Becoming a landlord can and is a daunting endeavor. We’ve all heard the horror stories about 1. the tenants that make life miserable and cost years worth of any potential profits from your real estate investment 2. the house that needed thousands and thousands of dollars in unanticipated repairs or 3. housing market collapse (that rings a bell). Positive cash flow and appreciation are two key factors in being a successful real estate investor. Today I’m going to focus in on 1. The tenant factor. Tenants can stifle your profits in several ways, some common occurrences include; tenants trashing the property, refusing to move out, refusing to pay, selling, growing, or cooking up drugs, and last but not least stripping the home and selling off the fixtures for their next fix.
Those are the horror stories and if every tenant, or even one in five, were horror stories then there wouldn’t be people interested in being landlords. There are plenty of tenants who have never paid there rent late, trashed anything, refused to move out, or committed illegal acts. In fact we were all probably tenants at one point or another in our lives and we never caused our landlords more problems then maybe a cupboard that we forgot to wipe down at move out. So the key is to target those good tenants and deter or weed out any bad ones.
Targeting Good Tenants
Targeting good tenants starts even before you purchase the property, let’s ponder some of the things that a good tenant might want.
1. Our good tenants are drug free so they don’t want to live in a high drug neighborhood.
2. Safety is a big concern so high crime neighborhoods are out too.
3. Our good tenants may be trying to save money to one day purchase there own home so they may opt to live more simply in a smaller more economical home.
4. Without a doubt our good tenants will choose the cleanest housing in the best condition in their price range. Passing up homes that have signs of poor maintenance.
5. Our tenants are rule followers and they want to know what’s expected in writing in a well thought out, clear, and fair lease agreement.
6. Good tenants want to be treated fairly and with respect. Treat your good tenants fairly, keep the property maintained even though its occupied, never make heavy handed decisions without knowing the full story.
7. Allowing good tenants to make the home “their own” by allowing them to paint, put a little garden in, or have a pet can increase the chances that they will stay longer.
Reaching Your Target
When in search of the rental property that is going to reach and appeal to your target consider the list above. Look for single family homes or small complexes such as a townhouse in quiet, stable neighborhoods. Look for areas where the yards and homes are well maintained. Always ask yourself what type of tenant will this home attract? Doing some research and becoming familiar with the local markets and neighborhoods is critical and can really reduce the landlord/tenant issues by preventing them in the first place.