My husband and I purchased a house across the street from our own home several years ago with the intent of having my mother live there. She passed away before she was able to move in and we were then faced with the decision of what to do with it. It was a buyer’s market at the time, so instead of selling the house, we decided to turn it into a rental property and use the income to help pay the mortgage.
And thus began our adventures of being a landlord. We have learned some valuable lessons along the way and hopefully our experience will save much headache for those of you who are thinking of venturing into the world of property management.
Screen your applicants carefully but also pay attention to your instinct.
Because we considered our rental property an investment and because we wanted to make sure that our tenants will pay the rent, hopefully on time and avoid late fees and/or eviction we had them fill out an application form with an application fee for a background check.
As part of the background check we reviewed their credit histories, got references from past landlords, looked closely at employment histories and checked for any kind of criminal activity.
In some cases, we even visited and interviewed them at their current home to observe how they cared for it as this also shed some light on how they will take care of our place.
We have found that a potential tenant with a clean financial background does not always guarantee that they will pay the rent on time.
Our experience with one tenant whose record came back on the recommendation that we rent to them was not favorable. Those tenants were always late on their rent and had a multitude of excuses for why they were late. For the first few times we forgave the late fees but after that, we had to insist that it be paid per rental contract.
With another tenant of ours, a family member had some medical issues which drained them financially causing them to lose their home. It was not recommended that we rent to them. In addition, we observed that their yard was cluttered with toys and rubbish, and the lawn not well cared for either. After a discussion with them on our expectations of paying the rent on time and taking care of the property, we took the chance and rented our home to them. These tenants have turned out to be some of the best ones we have had and they continue pay their rent on time and maintain the property.
Have an appropriate security deposit to cover damages.
Another very important thing to do especially since there is potential to cause more damage than the expected wear and tear. At least one month’s rent is typical, however the maximum allowed security deposit and when to return it varies depending on where the property is located. Be sure to also check the laws of your state with respect to landlord and tenants rights.
We’ve had a couple of situations however where the damages to the property exceeded the security deposit. In one case the tenants were moving out and as we were doing the final inspection we discovered that the bark was stripped off a very expensive tree in the yard by one of their children. The tenant who was seeking to get back all of the security deposit as a down payment on another rental property, did not want to pay for the damage, because they felt that the tree would still live and continue to thrive. Unfortunately for them, an arborist confirmed that it would not survive. The arborist’s fee and report was submitted to the tenants after they moved out. This fee was deducted as part of the security deposit.
Consider paying the water bill.
It is in very rare cases that tenants will care for your property in the way that you will your own. We found this out soon enough when we had the tenants paying their own water bill. Because they were trying to save money, they would sacrifice on watering the lawn causing it to die. We ultimately switched to paying it ourselves and controlling the settings in the automatic sprinkler system. The lawn stayed greener and so helped in the upkeep of the property. We also encouraged our tenants to grow their own flowering plants and a vegetable garden if they desired.
Conduct regular inspections and keep the property well maintained.
This is helpful to assess any damages or potential damages that can come from water leaks especially from under bathroom or kitchen sinks and in some cases leaking roofs. We usually schedule with the tenants at least a week in advance as a courtesy and if there are any issues we attend to them promptly. Fortunately my husband is also handy and most of the repairs have been an easy fix.
Property management is a business, keep it professional.
Some tenants tend to push the boundaries of the rental contract especially if they see themselves as your friend. This was the situation concerning the payment of late fees mentioned before. Property management is a business with bills that have to be paid and we learned to treat it as such. Keeping the lines of communications open and setting expectations through a clear and concise rental contract and proper documentation helps to keep the landlord/tenant relationship respectful and professional.
We now have two rental homes and fortunately we also live close by and can monitor our properties sometimes through drive-bys. In addition, our previous neighbors who we still keep in contact with also let us know if there are any issues. When we started this adventure we had no idea what experiences were in store for us but we have discovered that it also varied depending on the tenants who moved in and just like that box of chocolates, we never know what the outcome would be.