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Landlords treat your tenants like a adults and set the tone for this very vital relationship. I think being knowledgable in the field is of vital importance. I have a hard time with not being the owner and just a manager. I pick up the rent myself each month as well as have made improvements in all of my properties. My tenants see me often and I provide excellent service by making repairs as soon as possible and handling any issues calmly and quickly.

I guess my biggest problem with this approach is that I cannot stand to perpetuate the myth that all business people are greedy and a heartless bad guy. I strive to put out a superior product and show how it is a great value for them. My best tip has been to explain the different costs to the tenants.


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I will update my tenants on any tax increases, property assessment changes, utility rates or spikes. I explained to a tenant how a water bill spiked when they left the water running outside for kids to play. When the city adds yearly charges for garbage or recycling services I let them know and how much it is. When I update the windows or furnace or anything else on a property I always check with the tenant on their energy costs before and after.

I guess one trick would just be using numbers. Of course I always point out any improvements as well as explain that I have looked at other rental rates in the area and these are still slightly below market and my service pushes it over the top as many tenants have either had bad landlords in the past or know someone who has..

I think many tenants think the landlord gets to pocket all that money. Little do they know about all the costs! Thanks for the tip! Brandon — this was very edifying for me as I have been at this for over ten years now and do not normally collaborate with other investors often. I have done all but one of the things your recommended just because it made good business sense to me. I plan in implementing the other this week!

For me it he policy bein written. Good stuff thanks. Great advice! I particularly liked the 1 about not being the owner, it certainly serves two purposes as you outlined; the decision filter and the legal shield. Some tenants even feel more comfortable dealing with the manager and not the owner, as they perceives the manager as the facilitator and the owner as the bad buy.

Also liked the 6 about the Google Voice number, I will go ahead and grab one now. Thanks Alex. It appears to be working very nice, and if I ever recieve a phone call from them, Ill just say that the policy states that not even me as the legal representative of my LLC can interfere with the management company as for rent collection or other issues. What do you think of this?

Hey Jose — Thanks for the comment. I think that if you are going to rent to a friend — that is the best way to do it. Get yourself out of the equation. Good luck and let me know how it goes! Thanks so much for the great post, especially 5. Once I did, I became a much happier landlord. I think it is very important to keep the tenants at arms length. That way I can think about the reply.

I could tell some stories. Good luck. I agree, Ian. I live in a weird area! Brandon, your post just made physical impact in my properties… I have a crew of 8 people with a manager that have been doing all my rehabs the last 3 months. I decided this because with the same money that I used on contractors, now I can make a much better job with better matterials. Sometimes we summarize the things we read and stay with just a few things… yours made impact already.

Thank you for that! Thanks Jose! That means a lot! Just a warning! That stuff is pretty Hardy! I would guess anything that would have left a big gouge would have torn up a carpet too. I agree, this week I have been anylizing several kinds of laminate… We will make some tests with industrial kind… it looks like wood still and is resistant to water and scratch.

Do you have any experience with industrial laminate floors? One of my mentors says that you have to teach your tenants exactly how you expect them to act. If you are always consistent, you will completely avoid a lot of hassles down the road. If they know you will waver, they will test everything. If you have an emergency call Anything else can wait until the office opens. Like you, there is someone on call in case of something major happens.

I agree completely that the quality of your rental determines the quality of tenant that you will attract. I saw him post on your blog once, so I figured you must be acquainted. He sure knows his stuff! Yes it is. Mike is a friend of mine, and is the past president of our local REIA. And you are right; his book on landlording is one of the best on the market. It should be required reading for every landlord. Do you really think a tenant should call for an overflowing toilet? I hope you make sure your tenants know where the shut-off valves to each utility is located, so at least they can create the option of waiting until the morning.

Even then, your tenant might have to be at work during your office hours, so having someone on call is important, but that might be you if you are managing your rentals yourself. Brandon, Awesome write up! I think the only thing I do in addition is to enforce the 3 days notice, once the rent is late. My top pick is the google voice. I have had mine for almost two years now and I love it!

Being a stickler for the rules trains tenants to be the same. We are very strict with our 3-day notices and have very little problem with late rent or evictions. If you do not live near the rental property, you can use a Google Voice number with the local area code and a nearby exchange and forward the calls to your home or cell phones that are in faraway area codes.

It makes your rental listings look more local and, presumably, inviting. I sure love that trick. Rule Number 1! I immediately jumped out of my seat and called my parents to see if they did anything of that sorts, Would the LLC be only for investor or should the LLC be fore any landlords in general?! I am going to talk my parents into creating a llc for it. I also googled alilltle bit about LLC and was wondering if your do your LLC per property or is all property under 1 llc.

Good point… I would like a comment from you Brandon if you dont mind of how I decided to go with mine…. What I did is what my lawyer adviced me to.. What I decided also with the advice of my lawyer and accountant is to create a holding LLC with 0 properties, but who will be the owner of the other LLCs… this also is very helpfull for accountability, and to get a General Liability insurance and a Umbrella in the top of everything. I also have one with 13 properties, so now that I am considering to sell investing packages, I will give the option to buy 2, 5, 7 , 13 or whatever ammount of properties a potential client might want.

Again, the whole purpose of the LLC is to limit the liability of the whole value that relies on it.. So it sounds pretty good to me, but again — this is my weak spot! So, be sure to check with a good attorney or accountant on the exact structure. This is also a topic mentioned quite a bit on the BiggerPockets forums, so check there also for ideas on LLC stuff! How do you create an LLC for properties which you personally own. My mortgages are in my name. If I would need to transfer the property to a newly created LLC, how can I get a bank to sign a note for an organization with basically no financial history.

Great website! I would particularly like to comment on 2: No Friends of Family. My sister made the mistake of renting her condo to the daughters of relatives. The were attending college and this was their first time on their own. Unfortunately they were brought up with maid service and were basically incapable of even rudimentary house care.

The result was disastrous. I promise to adhere strictly to rule 2!! Thanks Paul! Definitely get connected over on the BiggerPockets Forums for a lot more great information! Brandon, Great tips. More importantly, you will look at this as the small business it really is, which most new landlords do not. With public and online property records, a landlord can suddenly be labeled as very dishonest when tenants discern the landlord is the property manager via one LLC and the property owner via another LLC.

Although the landlord is protected, try explaining to tenants why your name is on both LLC annual reports … Technology makes hiding more difficult these days, although I would still suggest to hide your home address, P. Box information …. If they did — they probably already had the suspicion. Thanks for the comment Cooley! I think that eventually the advice to potential landlords becomes distillable to more-or- less the advice in this article.

I will add my advice with the caveat that it may be a bit contraversal. My experience? That is to say I am a relative…. I will only add stuff that I have not seen said elsewhere and proof there of. Hope this helps, take it for what it is worth: This advice and subway fare will get you from point A to point B on the A train…. If you can swing it hire a property management company and when you do? Really really do a lot of research and soul searching…. This hire will make or break you. Consider partnering with a good property manager because they are worth it. Use the same dilligence. B Tenants?

I love my property managers but 9 times out of ten? I get little shit tenants with perfect credit scores and a lot of letters written by previous landlords who are glad to get rid of them. If you are good judge of people interview a tenant, if not? If someone loves the place thats a great start. I just rented an office and the girl obviously loved it a great sign she went to a great school which I know and she had a great sense of humor….

Rented, next? Obviously make sure they can pay for it but you heard that in landlord school I am sure. C Did I say hire a great Property manager? A property will show itself in the numbers…. If you pay 10 dollars for a widget maker and will get 2 dollars to rent it…well? If you make about 2 to a month with all expenses accounted for then that is your profit…. If it were Me? I always find property which is ridiculously profitable…. D Your relationship with a tenant is complex…Home is more than a house and a tenant is using your house as a home….

This is a great responsability. Learn to show a respect for the tenant and not go legalize at the first provocation. Funny story: Our apartment? The horrible property manager took the bait and insulted us slander we have that letter here now. I have found the best way to deal with difficult tenants is to give some ground. Some of my tenants pay late…. So what? The problem with a lot of landlords is they have never dealt with a really bad tenant…. It is best to have a relationship with a tenant where rent comes in, you both are satisfied…. It really is not worth it sending a notice for rent that is a little late, you can get really screwed and not get rent delivered for a few months which will make a difference!

While obviously we differ on a few things, I think every landlord eventually settles into a strategy that works fo them. Thanks for taking the time to comment — that was a killer long comment and I love those! Your approach is really the long version of the Golden Rule, so I am sure it works well.

Your point about seasoned tenants is well taken. There are plenty of landlords who resent seasoned tenants who know their state and local landlord-tenant rental ordinances. The abuse was so bad in one city, the city council even put out a flyer for prospective tenants. Darrell, You mentioned preety good stuff about how you manage the tenants and emphasize in how important is the property manager. I actually hired a project manager to have my own crew by the hour so they make the make readys and attend the repairs of the leased properties, which call my property manager and then let us now.

I have done that at the beggining and found that it only encourage them to repeat this process through the months… So my property managers adviced me to send the late notice and then the eviction notice… which the tenants didnt really hear, they thought it was a joke since they usually payed late… Well they did get called to court, together with my manager… they agreed to pay in full every 1st of each month….

They are happy tennants, with no complains and pay every month in time! I guess they just need to know that you are a good landlord but they have to pay on time.. Let me know what you think! Thank you! Your management people are psychologically well schooled….. Tenants, like the lot of us, come in different flavors so to speak. A classic situation is one where you, the owner have to decide what kind of psychological profile you are dealing with.

In this situation the right call was made…. The reason I would consider this decision to set limits carefully is that some property markets, like San Francisco where I am located, have very strong tenant protection laws. When legal action is initiated by one side then it becomes a legal matter and it is officially an escalated situation. Funny fact here: my lawyer in the Bay Area for these situations? Some of the tenants I have dealt with? Stereotypes which are used in actual written materials put out by many tenant protection groups in the Bay Area! I should say here that I definitely can see the need for limit setting at times.

Take two landlords with opposite views of human nature and they will both be right about setting limits half the time haha. What separates the men from the boys, so to speak is something you did which is very important….. I tend to do the same…. I know I am a soft touch so I always run my approach by the resident hard ass on the team….. What I constantly emphasize in my business is the value of team building for these scenerios with any problems.

When dealing with the type of money, legal and psychological issues that landlording engenders the sooner one can get a team together the better. We all can easily get angry at tenants… they are at times trained button pushers! All of us can be offtrack in how we are profiling a situation with a tenant….. Sometimes tenants do indeed need limits. That is as much a fact as the fact that the sun will rise tomorow. Hi Brandon, Good stuff. Google voice number, I have to try it.

THE LANDLORD’S SUCCESS GUIDE TO TENANT SCREENING

Quality product-quality tenants is the golden rule I follow. Never evicted anybody because of this simple rule. Quality rehabs are expensive. You have to find balance on how much quality you want, to get better tenants.

Benefits and shortfalls of a rent-to-income ratio calculation

This is a very important consideration. One of the best ways to start a real estate portfolio is to get a place with a decent and small in law. Why small? The improvements can all be made with great materials, you can learn about property and…. Now you should attract quality tenants with the place.

A guy named Pedro at Home Depot talked me through my first bathroom installation… I almost burned a few studs down doing a weld……but hey! Live and learn. However, I have not begun simply because of the negativity from relatives. Nevertheless, I am going to step out there and go for it….. Thanks Angela. I appreciate the comment! You can run potential deals past hundreds of eyes, ask questions when difficulties arise, and make some great friends in the process.

Be sure to send me a colleague request! My husband and I just inherited a couple of rental properties from my father who just passed away. I enjoyed your tips and liked the number one tip but was wondering what is someone says they want to speak to the owner. Then what would you say? I have a feeling I will be on this forum a lot in the next few months. Thanks for the advice! Hey Kay, thanks for the comment! Landlording can be a little bit overwhelming when you first start out, but hopefully this post has given you some guidance.

And never hesitate to ask questions over on the Forums. BiggerPockets is a community of thousands of landlords and other investors more-than-willing to help you through any of your tough times. Keep in touch! I will have to do that once I get the new building up and running, still in the repair stage. Thanks for the advice. Thanks Brandon. The one about not renting to family and friends is my absolute favorite—vintage! Great advice, thanks so much Brandon. I am just in the beginning stages of becoming a Landlord, but, I have been actively running my own business for 12 years.

If the answer is not the one they want, I just blame her, lol! It never fails that peoople will catch you off guard and you end up agreeing to something that you immediately regret. Just having the time to think about it , without giving them an immediate answer is invaluable. Lots of great other tips, thanks! Hi, Brandon: My husband and I have also been landlording for five years.

We offer quality housing, are very good at screening, and currently have really good tenants. One tenant always pays late, and I never collect the late fee. I have become friends with my tenants, but in the future, I will make our relationship strictly business. Overall, I really enjoy being a landlord, which always seems to surprise people when I say that. Thanks for the comment Jeanie. We tend to have tenants initial all the really important things, and then send them a highlighted copy when they argue with one of the points. Good luck on your future landlording! On the other hand, some landlords do not even know what their leases say.

They just print them from some website and hand them to tenants. Some landlords are surprised and irritated when the tenant takes the time to read the lease. And it is very difficult to diplomatically tell a landlord about a problem with their lease. I still fondly remember the lease for a southern California apartment that required the tenant to keep the sidewalk free of snow.

Another time the lease was so full of problems the landlord had not even noticed until I brought them up that I volunteered to write a new lease for him and he had several units. I ended up signing the lease I wrote. Hi Brandon I am new to member of your community and i want thank you for sharing your knowledge with all of us and become more successful at becoming landlords. To me the two most important tips that I just learned are: 1. Never be the owner ,only the manager.

Set up a google business number. Always charge a late fee 4. Never rent to family or friends. Thank you Brandon for your tips. Brandon, you brought up some very good points, I will be buying the book about landlording. I see many points from a lot of people, I mean no offense with anybody whatsoever, but I tend to analyze websites and their content before I add to their visitor number or participant number.

The topic started excellent and somehow many people started talking about grouping properties and also introducing friends, my point is, how can a newbie like me in Real State , get to the information needed if is embeded between words of non-helpful information. I had an experience which I am sure will be appreciated by many, and which also can help many prevent errors, since I believe that was the purpose of creating this blog.

I just bought an appartment complex, one of the units had a tenant which was section 8, and had an agreement from 10 years ago, the previous owner had made a new agreement because she was disturbing other tenants and having other relatives live there…little that I knew about section 8 tenants….

I read before about section 8 being the best and the rent is on time…my point for bringing this up…quality tenants are really hard to spot or find, it only takes one bad encounter with the tenant to break that landlord-tenant relationship no matter what kind of tenant you have. Most of the topics in this post are about complains like me, but I have not yet seen somebody actually posting a solution not to be rude. For example, any suggestions about screening a tenant? How much percentage is good to increment the rent by? There are many essential questions that I have not seen answered here…..

I have read a lot of people talking about how many more properties they want to buy or when to buy or about being landlords for 10 years, I believe we need a bit more substantial information. I am pretty new at the business, all I have found out so far is that a tenant is another human who will not pay you rent for 6 months if you give them an eviction letter, or who will not answer you right back if you set call schedules, remember there are many savy tenants and you have to expect a return to your actions.

I was a renter myself, and if the faucet broke in the middle of the night and I needed to brush my teeth in the morning, I would not forget when the time to pay the rent came. I believe a few words when I called the landlord, despite of time, would have made a difference. By the way, somebody mentioned having his private lawyer, I would tell you please think twice before going into a lawsuit vs a tenant, most likely you will lose, even if the tenant is out time, stress, money and a drestroyed property.

Another great article. Just joined a few days ago and I have no prior experience investing in RE. It seems like every fear that I have for getting started is explained in an article or a forum post. I am definitely learning alot and taking away alot of good information. Branden, I am thinking about investing on property in a college town. I know you get more bang for your buck and most of the time the parents are paying. I of coarse will have my own contract for them sign. Do you have any experience being a landlord in a college town and what are the pros and cons?

Or should I really be asking if you feel this is a good investment. Please tell me if I am wrong. Thanks for you time in reading this and writing this forum. I learned a lot. Good article Mr. Turner and I will keep that in mind. Need some advise if possible.. I have managed two buy two houses.

I own them totally. I want to buy more houses so I can rent them out. Any advise? Brandon,I read every bit of this thread and enjoyed it. I plan on retiring soon and will be purchasing some rental properties Condo types in Florida. I like what you said about setting ground rules and expectations…I hope to follow up soon to let you all know how it turns out for me….

Thanks Bill. Brandon please help!! Can one set up LLC for rental property or properties that still have mortgage on them or do the properties have to be paid off free and clear? Good article. I disagree with 2 as a blanket policy, but agree with it as something to be particularly cognizant of. I have successfully rented to family and friends many times. It really comes down to boundaries and clear expectations.

Otherwise good stuff. I would recommend doing a better job of editing.

» 7 smart moves for getting started as a landlord

I seem to always find spelling and grammatical errors in articles that are otherwise great. I started buying investment property at My properties have great cash flow, and I make a comfortable living. I never set a property up over 10 year note. So if I only pay the payment I still retire at 39… I would love to cut that intrest. But at same time this is my main income. What would be your advice? One thing to check, do you have enough cash reserves?

For example, what would you do if you had no tenants for six months? Or half your units vacant for a whole year? Does that frighten you, or are you covered for such a catastrophic circumstance? Make sure you can sleep at night if that were to happen before extending the spare cash elsewhere. Chad — in my humble opinion I would let the tenants pay your mortgages for you and reinvest your efforts on new challenges. As an X gener myself in early half retirement mode myself I have found my time and abilities can be used in other ways.

From a purely fiscal direction if you where speaking to a financial advisor about this they might encourage you to fund other investments with any overage you have and strengthen the other side of your portfolio in insurance, stocks, bonds, businesses, etc.. Hope this helps! Joshua Macias — PhD Candidate. Read and will be using some of your tips. My husband and I are fairly new to the rental business, less then 5 years.

We have purchased our second rental property. Do you have a site or book to reference when setting on up? Do the advantages of using a lawyer outweigh the negative of doing on your own? Any helpful advise would be appreciated. Also if managing your own properties, what do you do when out of town on vacation or any other reason? Also, just came to mind. In our lease it has our actual home address, as from what I read must be supplied to the tenant. Where are you? Might be the law but usually you just have the mailing address official correspondence needs to go.

Can be your home, a PO Box, an office or your property managers business address. For example if you owned a property with a partner. A person needs to use caution though, and not abuse this wonderful tool. To me that is an evil abuse of the tool. Owners should always strive to keep rents well below market rates as this tends to create very loyal tenants who stay for years and years and rarely complain. Less turnover. More profit. Everybody wins. Brandon, Great relevant content to help landlords successfully run there business. No one ever argues with policies.

Wonderful article. Lots of great info I plan to use. Especially the last one! Seems like many others agree! I totally agree about separating the fact that you are both landlord AND owner. Setting hours can make your life much simpler as a landlord. I can say, without hesitation, this volume of information is very practical and following it will make some definite changes in how my rental properties are managed.

Great stuff. I have 2 rentals and both tenants are family. One of them is moma so that will have to stay. I want to buy a new home, and rent it out, I think it would be a good experience. I can see how it would be harder in low income housing, thanks for all the advice! Hello, in the rental agreement you use personal name as a landlord, also tax records will show you as the owner, so its kinda hard to convince the tenant that you are just a property manager landlord and not the owner.

Burt and I discussed this below, and it seems you could use an alias as your property manager name, and the ownership records, checks, etc would be in your real name as owner. Great post! What a great tip about not renting to family and friends! Long story short, that led to a lot of unnecessary stress and ultimately, the end of their friendship.

Example: HVAC maintenance is key here in TX minimum one time per year , it will keep your asset tuned and your tenants happy. Thanks much for the reminder, never rent to friends or family!!! However, I keep making that same mistake over and over again and each time I am royally screwed. I have since rented one of my flats to my sister, and of course, the rent was discounted…and rules disregarded…this is the last time am ever going to do this.

I am now thinking not as the owner but the property manager. A huge difference in perspective. I agree with the charging a late fee point. Before I had this policy in place, several tenants would pay days after the rent was due. Thanks for sharing. Thanks again for your time, effort insights and experience. I like what this post said about being knowledgeable. The landlord should be on top of everything and be able to answer questions effectively and confidently. That is my opinion at least.

Every future landlord should take advantage of this list. Knowing when you should outsource and when you can handle it yourself are keys to being successful. Thanks so much for posting. Other methods used to determine the rate of return on a rental property are mainly the cap rate and the cash on cash return.

You determine which one to use depending on how you pay for the rental property. Real estate investors use the capitalization rate or cap rate, for short when they pay for the rental property fully in cash. The formula for calculating the cap rate is:. The cap rate calculation is a fairly simple one. This method of calculating the ROI is a bit more complicated. Real estate investors use this method to calculate the rate of return on a rental property when they take a mortgage or loan to pay for the real estate investment property.

So, the formula for calculating the cash on cash return is as follows:. Your costs are:. Keep in mind the monthly interest payment associated with the mortgage. Next, use the cash on cash return formula and divide the annual cash flow by the total cash actually invested to determine the rate of return on investment ROI.

Furthermore, Mashvisor offers real estate investors detailed neighborhood analysis in the city of their choice, as well as complete property analysis. Needless to say, this is the best tool for real estate investors for calculating the rate of return on a rental property. Conversely, when using the cash on cash return calculation to measure the rate of return on a rental property, real estate experts disagree on what is considered a good ROI.

As a landlord, you should be familiar with how to measure the rate of return on a rental property. Depending on how you buy the rental property — either fully in cash or by putting a down payment and taking a mortgage — you can calculate the rate of return using the cap rate calculation or the cash on cash return calculation.