Four Simple Tips for Would-Be Landlords

So you've found some great investment properties and you're ready to become a landlord.  Congratulations! You are on your way to a profitable future.

But before you begin running those ads seeking tenants, here are 4 tips from my husband Brian's 20 years of success:

1) Start with a good lease.

By establishing the ground rules for your relationship with a renter in a written, legal document you'll be well prepared for the pitfalls that catch other landlords off guard.  Work with an attorney (to include things like late fees or a waiver of the tenant's right to notice of eviction) to ensure your lease follows the letter of the law. 

2) Do a credit check and a background check on prospects. 

These are easier to do than you might think since much of this can be done online, or turn to a third party to handle this part.  Taking the time to do this will weed out about 90% of the bad tenants.  (Monthly income equal to three times the amount of the rent is a good rule of thumb for determining their ability to pay.)

3) Be realistic and honor your responsibilities.

Occasionally payments are late.  Learn to be accommodating (as long as they are communicating with you), but never let a tenant go more than a month on a delayed payment.  When they stop communicating, it's a bad sign.  Similarly, respond promptly when they call about needed repairs.  This protects your investment and keeps your renters happy.  Regular inspections of the home or a simple drive-by to confirm the lawn is being cared for are good ways to confirm you have a good tenant. 

4) Work toward a break-even cash flow. 

Remember, your goal is to maintain the property until the mortgage is paid off.  If your rent is offsetting the cost of your mortgage plus the cost of maintenance, even if you're only breaking even, you'll be in good shape. 

The growth in property values over time historically makes for excellent return on your investment. 

Call me!  I'm happy to answer your questions.

NEXT MONTH:  Selling your investment properties.