Tips to Avoid Problem Tenants in your Rental Property

 

Having the right tenants in your property can truly make a huge difference in your ability to succeed in owning investment rental property. While problem renters can definitely exhibit some warning signs, there are some problem renters who are quite adept at getting past landlords. As a result, it is important to understand that you simply cannot always rely on your first impression of a prospective tenant in order to determine whether they will be responsible and reliable.

There are some tips you can use; however, in order to avoid tenants which could prove to be difficult.

First, always have prospective tenants complete a rental application. The application should be in writing and should provide you with the information you need to make a decision regarding renting the property. Along those lines; however, you need to make sure that you always follow laws, such as the Fair Housing Act. Discriminating against prospective renters is against the law and could land you in quite a bit of trouble. You are not allowed to deny someone the ability to rent your property based on religion, race, etc. By following the Fair Housing Act, you can make sure that you do not violate any discrimination laws.

Always make sure that you obtain proof of identity. This includes seeing a photo identification from any prospective tenants that you interview. On the rental application you have prospective tenants complete, make sure they write down their driver license information. Make a copy of the photo ID and be certain that you attach it to the rental application.

Many landlords make the mistake of not performing a background check. This is a mistake that you cannot afford to make if you want to ensure that you avoid potentially troublesome tenants. Performing a background check gives you the opportunity to determine if there are any previous problems. For example, running a background check can let you know if a prospective tenant has a history of destroying property or skipping out on the rent.

Along with a background check, you should also perform a credit check. You will need to obtain the applicant’s permission in order to do this; however, you can do this on the rental application. You will also need to obtain the applicant’s Social Security number on the application to run a credit check.

References are also essential. Make sure that you obtain the name of the applicant’s previous landlord so you can follow-up. This is because not all landlords make a report to the authorities when there is a problem, so by checking with the landlord directly you have a better chance of determining if there were any problems.

In addition, ask for character references. Make sure that you take the time to actually check with those references. If the applicant did not give you a valid reference this is a good way to find out about it and weed out the applicant.

Finally, make sure that you include information regarding a code of conduct with each application or lease. The code of contact should state what is expected of the tenant and have the prospective tenant sign and date the document. By making sure that these expectations are clearly outlined in the beginning, you can help to avoid a number of problems. 

Tips to Avoid Pitfalls in Owning Investment Rental Property

 

Owning and operating investment rental property can provide a number of important advantages. There are potential disadvantages to owning rental property; however, you can help to minimize possible pitfalls by following certain guidelines to protect your investment.

First, always make sure that your expectations regarding investing in rental property are reasonable and realistic. You should always approach the investment of rental property with the goal of achieving a positive cash flow; however, do not expect that you will be able to buy a new vacation home within a year.

In addition, it is important to make sure that you take the time to do your research and ensure that you understand the rules and regulations regarding the ownership and operation of rental property. As the owner of rental property, you must abide by certain federal and state laws which provide specific information regarding your liabilities and responsibilities.

Along those same lines, it is important to be certain that any lease or rental agreements you handle are absolutely legal. If you handle a lease or rental agreement which is not legal, you may experience a number of problems if your tenant happens to violate terms of the lease. To be safe, it is best to have an attorney draft your lease and rental agreements.

Before purchasing any rental property, be sure to have the property inspected or else you may discover you are facing a set of expenses you did not anticipate. Having the property inspected by a professional before you sign on the dotted line will involve an expense; however, compared to the expenses you could face by purchasing a property without an inspection, it is certainly well worth it.

When you begin the process of renting out your property, take the time to run credit checks and call references. These are both steps which many novice landlords often overlook in their rush to fill their rental properties and begin turning a profit; however, it can be detrimental. Remember that having an empty unit is always better than rushing and having an irresponsible tenant who may destroy your property, get behind on their rent and ultimately prove difficult to evict.

Joining the Landlords’ Association in your local area can also prove to be helpful by putting you in connection with experienced investors and landlords. You can also gain access to reliable contractors, inspectors and other professionals who can make the process of operating rental property much easier.

It is also imperative that you make sure you have adequate property insurance as well as liability insurance. Property insurance will help to protect your investment while liability insurance will protect you in the event anything should happen to someone while on your property.

Finally, make sure you take the time to establish an emergency fund in order to cover expenses which may crop up unexpectedly. Remember that you are operating a business and as such you must be prepared for those times when expenses arise. The exact amount that you wish to contribute to your emergency fund is ultimately up to you; however, it should be sufficient to cover typical expenses that may arise. The general rule of thumb is to put aside 20% of the value of your property. To make the process of establishing an emergency fund easier, consider setting aside a certain amount of your rental receipts each month into a special account. 

Tips for Locating the Right Rental Property

 

The decision to invest in rental property is an important one. The first step in getting started is to choose the right property which will generate a sufficient amount of income for you while also requiring as little maintenance and upkeep as possible.

Ideally, it is best to develop a list which you can take with you when you begin the process of shopping around for the right rental property. This list will help to keep you on track and focused on what you should look for as well as what you should steer away from.

When looking for the right rental property, you will want to take several factors into consideration.

First, you should always consider the condition of the property. Generally, it is best to keep in mind that if you come across a property with a price that seems too good to be true, there is usually a reason why the property is priced so low. Many real estate investors like to point out the fact that you are able to determine your profit when you purchase a property.

While you may not consider selling the property for some time and will instead be renting it out, it is still important to take into consideration the cost of any necessary renovations and repairs before you make a final decision regarding whether you will purchase the property or not. After considering these factors, you may find that it will actually be less expensive to purchase a property that is in better condition, although at a higher price, than to purchase a property with a lower price that requires extensive renovations and repairs to get it ready to rent out.

Location is, of course, one of the essential elements of purchasing the right rental property as well. Keep in mind that properties which are located directly on a busy street may not be appealing to tenants who like a quiet and peaceful neighborhood. On the other hand, a property which is located near schools or parks will likely be more appealing to families.

It is also important to find out the history on the property and specifically whether the property has ever been used as a rental property. This is important due to the fact that in some cases a property can get a bad reputation. It does not take long for word to get around and once that occurs it can be difficult to get past it.

If the property is currently being used as a rental property, you also need to consider whether tenants are already on the property. If that is the case then you may need to honor the current lease with those tenants. This means that you may not be able to raise the rent until the lease has expired. There may even be state laws in some cases which could regulate how much you are able to raise the rent. Obviously, this is something that should be carefully considered. While there is the obvious advantage of already having tenants on the property, you may find later that this is actually somewhat of a bit of a disadvantage so be sure to carefully consider this factor.

Maintenance and repair needs of the property should also be taken into consideration. In the event that you are not able to maintain the property or repair it, this will translate to hiring a property manager and/or repair person. This means extra expenses which will reduce your profits. Of course, it also gives you some free time so you will have to weigh the advantages and disadvantages.

Finally, consider the price of the property. You always need to make sure that you will be able to cover not only the mortgage payment, if you have one, but also other expenses such as taxes and insurance. In the event the property is not occupied for a period of time, you will still need to meet all of those expenses so be certain that you can cover them before you obligate yourself.