Owning a rental property, collecting monthly rent from tenants, and growing personal wealth is the dream for many people who buy investment properties.
But living the dream means understanding how to deal with tenants. All it’ll take is one bad landlord-tenant relationship to leave a sour taste in your mouth. You might even end up wondering whether or not you have the stomach for dealing with tenants.
According to census data, there are nearly 20 million rental properties with more than 48 million rental units across the United States. And individual investors own around seven in 10 rental properties. Could you become one of these individual investors sooner rather than later?
If you’re interested in buying a rental property someday, consider these three challenges landlords must successfully deal with to succeed with their investment properties.
1. Find Good Tenants
Finding good tenants is one of the main challenges you’ll face as a landlord. You want people in your rental units who take care of your property, pay rent on time month after month, respect whatever rules you put in place, and stick around for the long haul. But finding quality tenants isn’t as easy as it might seem. That’s one reason why many rental property owners retain the services of property management firms with proven processes in place for screening tenants.
A property manager will have people fill out forms, conduct background checks, request proof of employment and income, submit letters from previous landlords, and more.
When a property management firm screens tenants, your odds of getting great tenants will increase substantially. Trying to screen tenants on your own won’t yield the same results. In fact, you might land yourself in legal hot water if you reject applicants on prohibited grounds.
Navigating Legal and Regulatory Waters
As a landlord, managing properties and tenants is just the tip of the iceberg; you’re also navigating a complex web of legal and regulatory requirements. This aspect of property management, often underestimated, plays a critical role in your overall success and peace of mind. Amidst these responsibilities, understanding financial metrics such as how to calculate NOI ( Net Operating Income) is paramount. NOI is a key indicator of a property’s profitability, excluding the cost of financing and taxes, and it’s essential for making informed decisions about property investments, maintenance, and legal compliance strategies. Integrating financial management with legal and regulatory adherence ensures a holistic approach to property management, safeguarding your investments and fostering a stable, legal, and profitable rental business.
Firstly, staying updated on local and federal housing laws is crucial. These laws cover a wide range of areas, including tenant rights, eviction procedures, and property standards. Ignorance of these laws is not a defense in legal disputes, and violations can lead to costly penalties or lawsuits.
Moreover, regulatory compliance extends to property maintenance and safety standards. Ensuring your rental units meet these standards is not just about fulfilling legal obligations; it’s about providing safe and habitable living conditions for your tenants. Regular inspections, timely repairs, and adherence to building codes are all part of this responsibility.
Additionally, understanding the legalities surrounding lease agreements is vital. A well-drafted lease agreement protects both the landlord and the tenant by clearly outlining the terms of tenancy, including rent, duration, and policies on pets, subletting, and repairs. Tailoring your lease agreements to comply with local laws while safeguarding your interests is a balancing act that requires careful attention.
2. Provide Customer Service
Don’t underestimate the importance of providing great customer service — especially if your goal is to have tenants renew their leases rather than pack up and move elsewhere. Depending on your area, there may be more supply than demand for rental units. Tenants won’t stick around if they don’t feel their landlords aren’t responsive and don’t resolve issues.
When you hire a property manager, your tenants will get the customer service they deserve. Your tenants can call the property manager with any concerns or questions. The service provider will handle whatever landlord duties you delegate for the good of your tenants.
Another thing to consider is that a property management firm will keep your tenants up to date on any maintenance or other projects that might impact them in some way. Keeping the line of communication open will ensure your tenants aren’t taken by surprise.
3. Collect Rent
Obviously, no one gets into the investment property space without expecting some sort of return. But if you’re collecting rent the old-fashioned way — going from unit to unit to collect checks from tenants — you’re working harder rather than smarter. You can make things even easier on yourself by hiring a property management firm with a system to collect rent automatically.
The property manager can also follow up if tenants are late with rent. Instead of having to take time out of your day to make calls, the property manager will step in and take care of it.
Investing in a rental property can be a great way to make passive income — but it might not feel all that passive if you take on all the responsibilities associated with being a landlord. Finding a reputable property manager to work with will make things easier for you. It’s really about taking care of the people — your tenants — who take care of you — by way of paying rent. A property management firm will help you succeed without you having to do everything yourself.