3. Follow the laws
As a landlord, you are expected and required to comply with fair housing laws. Unfortunately, not all landlords know the rules before renting a property. It's imperative you understand your state's tenant-landlord laws and follow the rules to keep yourself out of a lawsuit. Fortunately, the American Apartment Owners Association offers a map you can click on to read about those laws in your state.
4. Have a thorough, well-written lease
Your lease agreement is everything as a landlord. It is a binding contract that explains what the landlord and tenants can and cannot do and states the process for what happens if the lease is broken. Throwing a two-page lease together may cut it for the time being -- but eventually, something that was not properly addressed in the lease will become a problem.
Your lease should include basic terms, clauses, and language according to your state's tenant-landlord laws and can be drafted by a real estate attorney. Your lease should also address items like:
- Lawn maintenance: including who is responsible for maintaining the lawn and what needs to be done as a part of that maintenance.
- Parking: including where tenants can park and the number of allowable cars in the parking area.
- Property alterations like painting the walls. If you will allow alterations to the property, do you require the property to be repainted back to the original color upon move-out? Do the tenants need approval on the paint color before they can paint? Also explain what happens if the tenant does not follow these rules, like a deduction in the rental deposit.
- Pet clause.
- Pest control.
- Property use: If you're renting a residential property, you want the unit to be used for living, not for running a business. Explicitly state what the property can and cannot be used for.
- Subletting: is subletting allowed? If so, do renters need pre-approval before they can sublet?
5. Take advantage of extra income opportunities
Some properties allow the opportunity to collect additional rental income. For example, you could collect additional rent outside of your standard lease agreement for:
- Storage sheds.
- Garage space.
- Parking space (especially in areas where parking is at a premium).
- Pets, such as a nonrefundable pet deposit or monthly pet fee (if allowed by your state).
In today's tech-savvy world, you are doing yourself and the tenant a disservice by not allowing online rent payments. Collecting rent online allows the rent to be deposited straight into your bank account. You don't have to worry about bounced checks or checks getting "lost" in the mail. Most online tenant management programs allow the tenant to pay by automatic bank-to-bank transfers (ACH) for free or charge the tenant a small processing fee for using a debit card.
There are dozens of property management programs that allow landlords to manage the rental property virtually. Beyond collecting rent online, the programs can help you advertise the property for rent, collect late fees or deposit amounts, manage repair requests, and communicate with the tenant.
7. Send reminders for routine maintenance
Your lease agreement may state the tenant is responsible for routine maintenance like changing the air filter or checking the smoke detector -- but it doesn't hurt to send a friendly reminder. You can send a reminder text or go old-school and send them a postcard or letter.
To ensure the property is maintained to your standards and expectations, it may also be helpful to provide the tenant with the required equipment, such as a year's worth of replacement air filters. It may be an extra cost upfront, but it's a lot cheaper than replacing your air conditioning because it wasn't maintained well.
8. Increase your rental rate annually according to market rent
Annual rental increases are a normal part of owning rental real estate, and it's highly suggested that new landlords implement them. If your local market has seen an increase in rental rates since you leased the property or there was a spike in property taxes or insurance cost, you can increase the rent by 5% to 10%.
Be aware of any rent control laws in your area, and try to keep the increase relative to the market rent. The fact that you can increase rent doesn't mean it's justified. And even if you raise rents to simply keep up with inflation, ideally, your rental rate will increase annually even if you have the same tenant in the property.
9. Keep good tenants with incentives
Good tenants don't come along every day. So when you find a great tenant, you'll want to keep them. One way to motivate the tenant to stay, even if you are increasing the rent, is by offering them an incentive to renew. Each year upon lease renewal, offer to replace or upgrade one thing in the property up to a certain value. Maybe you put in a new fan or flooring, paint, or add a backsplash. They don't have to be expensive upgrades, and a little can go a long way.
It's important to let the tenant choose the item to replace or upgrade, as it gives them a sense of ownership and tells them their voice is heard and valued.
10. Require renters insurance
Although you will have property insurance, it's a good idea to require the tenant to have their own renters insurance. This protects their belongings and provides additional liability protection to you as the landlord, especially if the property has pets.
Continue to improve your landlord practices
Becoming an effective landlord and property manager takes time. As your portfolio grows, so will your experience. Millionacres is a great place to stay up to date on changes to rental laws, tax benefits, or management strategies that will increase your return and make your job as a property manager and landlord easier. Hopefully, these 10 tips will help you avoid some common mistakes and be a more prepared and informed landlord.