Most people don’t spend their childhood dreaming of one day becoming a landlord. It’s not exactly a sexy job title and doesn’t scream “wealth.” But the fact of the matter is that landlording and managing rental properties can be very lucrative and rewarding.
5 Tips for Landlording Success
There are landlords…and then there are successful landlords. If you want to be characterized as the latter, you’ll need to come up with a game plan. The following tips and pointers should prove helpful:
1. Don’t Rent to Family and Friends
A lot of people think, “Hey, I’ll buy a rental property and then rent it out to family and friends.” While this may sound good on paper, it’s a risky proposition. When you rent to family and friends, you’re much more likely to be lenient in areas where you can’t afford to be. As a rule of thumb, never rent to close friends or family.
2. Have a Tenant Screening Process
One of the keys to successful landlording is selecting good tenants who are going to pay on time and take care of your property. If you’re simply accepting the first person who calls you, you might get a good tenant. It’s also quite possible that you’ll get an irresponsible tenant who is only interested in themselves. In order to reduce your chances of working with nightmare tenants, be sure to invest in a thorough screening process on the front end.
3. Have Zero Tolerance Policies
When you have a tenant who is a genuinely nice person, it’s only human to want to give them a second chance when they mess up. However, you have to remove your feelings from the equation and look at it as a business relationship. If they break the terms of your lease agreement, you need to follow through with swift consequences. This is the only way to get people to take you seriously.
4. Keep Your Cool in Tough Situations
Because of the stressful nature of landlording, it’s a good rule of thumb to stay positive, no matter what. This doesn’t mean everything will always go your way, though.
“Staying cool is just as important as being upbeat,” explains Green Residential. “A tenant might come to you in distress about a conflict with a neighbor or a plumbing issue. Panicking yourself or letting the stress get to you will make the situation worse and cause the tenant to lose confidence in you.”
If you find that you can’t stay calm in tough situations, you may not be cut out for handling tenant-facing issues. Hiring a property management company to deal with things like rent collection, maintenance, and repairs might be better for you.
5. Be Extremely Organized
As a landlord, you’re going to accumulate a fairly extensive paper trail. From closing documents and lease agreements to expense receipts and tax returns, a lot of paper will be coming across your desk. In order to protect yourself and stay on top of everything, make it a point to be extremely organized.
In addition to a systematic filing cabinet system, you may find it helpful to scan and digitally organize all documents in the cloud.
Is Landlording Right for You?
Let’s be clear about one thing: landlording isn’t right for everyone. If you have a short temper, like predictability, and want to avoid risk, you’re better off working in a cubicle. But if you want the opportunity to try something new and pursue financial freedom, landlording could be a good opportunity for you to get your feet wet in real estate.
You’ll never know unless you give it a try!