By Mike Baird
When it comes to the real estate investment business, I’m pretty sure I’ve done everything. Before I settled on flipping houses, I was a successful landlord. While flipping is fast-paced and can bring in a lot of money very quickly, it can also be a lot more unpredictable than investing in a long-term property and renting it out.
That said, dealing with tenants comes with a whole lot of challenges. If you’re thinking about a long-term property investment that will give you steady cash flow and a quick return on your investment, keep these tips in mind.
A Customized Lease is Always Worth It
Your rental agreement (or lease) is your strongest, most important tool as a landlord. You can print a generic lease off of the Internet and use that, but it’s a bad idea. A lot of generic leases have huge holes in them that leave both the landlord and the tenant unprotected. They’re also not written with different states’ rental laws in mind.
You can save money in a lot of other areas, but don’t skimp on this one. Pay an attorney to draft a custom lease that will protect you in all foreseeable scenarios. If you don’t, you could find yourself liable for an injury if your tenant slips and falls in the house. That might seem crazy, but believe me, it’s not the most ridiculous thing I’ve seen happen in my years in real estate.
Always Perform a Background Check
The next thing people try to save money on is waiving the background check. Don’t do it. Have your potential tenants pay an application fee and supply you with professional and personal references as well as an employment history. While you’re waiting on the background check to come back, you can call their references and former employers for more information on them.
Remember, appearances can be deceiving. Conducting a background check and calling references can reveal a lot of potential problems before move-in day.
Don’t Let Late Rent or Other Violations Slide
Once your tenants have passed the background check and signed the lease, make sure that they are fully aware of all of the policies in your rental agreement. The first time they are going to be late with the rent, you’re very likely going to get a phone call with a really sympathetic sob story. Don’t give in!
Letting them slide on the rent will only lead to more late checks. And they’ll start looking for other policies in your rental agreement that they can get around. No one wants to be the bad guy, but as a landlord, you have to be strict or your tenants will walk all over you.
Don’t Be Afraid to Evict
If things do get out of hand, make sure that you give your tenants the legally required notice to be in compliance with your state’s rental laws, and then kick them out! You don’t have to put up with bad tenants skipping rent payments or damaging your property. The sooner you get rid of them, the better off you’ll be.
Hire a Property Management Company
Finally, if you’re not up for getting repair and maintenance calls in the middle of the night or dealing with your tenants on a regular basis, you can turn over all of the property management responsibilities to the professionals.
This might cut into your cash flow and profits a bit, but it will save you a lot of stress. And handing over the day-to-day hassles of managing a property to someone else will free up time that you can use to make money with investments and other projects. It’s definitely an option to think about.