As a real estate investor, making the most of your asset and generating consistent cash flow goes beyond purchasing a valuable property at a good price. It means being a good landlord and business person. To achieve this, the best advice for landlords is to offer a nice property that people enjoy living in, at market-rate rent, with excellent property management.
Why? Tenant turnover is expensive. There’s no way around it: when a tenant decides to move out, it costs the landlord money.
Vacancies between tenants can mean a month or more of lost rent. And even if there is no damage to the home, the process of turning over the rental is costly. Each time a tenant vacates, getting the property ready for the next occupant means at least basic expenses, including but not limited to
- Cleaning
- Painting
- Minor repairs
- Marketing the property for rent
So what’s the best advice for landlords looking to make the most money over the long term? Find good tenants, and keep them.
Good landlords with quality properties create an incentive for tenants to stay for multiple years. A nicer, well-managed property will attract higher quality tenants who
- Stick around longer and
- Take better care of the home they live in
Advice on Being a Good Landlord:
1. Offer the Best-Quality Property on the Market
When it comes to fixing up rental properties, many landlords take the cheap route, using lower-grade materials and finishes. Their goal? Keep the budget small and spend the least amount of money.
But here’s what they are missing: a higher-end rental remodel attract better quality tenants with good income and solid credit. The nicer the property the landlord offers, the better the caliber of tenant they will attract to the property.
In real estate, well-qualified renters lead to steady, reliable cash flow.
Tenants with solid employment and good credit are much less likely to be late or miss a rent payment. What’s more, renters who care about the property take better care of it, which means less cash out of the landlord’s pocket for repairs.
For landlords looking to upgrade their properties, keep in mind that certain higher-end finishes tend to appeal to renters most, so they’re worth considering first for maximum ROI. These include
- Granite countertops
- Stainless appliances
- Refinished hardwood floors
- Tile shower surrounds and backsplashes
- 6-panel doors
- 3-toned paints
Pro tip: if you choose to maintain high-quality properties, you should study the value that owners like you find in flat rate property management services.
2. Set Fair Market Rents
Once the landlord has an attractive property to offer, the next foundation of being a good landlord and bringing in a quality tenant is to set fair market rent. Good landlords research current rental prices and aim to keep their own rates right at market rate—or just below.
Initially, this may seem counterintuitive. Shouldn’t spending money on a higher-end remodel justify a higher monthly rent?
Yes. It’s true that the landlord may be able to price the rental higher, given its quality. But let’s get back to that goal of attracting the best renters—and keeping them. A great price eliminates one more reason for the tenant to move out at the end of a lease.
Plus, in the properties we own and/or manage, we’ve proved again and again that if your tenants know they’ve found a gem, they’re far more likely to stick around, pay on time, care for the property, and keep their landlord happy.
Pricing at market rate saves money over time by avoiding the cost of turnover. This approach leads to longer-term tenants who stay for multi-year leases. Many of ours stick around for 5 – 7 years!
3. Provide Excellent Property Management
Even with your very first rental property, it’s important to be as professional as possible, and to set up organized systems to support the business.
Landlords who have well defined and executed processes instill confidence in prospective tenants. And renters who know they will be taken care of and treated fairly are more likely to stick around and attend to the expectations of the lease.
Professional management also sets the rental business up to scale. When a landlord is first starting out, this may not seem like an issue. But as you grow to acquire multiple properties, efficiency and proven processes become increasingly important.
By putting tested systems and management processes in place from the beginning, you can help ensure
- Suitable screening of prospective tenants
- Proper lease execution
- Timely collection of rents, with built-in follow up as needed
- Efficient, effective handling of property issues
- Adherence to local laws
- Avoidance of unnecessary fees, or correct billing of fees as appropriate
Streamlined management will also help ensure that properties don’t sit vacant for longer than needed—meaning more money in your pocket.
Tips for Setting Up Professional Property Management:
Have rental documents ready. Being professional means the landlord has documents ready for prospective tenants. Start with a standard rental application and lease, and build any additional required documents from there.
Create a process for handling applications and screening tenants. Receiving multiple applications on a property gives the landlord the chance to pick the most qualified tenant. To do this, the landlord must set clear rules for easily evaluating prospective tenants. It can be dangerous to rely on a gut feeling or lease properties because applicants “seem like good people.”
Create a process that includes professional credit and background checks. And establish set-in-stone policies—like the requirement that every occupant over the age of 18 completes an application and has his or her name on the lease. Such rules are important and necessary for the protection of all.
Hire a professional property-management company. Not every landlord has the capacity or desire to also play the role of property manager. Consider hiring a professional property-management company to handle the day-to-day operations of responding to tenant needs, renting properties, maintenance, and more.
Know how to deal with late payments and eviction. Late rent payments mean an interruption in cash flow. When a tenant is behind in paying rent, it’s important to
- Understand the timeline according to the lease agreement and
- Take action accordingly
Allowing precious time to pass can lead to money lost for the landlord—and confused expectations for the tenant.
The eviction process can be intimidating, but education is the most important means of protection. In the event that the situation escalates, here’s what the landlord needs to know:
- The rental laws and rights of both parties
- How eviction works in your location, i.e., the exact steps for removing a tenant
With a clear, up-front understanding of how to remove a non-paying tenant, the landlord not only saves time and money, but also eliminates the extra stress of figuring out an intimidating process in the moment it needs to be implemented.
Better Management = Fewer Problems
Good landlords have the advantage of leveraging their investment properties to make more money in the long-term.
The best advice for landlords looking to maximize their earning potential? Limit tenant turnover by offering the nicest property on the market, at market-rate rent, with professional property management.
Long-term, income-generating tenants are those who have no reason to look for a new place to live, because they know they’ve found great value in a quality, well-managed property.
For more information on professional property management, contact Epic today.
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