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Buying Your First Rental Property And Becoming A Landlord
When you are buying your first rental property and becoming a landlord, there is lots to learn. How do I find tenants? What should I charge for rent? Should I update the places to get more rent? How do I tell the tenants they are late on rent?
I have read a lot about how you have rule with an iron fist to keep your tenants in line. Our philosophy is much more laid back, and it has worked out amazingly well for us. Every property is different, but this was our experience.
Our first rental investment property was somewhere we would move into ourselves, and in retrospect, that was an aspect more important than I would have guessed. There's many decisions along the way, and being a potential tenant yourself makes those decisions much clearer.
First off, when it comes time to market your place, you are part of the target audience, so it is easy to find the right place to advertise. Just ask yourself... how would we go about looking for a place? We actually mistakenly put costly newspaper ads out initially, bringing in the completely wrong renters who were completely not interested. Once we switched to advertising in places we would look, 90% of the people who came were actually interested, the place would rent faster, and the tenants were happy to be in our place.
That leads to the next reason why buying something you would live in as your first rental property makes the landlord learning process so much easier. The tenants! These will be people that you basically get along with because they like what you like, and if you meet them, they will most likely like you, or they would not be renting it. You will make sense to them, and they will make sense to you. When you are at odds with your tenants, the whole interaction and experience can be painful, so getting along helps tremendously.
Why, you say, should I care if my tenants are happy? Because everything is easier. They will more likely pay rent on time, respect & keep your place in shape, and stay longer. Believe me, there is nothing like a completely wrecked apartment by a short-term tenant. Sure you can charge money for damages, but it will still take time and be a hassle to get it back up to a rent-able state. And dealing the whole time with bitter, angry tenants is no fun either.
How do you make your tenants happy? There's a couple things we do. One is that we allow tenants some flexibility with painting and decorating. 95% of the time, our tenants actually do wonders with our apartments and leave them with a better style than we could have done ourselves. Many times, we even get good ideas to carry over to the other apartments to make them more marketable, like some basic drapes & mounted wine racks. We even had a tenant call us to ask if she could plant some flowers by her porch. We welcomed it. It was an indication that she felt invested in the place and felt at home. Of course, I am not advising you let someone remodel your kitchens... I am talking small things that are easily undone, but make the tenant feel invested and at home.
Another thing to do to have happy tenants is to give them a sizable re-signing bonus when their leases end. And unless it is painfully needed, do not raise the rent, especially if the tenant is someone who pays on time and is easy to deal with. We offer a $500 re-signing bonus each year with rents at $800. It is almost a free month and about the cost it would be for us to do a make-ready, so it is good for us and them.
Also, we do not rent our places at the maximum. We make them a somewhat good deal so that many people will inquire, and so we have a better chance of a good fit that will be happy and stay long. We also do not overcharge because feeling ripped off is one main reason a tenant will leave.
We also treat our tenants with a lot of respect. We call them every time we enter their units, and if repairs take an extensive amount of time or hassle on their behalf, we give them some rent back. We also maintain the property and do pest control. And we always answer their issues within a day, at least with a phone call.
Becoming a landlord was definitely a learning experience. Everyone has their own style, and even different properties may prescribe a different style. Just be open to handling your rental property business (which is basically your tenants) with respect rather than the stereotypical overbearing attitude.
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Travel Part B