www.akerahomes.com
mfrentz@akerahomes.com
Remember: Please share this article if you find it enjoyable
Start of The Process
I have heard many people shy away from investing in real estate providing this one reason: "I don't want to deal with tenants". I want to say two things to start this post and mini-series.
1. There are a lot of bad landlords out there and I believe it is unfair to simply blame tenants for the lack of skill or care that a landlord brings to the table.
2. You have complete control over who you rent your property to!
In the spirit of doing something to change your tenant situation as well as your investing experience... Wouldn't it be great to have little to no problems with tenants ever? I purchase my first rental property at the age of 19 and I can honestly say that I've never had a tenant I had difficulty with. Now, the first couple of tenants I had were less than ideal but I've realized since that time that I handled the situations wrong. I have never once in my life had a situation where my tenants trashed any property I was renting out and I would like the same for you. Without further delay I give you the art of attracting and screening quality tenants. In the 2nd and 3rd posts I'll discuss how to keep great tenants and prepare for your next great tenant.
Attracting Great Tenants
Before you place an ad, you need to determine what your rental rates will be and create a great rental ad that stands out. To determine your rent you need to understand what market rent in your area is. This is difficult for some people. Here's my advice: Just because the property is yours and you want to make money in it does not mean it is worth the same as every other property out there. If you have difficulty being objective about this, have someone else help out. Once you have the average of market rents for your place in your area I would recommend lowering your rent by a little bit. I typically keep my rent at 10-20% below the market average. That way I have more people walk through the place to find that ideal applicant. Now, to create a great ad you want to take great pictures (hire someone to do this because you aren't as good at photography as you think you are). Once you have your ad ready... post it online (Kijiji and Craigslist are musts, but every local market has its own online rental websites and/or classified sites that are popular. find them and use them). Market your rental in other ways thinking about whether it is worth your time. Two days ago I saw a 'for rent' sign in the window of a house at the end of a culdesac. This won't get great exposure, so decide on whether or not it is worth you time. I've always found online ads work the best for myself. One last thing here... Try to post ads and begin showing the property at least 30 days before the potential move in date. I've found that a ton of really responsible applicants are looking for properties well before their current lease is up.
After having applicants contact you make sure to contact them back quickly and watch how long it takes them to respond to you. I once had a family that had a pet (and I was advertising the place as not being pet friendly). The person who contacted me let me know she was aware of no pets, but was wondering if I would make an exception. I told her I wouldn't in a respectful way. She responded by thanking for getting back to her and wishing me the best... Now, if you know typical rental communication you know that it stood out that she was making an effort to say thank you. I ended up connecting with her and giving her family a showing because of how she stood out. Then I ended up renting to them and they were a fantastic family. The place was in pristine condition when they left. If you want to stand out to the great tenants, treat every piece of correspondence with respect on your end as well.
When you speak with a prospective applicant on the phone make sure to pre-screen them. Do they have enough money for the first month's rent as well as the security deposit on the day of the showing? If not, it's a red flag that this may not be a long term fit. Only show the rental to applicants who strike you as responsible people. Race, age, ability vs. disability, gender, occupation... I don't care about any of these. What I want is to know whether or not these people are responsible and respectful of this contractual agreement. Make a list of questions and try them out. Find out what works for you to glean whether you think they can afford the rental and will take care of it. Some people are simply kicking tires. Unless they are interested it probably won't be a great use of my time.
Next, you want to schedule showings or even open houses. I like to show my properties in 15 minute intervals and spend time with each applicant. I get a great sense of who they are and often hear information that helps me in my decision making. I have often heard applicants complain about their current landlords and even once heard someone say they would do anything they could to hurt their previous landlord... I took that as a red flag. Show your unit and ask questions. Get to know people. Some investors charge a $35 application fee. I haven't done that, but I can see how it would only bring serious applications to the table and saves you a lot of time. Remember that when you are following up on prospective tenants you are working and can be compensated for your time.
Processing applications is so important. Do your background checks. Ask previous landlords what their experience was. Remember that you are entering an agreement with a very expensive asset. Treat it as an expensive asset! Rent it to an applicant that you feel will best be able to meet your criteria of paying rent on time and treating your property with respect. Make sure that you are consistent in your rental standards. If you are racist... you need to grow in your understanding of the world. Enough said. When you choose an applicant to rent to, ask for the security deposit and first month's rent in order to sign the contract. As soon as the contract is signed you also need to take the needed time to let every other applicant know they did not get the property. Know that there are times when two great tenants will apply and I can only choose one... In that case it is best to also ask to keep in touch with the declined applicant.
Note: Keep in mind that what I have provided so far is an overview. There are different laws and regulations in each province and state and you need to know the laws in your area.
Lastly, complete a lease checklist which should include:
1. The lease (initials on each page)
-Explain every detail. The better both parties understand this agreement at the beginning, the better your relationship will be moving forward. Miscommunication can cause serious difficulties later on. Make sure everything is communicated fully.
2. Copy of driver's licenses
3. Security deposit
4. First month's rent
5. Provide emergency contact numbers
6. Go through your initial walkthrough and sign and initial this agreement as well
-Explain this agreement and the importance from their perspective as well. Let them know what you consider normal wear and tear on a property. Again, communicate clearly.
7. Hand over the keys
Summary
The key word to all of this is: RESPECT! If you treat others well, you will be treated well in return. I know of many slumlords in and around the areas I invest in. They are awful people to deal with and typically find tenants that don't have many reasons to respect them. Be the person you would want. As a general rule you want to communicate well and give your new tenants some space. If you trust them, then trust them (with verification). Respect your side of the agreement as well.
Here's to your future of risk-averse investing!
If you would like to learn more about investing in real estate please
contact me at the email address listed at the beginning of this article
or go to my website at: www.akerahomes.com/investing-in-real-estate.html
No comments:
Post a Comment