Simple Principles that Could Make a Dramatic Impact on Any Rental Properties You Own

Mar 16 2015 / 10:04 pm Was written by Atwell & Co. No Comments Yet
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Being a landlord and maintaining your rental properties are a huge investment emotionally as much as it is financially. Now here are simple principles that can make a dramatic impact on any rental properties you own. These principles are so simple it can save you tremendous amount of money; it is going to reduce a whole amount of heartache, and hopefully make you much more profitable with your rental units.

Choice of tenant

90 percent of all property management can be summarized in this concept right here. As a landlord, you can choose your tenants based on their financial qualifications. You can’t discriminate based on race, religion or in that sort of thing. But you can discriminate based on their credit score, job, income, debt to income ratio or based on what they did on their last place that they rent from, so you can deny their application. Choice of tenants is the biggest problem in owners’ experience. They tend to choose unwisely. Some owners do lousy job in marketing for tenants so they don’t get many applications, and they end up choosing from the bad list of potential tenants. It starts with good marketing; really getting your property out there that would allow everybody to see that your property is for rent. You also need to price it correctly. If the rent is too high you get a whole lot less people looking at it. Assuming you get the right mix of people looking, then it boils down to choosing the right tenant. Now, first thing that you should consider in choosing a tenant is their job. What their job is more important than almost anything else. No matter what their income level is, does not matter. It has more to do of how they create that income. Now, the worst is self-employed. Self-employed people don’t have constant or stable income. The best are nurses, as they always got a job and if they fall behind on payments which tenants do, nurses can always pick up an extra shift.

Cash Flow

Properties got to cash flow well. It’s going to bring you a lot of good money because all kinds of things can go wrong and you need a buffer or a margin of safety. Even if the hot water heater breaks down or the AC unit breaks, you’ve always got money coming in.

Reserves

You got to have reserves to support your committed expenses when things go wrong. Mostly, what goes wrong is the tenant don’t pay you and you have to evict them. If you won’t get paid, there is a 2-3 month empty house payments and you got to fix a lot of things. This is kind of like a funny money because you get it, but then you may have to give it back. A simple way to overcome this problem is what we called a “rent to own” agreement. With this agreement, you get an upfront down payment and that usually is your reserve in case things go wrong.

Local Laws

Local laws can change dramatically from county to county, not even from state to state. You need to read your landlord and tenant act for your county and you need to make sure you understand all of it, even the little things like putting screens in all of the windows. All agreements must follow these technical legal procedures and if you won’t obey, that will become a problem when you try to evict somebody and they will find a loop hole in order to ruin your life.

Prepare for Eviction

Before you put a tenant in your property, you need to take all legal documents of your property, bring it to your eviction attorney and start the process. And if you don’t have one, make sure you find a great eviction attorney. The more eviction the attorney does per week or per month, the better they are. This shows their experience on how they handle their job.

Take that agreement to your attorney and ask them what needs to be in there to make it easy for you to evict. Before the tenant moves in, you need to get all the information and the data that an eviction attorney’s going to want. The more data you have on that person, the easier it is for the eviction attorney to track them down. Now, preparing for an eviction means you need to be prepared to evict somebody, and if you don’t have the stomach for that, then don’t own a rental property.

Evict

If you’re going to be an owner of a rental property, you need to evict. If you don’t and if you let people live in your homes and not pay you for months in return, they tend to take advantage of you as a landlord. You are doing a disservice to society.

Keep a strict system and don’t give longer grace periods. That’s how you make it roll.

Auto collect payments

Rather than waiting for the check in the mail, what you do is you draw the money out of their bank account. All you have to do is to set up what it’s called a “merchant account”. It takes a little bit of money but not much.

There are good options these days whether its PayPal or Square, but the best merchant account comes from your local bank – the place where you do your business banking. All you have to do next is get their credit card information as well as their bank account information. If it doesn’t come out of the bank, you can pull off from the credit card. Now with auto collect, nothing is ever late. It is always on auto pilot.

Stay close to home

It’s so much better to own all your rental property close to your home, where you can just drive over to them and see what is going on.

Knowing these principles will make you a good landlord. Knowing all the tenancy and property laws, tax laws and by-laws will captivate good tenants. And being a good landlord and having good tenants will make you earn a huge amount of money from your rental properties.

Atwell & Co Real Estate
Unit 6 / 29-30 Grattan Street Prahran, Victoria 3181
Phone: (03) 9510 6203 URL of Map