Property Landlords
Five Bad Moves Landlords Must Steer Clear Of
A lot of people who own homes and later become new investors in real estate have a goal of renting out properties and being a landlord - how amazing is it to make a profit every month while your renter is paying off your mortgage?
However, being a landlord is not as easy as it seems. It takes some hard work, and in some cases, takes some past experience or the advice of someone else who has some. Here are some bad moves that landlords need to steer clear of.
The first bad move is to over leverage the properties you rent. Borrowing the most money you can when you are purchasing or refinancing a rental property can be easy. It becomes a problem, however, when you no longer have any monthly income from your property due to your leveraging, so you'll have an issue as soon as one or more of your rentals becomes vacant or you suddenly have some unexpected repairs or upkeep expenses. Your expected monthly expenses (including insurance, taxes, and mortgage) should not exceed 50% of your monthly rental income, and by year-end you should show a positive return.
The second bad move is to use a generic lease. Nobody sets out to spend unnecessary money, but using a generic lease from an office store is a guarantee of disaster. Every state has specific terminology that is necessary to be included in the lease, and a lot of states have specific disclosures that are necessary to be attached to the lease, not to mention pamphlets on lead paint.
Every state also puts limits on the amount landlords can retain as a security deposit, how many days overdue the rent must be before a late fee can be assessed, etc. The best thing to do is to work with an attorney or use an online agency that assists you through the procedure of creating a lease to meet the criteria necessary for your state, and it will prevent countless headaches later.
The third bad move is to fail to properly investigate your potential renters. Unfortunately there is a multitude of undesirable renters, especially for lower-end properties. Remember to place advertising in a local newspaper and on Craigslist for renters, obtain credit reports, and run background checks to determine if the applicant has ever been evicted previously. People are inclined to be either generally responsible or completely irresponsible with money, and whichever it is, their credit and eviction histories will bear out the truth.
The fourth bad move is to ignore your rentals. It can be quite aggravating to receive phone calls from your renters who are frantic because the roof is leaking, and it's easy to avoid calling them back or spending money to repair the damage. However, it is necessary to deal with both the renter's concerns and the issues with your rental properties rapidly and effectively, or you may face even larger repair bills or even lawsuits by the tenant. Hire a handy man or subcontractor who you have confidence in to take a look at the property. In many instances it will turns out that the renter was simply overreacting, but it's prudent to make sure.
The fifth bad move is to fail to evict rapidly when renters breach the lease. A lot of renters fall behind on their rent and want you to show some leniency in getting it caught up. No matter how sympathetic you feel you need to remember that the eviction process is long and tedious and the renters will have plenty of time to pay the back rent and make it current between the time you serve them a notice to pay or quit and when they will be forcibly removed by the sheriff if necessary. Serve the renters with the appropriate notice rapidly when their rent is not paid, and it will communicate a powerful message that you are running a rental business and not a charity.
Although many landlords recognize the truth in these five tips, a lot of them fail to incorporate them into their practice until after they've already been burned by an unenforceable lease, or have lost several months worth of rent. Adhere to these steps, and your rental business will run smoothly.
If you go to Free Legal Forms site, you can find various legal resources and free legal forms that are completely free of charges, including Rental Agreements Forms and real estate forms that are popular for those who are interested in their property management.