliance with state laws.
3. Think Twice About Renting to Friends and Family
Some former landlords report that renting to people they knew was one of the worst mistakes they made. Even with a lease, these people can sometimes take advantage of the situation and push the envelope in terms of what’s allowed. From late rent to a lack of cleanliness to causing property damage, former landlords often reported bad experiences with renting to people they knew. The relationship suffered, and they were often impacted financially. Tax laws may be different and more costly in these situations as well.
4. Use Tenant Screening
While some landlords attempted DIY tenant screening, many found that the results they received were not as accurate and comprehensive as they were hoping for. A professional tenant screening service eliminates the guesswork and can ensure that all relevant areas will be thoroughly checked.
5. Double Your Estimated Cash Reserve Amount
Landlords often have a basic idea of how much cash they think they should set aside for repair and upgrade costs in rental units. However, former landlords attest that they always tended to estimate too low – to the tune of half of what’s really required. To make sure essential repairs will be covered, it’s best to double this estimated amount.
6. Create a List of Go-To Helpers
When something breaks down in a unit, it can be a real emergency for tenants. The best way to handle this is by being prepared. Former landlords recommend compiling a list of go-to electricians, plumbers, exterminators and handymen so that they can be called at a moment’s notice. Ensure that these service people are reputable and will charge fair prices even in emergency situations.
7. Prepare For Some Stress
Former landlords also reported that the ability to handle stressful situations was a must. The best landlords have patience, tolerance and a higher-than-average threshold for handling difficult situations. Occasional challenges are inevitable and part of the territory. That said, proper tenant screening can help to forego many issues and headaches so that fewer problems arise down the road.
Being a landlord isn’t for everyone, but there are steps that can be taken to increase the odds of success. Take a page from former landlords by learning from their experiences in these seven key areas.