By Mike Baird
When you talk to real estate investors who have experience with fix-and-hold properties, you’re bound to hear some real horror stories that will make you want to stick to flipping houses and stay far away from being a landlord. But sometimes holding and renting a property is your best exit strategy in a down market.
Knowing that, you might be thinking, “Great, I’m damned if I do and damned if I don’t,” but that’s not actually the case. If you follow these tips, you’ll avoid a huge percentage of all of those horror stories just by getting good tenants who will take care of your property, pay rent on time, and renew their leases when they’re up.
Find a Great Property Management Company
One of the major keys to finding great tenants is having a really attractive property. If we’re talking about one of your flip houses, you’ve probably put a lot of work into updating it and making it a great place to live, so you’re already one step ahead of other landlords in your area. But you can go a step farther and save yourself a lot of time and energy at the same time by finding a great property management company.
Top-notch property management firms will take care of everything from collecting rent and responding to maintenance requests to finding tenants, taking care of bookkeeping, and even paying your property taxes before they disperse your profits to you.
If you find a property management company that takes care of finding tenants for you, then your job is done and you’ll only have to worry about collecting your check each month. Of course, that’s not always the case, so you should be prepared to find your own tenants and to make sure that you don’t make any potentially expensive mistakes in choosing them.
Always Do a Thorough Background Check
When you meet prospective tenants, you might get a good feeling about them and decide to waive the background check. Don’t do it. Some of the worst tenants I’ve ever had seemed really great when I first met them, but they almost immediately paid their rent late, trashed the property, and then left without any notice, leaving me with a huge mess and a lot of rehab work to do.
A background and credit check won’t be a 100% guarantee against this, but they’re a good start. Plus, charging an application fee to pay for the background check is a great way to weed out people who aren’t serious about renting your property.
Follow Up on References
In addition to the background and credit check, don’t forget to call those references that you asked for in the rental application. Talking to these people can tell you a lot about your prospective tenants and whether or not they are the kind of people you want to rent your property to.
Be Upfront About All Fees and Fines
Finally, make sure that it is clear and boldly stated that you will enforce late payment fees and other fines if the lease is broken and/or the tenants damage the property in any way. This is another good way to weed out bad tenants because clean, respectful tenants who pay their rent on time aren’t going to be fazed by these stipulations while bad tenants may shy away.
If you have multiple applicants who qualify and seem like they’ll be good tenants, you can choose who to rent your property to based on who put their application in first or who seems to be the cleanliest and nicest. At that point, you’ll basically be choosing between the best of the best, and you really can’t go wrong. You should start making money back on your investment almost immediately, and when it’s time to start flipping houses again, your property should still be in great shape.