My wife and I have managed rental property in West Virginia, Oklahoma, and Georgia. We’ve had good tenants, bad tenants, a couple of great ones, and the rental property nightmare. Here are a few things we’ve learned along the way.
1) Make friends with your plumber. It seems like rental properties always have plumbing problems. My family lives in a house. We hardly ever have plumbing problems a plunger won’t fix. There’s just something different about rental houses. Plumbers fix problems, but they don’t fix them cheaply. Friends don’t screw friends, so the plumber is definitely one guy you want to be friends with. Go ahead and make friends with a handyman too.
2) Know the age of your roof. If you end up living several states away as we did, you can’t always just pop over for a look-see. Roofs can cost big bucks to fix, so you’ll want to save for it. We’ve had serious hail damage in both Oklahoma and Georgia that was bad enough it required roof replacement which leads to.
3) Figure the insurance out. Make sure you have the right policy. Don’t try to get over on the insurance guy by claiming you’re living in the place when you’re not. People demonstrate lots of ignorance over insurance. Ask around and talk with a couple of agents. You’ll soon figure out who’s blowing smoke and who’s telling it straight. The right policy can actually be cheaper than a homeowner’s policy because you’re insuring only the house-not all the stuff in it.
4) Learn about the bad things before they happen. What happens when the tenant is late on the rent? How about if they just quit paying rent? How long does it take to evict someone? It’s different from state to state. Some states (like Georgia) are pretty landlord friendly, while others aren’t. We’ve had to evict and even went to small-claims court in Oklahoma. We broke even, but quite honestly, we were more lucky than prepared.
5) Max out your rent. This sounds obvious, but many landlords don’t do it. They try to make their property more attractive by a lower rent. I hate to say it, but generally speaking, the more rent someone pays, the better they keep the property. Say what you want about fairness, but our experience bears testament. It also lets you build a cushion for repairs.
6) Dedicate a separate checking account to the property. Deposit the rent checks and pay the mortgage out of the account. You’ll want to seed it with at least three months of mortgage payments at the beginning and keep a cushion. If your mortgage is $500/month and you’re renting the place for $700/month, bank the difference because you’ll need when the hot water tank needs replaced, or a window, or a whatever. It also makes expense- and income-tracking much, much easier for . . .
7) Taxes. Understand the tax implications. One of the best kept secrets about owning rental property is the amazing impact it has on your taxes. The deductions are substantial, both from depreciation and expenses. If you’re carrying a mortgage, the income is usually more than offset. We use TurboTax and have been very pleased with it.
There are a million more tips out there. Lots of books have been written to help you with all aspects of rental property. Do your homework and then enjoy the fruits of your labor!