Kim and I have been managing rental property and tenants since 1997. We still own the very first single-family investment property we bought way back then!
Between then and now, we’ve made every landlording mistake in the book. We’ve bought bad rental properties, rented to awful tenants, and let tenants get three or four months behind in rent.
Here’s the important thing to remember: With every mistake we made, we learned what not to do. And with everything we did right, we learned what to keep doing. That said, here are the top 10 landlording lessons I’ve learned over the years.
Number 10: Take the magic nickel. Why own rental property? If you flip a house, you make a dollar. The only way to get another dollar is to find and flip another house. With rental property, you only make a nickel. But it’s a magic nickel that you get every month for as long as you own the house!
Number 9: Begin an eviction ASAP. Over the years, we’ve had tenants not pay us on time. In the beginning, we’d work with them only to be left holding the bag after three or four months of non-payments. When a tenant defaults on the lease, immediately file for eviction in order to get the eviction clock started.
Number 8: Get all cash at move in. A number of times, we had tenants give us a personal check for their rent and security deposit at lease-up. Two weeks later, we discovered their check had bounced. It took another two months to get them out of our house. Nowadays, at lease-up, we accept cash and only cash!
Number 7: Landlording begins at lease-up. In the 90s, I remember how excited I got when a lease got signed. I remember thinking: Great, my job is done. I quickly learned that my job was not done. In fact, it had just gotten started. Landlording begins, not ends, at lease-up!
Number 6: Get face-to-face to solve problems. Whether I’m dealing with a tenant, contractor or lender, I’ve learned to not email or text the person. Eighty percent of communication is non-verbal. Therefore, if you want to solve a problem, get face-to-face with the other person.
Number 5: Buy the right kind of rental house. What’s the most in-demand rental property? A three-bedroom, two-bath home, with a two-car garage, in a nice, convenient neighborhood, within five miles of a Walmart. These kinds of homes always rent fast to nice families who can afford them.
Number 4: Landlording is a service business. Too many landlords don’t respond to tenants’ needs. If you want to keep good tenants, you must give them great service. When something breaks, fix it as fast as you can!
Number 3: Do surprise in-homes. Before I will rent to a prospective tenant, I first go by where they currently live and do a surprise inspection. However their home looks – inside and out – is exactly how they’ll have my home looking three days after they move in!
Number 2: Cash flow is king. A rental property must cash flow from day one. Nothing turns your stomach like an investment property that costs you $300 a month!
Number 1: The tenant is your capital asset. I always thought a rental property was a capital asset – but David Tilney set me straight. The property is nothing but an expense. It’s the tenant who sends you a check. The tenant is your capital asset. Treat him/her as such!
To sum this list up, I require four things from my tenants: 1) Take exceptional care of the property – both inside and out. 2) Pay in full and on time each and every month. 3) Be easy to work with. 4) Be a good neighbor.
If the tenants follow these four simple rules, they can live there for as long as they want. But if they break any one of these four rules, they need to move from the property yesterday!