Now that you’ve purchased, renovated, and leased your property, you need to maintain your investment with proper management of your tenants, from selection, maintenance, conflict resolution, all the way to turnover.
If you do a great job selecting tenants, the rest of the management process is much easier. If you find a good tenant, it’s crucial to do everything you can to keep them happy so they renew their lease for another year. One bad tenant can be more work than 20 good tenants, and can easily rack up thousands of dollars in damages, unpaid rent, evictions, and legal fees.
Screening Tenants For Success
The first step to managing tenants is to setup a proper screening system, and requirements for occupancy. Depending on the class of rental, we have a minimum required credit score and income. We also require our tenants to apply via Cozy, as it prompts them to submit a background check and prove their income. We will also call their provided references to check for any obvious red flags.
If your apartment is taking a while to lease, it can be tempting to accept the first applicant, even if they don’t meet your criteria. While this might be satisfying in the short term, accepting a bad tenant can cause headaches once they move in. It’s better to keep your unit vacant than rent to a bad tenant. The cost of repairing damage, or an eviction is almost always more expensive than being patient and waiting for a good tenant.
Before a tenant moves in, it’s important to set ground rules and expectations. Many landlords have a guidebook they give to all of their tenants that lay out their preferred methods of communication, availability, expectations, and procedures. Our guidebook sets expectations on when rent is due, and what happens if it’s not paid, all the way through to eviction.This leaves no confusion or room for negotiation, as we behave the same way for all of our tenants.
You also need to document the condition of the apartment before any new tenant moves in, and make sure both you and the tenant sign it, so if there is any damage done during the stay, there is no argument that the apartment was inherited in the damaged condition.
Pro Tip: Sometimes we will go above and beyond with a repair or upgrade for our best tenants to motivate them to renew their lease for another year.
Another aspect of managing tenants that many landlords get wrong is collecting rent. There is no reason to ever accept cash, or any kind of in person payment. Services like cozy.co make online rent payments free to accept, and let your tenants schedule payments automatically. For tenants without access to computers or direct deposit, you can set up transfers at stores like 7/11 to allow tenants to pay in cash, without accepting the risk of accepting cash in person.
In real estate, there’s an old saying that “you make your money when you buy.” Multifamily investors know, you could just as honestly say “you make your money when you rent.”
Landlording Best Practices
When buying your real estate deals, you don’t just jump at the first property to come on the market. You take your time to analyze, estimate risk, and make a calculated decision.
When leasing your properties out, approach tenants the same way: do your work on the front-end, and you will set yourself up for easy management in the future — leaving more time to track down your next deal.
Thanks for taking your time to learn more about Managing Tenants and reading Part 4 of my Landlording Investing installment. Here are the direct links to all the investing articles in the series: