I am considering purchasing my first property (triplex) and I wanted to know if anyone had any advice for me being this is my first time landlording? What are some things I should know or expect?
Mainly you need to focus on getting the best tenets and then training those tenets to pay on time.
You have to be a "hard-nose" landlord and remember that you aren't in this gain friends. Some tenets will push you hard and if you give they will take advantage of you. Be Vigilant!
Big piece of advice...Get everything in writing. Verbal contracts, leases etc are nothing. Show some flexibility with good tenants (ie allowing SOME leeway with them paying you what they owe you), and throw the bad ones out as fast as you can. My current downstairs tennant is good, but poor. I have cut him some slack in paying me things (ie pay rent in 2 payments, heating bill late etc) in exchange he does stuff like pick things up, paints, fixes things etc.
Get ALL of the money before they move in. You wouldn't believe how many tenants say . ...
"I've got enough for the first months rent, but not the deposit. I will have the deposit next week. If you let me go ahead and move in, I will pay you the rest next week!"
It will be like pulling teeth to get the money because you lose your position of leverage once they move in. Many landlords 1st and last months rent or 1st months rent plus secruity deposit of the same amount, etc. No matter, how you decide you want to word or work it, dont hand over the keys until they give you all the cash!
*Good tenants* can't be emphasized enough. Develop a good screening process and be very aware of any red flags that could prove to be issues like bad credit history etc.
From my personal experience I dropped the rents $10 below the market and got a whole lot more people to look at. Then I picked the senior citizens and never went wrong! They have retirement income, take care of the place, and don't like to move. Most of my renters over 55 stayed an average of 4 years.
Randall
ps don't tell anyone you only want senior citizens or youll get sued.
here's something i learned right here on tci...get first, last, and a security deposit. this will prevent the tenant from telling you that he's moving out next month and you'll have to take that rent out of his security deposit, only to find that the place has been destroyed and you now have no security deposit left because that went toward his last month's rent. (sure, you could sue...but does anybody really win in court?)
What about in regards to proxomity to your place of residence?
Any tips for that?
Obviously we wish we could rent out the place next door to us...to keep a better eye on the place...but realisitcally, do you guys have any problems renting out to tenants an hour drive from you?
Or is it wise to just stick to the neighbourhood 5-10 min drive. If its going to be your first investment. property.
[addsig]
Talk to some landlords in your area to get a better feel for what it will be like where this property is located.
Are you able to collect rent from people who are in tough times?
Are you able to evict people?
Are you able to confront people when they are causing problems?
Are you able/willing to fix things yourself or have a good enough cash flow that you can hire it out?
My advice...You are in this to make money, not to start your own charity. Remind yourself of that as frequently as needed. (After all, do we blame grocery stores for the people who are hungry?)
I would VERY STRONGLY advise you to pick up the book "Landlording". (Big Yellow book) and get the latest version. It has hundreds of pages of great advice.
I rent out a house next door to me, and am trying to buy the place across the street from me too! Usually they give me the rent check at my door or call and ask to have me send a kid over to pick it up... no mail for it to get lost in. I personally would rather Rent out a place near me and flip a place farther away.
Having good tenants is certainly #1 as many have said. I will refine that a little. I try to enable tenants as leverage for me. With duplexes and triplexes usually there is one person or family that stands out as being fairly responsible and desirous of a nice environment. I will pay for grass seed if they will plant and water it. Several of my tenants are struggling a bit and are capable at maintenance and repair. I have had them get invoice pads and allowed them to do limited repair.
This next point may be up for debate, but I manage most of my properties myself. Almost all of these were managed by property management companies by the previous owners. My tenants really like the fact that I respond quickly to maintenance and repair needs compared to the management companies. I think this is one reason I can leverage their help.
dare2003,
My previous response refers to properties that are 100 miles away. I have every other Friday off and for awhile I was visiting every other week. I have a team of people nearby who I can rely on in emergencies. My main person is my RE agent.
I have a property in Hawaii that I haven't seen since I bought it. It is managed by the previous owner who owns the RE company I bought it through, as well as, a management company.
edmeyer,
thanks for responding...but weve all heard the stories...the calls in the wee hours of the morning...only to find out it was something that could have waited until the morning.
I guess distance isnt an issue...because great tenants will eliminate all of the associated horror story problems of landlording. Easier said than done though.
[addsig]
1) Create and MAINTAIN a detailed Rental Contract. Your Rental Contract must include all of the basics (address, rent amount, etc.), but it also needs to include every single thing you can think of, such as: lawncare, gutter cleanouts, locks and key replacement, caulking of bathrooms, how long vistors can stay over, etc. As you handle a new issue you need to add it to your contract. For example, I just added a clause detailing how many COPIES of the contract the tenant will receive and that there is a $10 fee for each additional copy. Sounds stupid doesn't??? While, I had a problem with a tenant who continued to request COPIES of their contract. After the 10th copy, I refused to send anymore. After they moved out, I retained their Security Deposit. One of the points their attorney mentioned in his letter to me, was I had refused to provide the tenant with copies of the lease. If it is not in writing, it can be debated.
2) You are NOT the owner, you are the Property Manager. Never, ever, ever tell a tenant you are the owner. You are just the Property Manager. You are a great friendly guy. You are the guy who drops by once and awhile for a chat and to look at the property. It is NEVER your decision about how much rent to charge or late fees or any of the other nasty things. All of those items are up to the OWNER. The Owner is an evil, evil man who eats small cute puppies for breakfast and likes to evict tenants. You are just doing your job.
3) Inspect the property. You must inspect the property once a quarter. You need to fill out and submit an inspection form to the OWNER.
4) Tenants pay the first $50 of any repairs. This stops any and all calls about broken lightbulbs. If you, the poor Property Owner, get called out, there is a $50 fee.
5) Rent the houses using an Open House.
Follow this advise and your life will be a lot easier.
Bruce, i have to thank you for such a great response.
I especially loved the part about small cute puppies
That right there in writing would easily alleviate alot of headaches. (thumbsup)
[addsig]
As far as proximity is concerned, you want to be able to comfortable drive to the rental twice a day. Anything further is too risky IMO.
That being said, you don't want your tenets to know where you live. If your old fashioned and let your tenets mail their rent be sure to get a post office box.
If you're a young cat like me, setup a bank account that is set aside for the tenets of that rental to deposit the money into. Then you can monitor their prompt payment online and keep nice records too (it also eliminates the "lost in the mail" issues)
There isn't enough information about the property or how you want to invest to give you a great deal of advise. However, I would first want to know about the tenants that are currently in the units. Are they tenants that you would rent to or did the owner just get them in there by any one of several tactics that could be used to fill up the place and make it look like a great deal. What is the vacancy rate for this property? What have the rents been and are they trending up or down?
If this is your first unit you are probably underestimating your costs and overestimating what the units will bring in. There are a number of ways to accurately determine what you should pay for a property in order for it to cash flow but here as an easy one that always seems to work in my area. Never, never pay more than 5 times the gross annual rent that a property brings in. Some people may consider this extreme, but my properties always cash flow extremely well and I never have to worry about money for repairs or vacancies. If you pay more and the neighborhood goes down, or rents fall because of competition, economy,etc or properties in your city stop appreciating. you could end up losing a great deal of sleep.
Real estate investing is great. I love it, but the more cautious you are with your investments the better you will like it.
Mainly you need to focus on getting the best tenets and then training those tenets to pay on time.
You have to be a "hard-nose" landlord and remember that you aren't in this gain friends. Some tenets will push you hard and if you give they will take advantage of you. Be Vigilant!
Big piece of advice...Get everything in writing. Verbal contracts, leases etc are nothing. Show some flexibility with good tenants (ie allowing SOME leeway with them paying you what they owe you), and throw the bad ones out as fast as you can. My current downstairs tennant is good, but poor. I have cut him some slack in paying me things (ie pay rent in 2 payments, heating bill late etc) in exchange he does stuff like pick things up, paints, fixes things etc.
Thanks guys...that sounds like good advice and what I was wanting to hear. ...Anyone else??
Hi sharpREI_PA,
Get ALL of the money before they move in. You wouldn't believe how many tenants say . ...
"I've got enough for the first months rent, but not the deposit. I will have the deposit next week. If you let me go ahead and move in, I will pay you the rest next week!"
It will be like pulling teeth to get the money because you lose your position of leverage once they move in. Many landlords 1st and last months rent or 1st months rent plus secruity deposit of the same amount, etc. No matter, how you decide you want to word or work it, dont hand over the keys until they give you all the cash!
Best of Success!
BAMZ
*Good tenants* can't be emphasized enough. Develop a good screening process and be very aware of any red flags that could prove to be issues like bad credit history etc.
From my personal experience I dropped the rents $10 below the market and got a whole lot more people to look at. Then I picked the senior citizens and never went wrong! They have retirement income, take care of the place, and don't like to move. Most of my renters over 55 stayed an average of 4 years.
Randall
ps don't tell anyone you only want senior citizens or youll get sued.
Sounds like you all have been through this stuff once or twice
Thanks 4 all of your advice! I will be sure to put it to use.
CG
here's something i learned right here on tci...get first, last, and a security deposit. this will prevent the tenant from telling you that he's moving out next month and you'll have to take that rent out of his security deposit, only to find that the place has been destroyed and you now have no security deposit left because that went toward his last month's rent. (sure, you could sue...but does anybody really win in court?)
What about in regards to proxomity to your place of residence?
Any tips for that?
Obviously we wish we could rent out the place next door to us...to keep a better eye on the place...but realisitcally, do you guys have any problems renting out to tenants an hour drive from you?
Or is it wise to just stick to the neighbourhood 5-10 min drive. If its going to be your first investment. property.
[addsig]
Great advice so far.
Talk to some landlords in your area to get a better feel for what it will be like where this property is located.
Are you able to collect rent from people who are in tough times?
Are you able to evict people?
Are you able to confront people when they are causing problems?
Are you able/willing to fix things yourself or have a good enough cash flow that you can hire it out?
My advice...You are in this to make money, not to start your own charity. Remind yourself of that as frequently as needed. (After all, do we blame grocery stores for the people who are hungry?)
I would VERY STRONGLY advise you to pick up the book "Landlording". (Big Yellow book) and get the latest version. It has hundreds of pages of great advice.
I rent out a house next door to me, and am trying to buy the place across the street from me too! Usually they give me the rent check at my door or call and ask to have me send a kid over to pick it up... no mail for it to get lost in. I personally would rather Rent out a place near me and flip a place farther away.
hibby76,
where do i get a copy of the yellow book "landlording"?
[addsig]
Having good tenants is certainly #1 as many have said. I will refine that a little. I try to enable tenants as leverage for me. With duplexes and triplexes usually there is one person or family that stands out as being fairly responsible and desirous of a nice environment. I will pay for grass seed if they will plant and water it. Several of my tenants are struggling a bit and are capable at maintenance and repair. I have had them get invoice pads and allowed them to do limited repair.
This next point may be up for debate, but I manage most of my properties myself. Almost all of these were managed by property management companies by the previous owners. My tenants really like the fact that I respond quickly to maintenance and repair needs compared to the management companies. I think this is one reason I can leverage their help.
Good luck on your new acquisition.
Regards,
Ed
dare2003,
My previous response refers to properties that are 100 miles away. I have every other Friday off and for awhile I was visiting every other week. I have a team of people nearby who I can rely on in emergencies. My main person is my RE agent.
I have a property in Hawaii that I haven't seen since I bought it. It is managed by the previous owner who owns the RE company I bought it through, as well as, a management company.
I sleep reasonably well at night!
Regards,
Ed
edmeyer,
thanks for responding...but weve all heard the stories...the calls in the wee hours of the morning...only to find out it was something that could have waited until the morning.
I guess distance isnt an issue...because great tenants will eliminate all of the associated horror story problems of landlording. Easier said than done though.
[addsig]
Hey,
Here is Landlording 101:
1) Create and MAINTAIN a detailed Rental Contract. Your Rental Contract must include all of the basics (address, rent amount, etc.), but it also needs to include every single thing you can think of, such as: lawncare, gutter cleanouts, locks and key replacement, caulking of bathrooms, how long vistors can stay over, etc. As you handle a new issue you need to add it to your contract. For example, I just added a clause detailing how many COPIES of the contract the tenant will receive and that there is a $10 fee for each additional copy. Sounds stupid doesn't??? While, I had a problem with a tenant who continued to request COPIES of their contract. After the 10th copy, I refused to send anymore. After they moved out, I retained their Security Deposit. One of the points their attorney mentioned in his letter to me, was I had refused to provide the tenant with copies of the lease. If it is not in writing, it can be debated.
2) You are NOT the owner, you are the Property Manager. Never, ever, ever tell a tenant you are the owner. You are just the Property Manager. You are a great friendly guy. You are the guy who drops by once and awhile for a chat and to look at the property. It is NEVER your decision about how much rent to charge or late fees or any of the other nasty things. All of those items are up to the OWNER. The Owner is an evil, evil man who eats small cute puppies for breakfast and likes to evict tenants. You are just doing your job.
3) Inspect the property. You must inspect the property once a quarter. You need to fill out and submit an inspection form to the OWNER.
4) Tenants pay the first $50 of any repairs. This stops any and all calls about broken lightbulbs. If you, the poor Property Owner, get called out, there is a $50 fee.
5) Rent the houses using an Open House.
Follow this advise and your life will be a lot easier.
Bruce, i have to thank you for such a great response.
I especially loved the part about small cute puppies
That right there in writing would easily alleviate alot of headaches. (thumbsup)
[addsig]
As far as proximity is concerned, you want to be able to comfortable drive to the rental twice a day. Anything further is too risky IMO.
That being said, you don't want your tenets to know where you live. If your old fashioned and let your tenets mail their rent be sure to get a post office box.
If you're a young cat like me, setup a bank account that is set aside for the tenets of that rental to deposit the money into. Then you can monitor their prompt payment online and keep nice records too (it also eliminates the "lost in the mail" issues)
There isn't enough information about the property or how you want to invest to give you a great deal of advise. However, I would first want to know about the tenants that are currently in the units. Are they tenants that you would rent to or did the owner just get them in there by any one of several tactics that could be used to fill up the place and make it look like a great deal. What is the vacancy rate for this property? What have the rents been and are they trending up or down?
If this is your first unit you are probably underestimating your costs and overestimating what the units will bring in. There are a number of ways to accurately determine what you should pay for a property in order for it to cash flow but here as an easy one that always seems to work in my area. Never, never pay more than 5 times the gross annual rent that a property brings in. Some people may consider this extreme, but my properties always cash flow extremely well and I never have to worry about money for repairs or vacancies. If you pay more and the neighborhood goes down, or rents fall because of competition, economy,etc or properties in your city stop appreciating. you could end up losing a great deal of sleep.
Real estate investing is great. I love it, but the more cautious you are with your investments the better you will like it.
"Landlording"
ISBN # 0-932956-25-4
Author: Leigh Robinson
(get the 9th edition)
Get it from Barnes and noble, www.buy.com, www.half.com, www.amazon.com, or ebay.
Money well spent if you're a landlord or landlord to be