Building a relationship with tenants and protecting your real estate investment is the goal when creating a lease agreement. I have compiled a list of tips for landlords to use as a tool for creating a lease and guidance on rental property management in general.
1. Fair Housing Act When advertising for a new tenant, it is critical to understand and comply with the Fair Housing Act. The Fair Housing Act prohibits landlords from using any of the following criteria when evaluating prospective tenants: race, color, national heritage, religion, gender, disability, and familial status. Landlords should use financial data, credit histories, and other background data to evaluate potential tenants.
2. Know your tenant Tenant screening for each prospective renter is crucial to avoiding problems. By simply logging into your property management software and conducting a credit and criminal check you can quickly check for any red flags and may choose to avoid tenants who have been fiscally or socially irresponsible.
A landlord should always verify the rental applicants credit, employment/income, criminal background, and eviction history. When landlords run these checks, not only can they determine the best rental applicant, but the landlord can defend against any discrimination lawsuits by producing the data used to choose one rental applicant over another.
3. Lease agreement Because each state has slightly different laws that impact a landlord-tenant relationship be sure to use a state-specific lease rather than a more generic lease to best protect your investment and yourself. Every state has different limits on security deposits, late fees, etc.knowing the laws that apply in your state through a state-specific lease will keep you on the correct path.
4. Eviction process Although many of us don’t want to think about the worse case scenarios, it is important to become familiar with the eviction process and be ready to start the process when a tenant violates the lease. As with lease agreements he specific documents required are different in each state. However, all states involve the same general eviction process. The landlord must serve the defaulting tenant with a notice, wait a specified period of time, file in court, attend a court hearing, schedule a date for the actual eviction, etc. It is a process landlords or property managers need to understand and follow exactly or you could have the “bad” tenant longer then the law requires and they likely won’t be paying rent or treating your property with respect.
5. Pre and post inspections One helpful tool is a comprehensive walk-through checklist. This document will be used for the landlord/manager to walk through the rental unit with the tenant and document the condition of the unit upon move-in and move-out.
6. Offer ACH incentives Lease agreements always include a late fee for rent not paid on time but why not be creative and reward a positive behavior. We always offer $5 off rent for tenants who pay there rent through ach payment. Rewards can range from rent discounts, gift cards, updates to the rental unit, etc.
7. Build a reliable team Landlords and property managers need at the very least a licensed contractor who can handle large jobs, and an inexpensive handyman who can fix minor issues at an affordable price. Building these relationships will allow you to simply make a phone call and have the problem resolved immediately.
8.Stay liquid Being a landlord can sometimes involve unexpected expenses and expected expenses. It is important to set aside enough money to handle any expenses that might come your way. Tenants can cease to pay their rent, unexpected repairs, lawsuits, replacement of appliances, paint, roofs, etc.
Any of you who are dabbling in real estate investment or who are seasoned pros, I wish you the best of luck!