Do’s and Don’ts of Being a Landlord

Being a landlord is supposed to provide you with residual income and long-term wealth. There are some things you need to know before you even advertise the property to prospective tenants. The do’s and don’ts on this list will help you avoid making costly mistakes as you build your real estate portfolio.

Do’s

Knowing the Arizona Fair Housing and tenant laws could help you avoid unnecessary legal issues as you grow your investment portfolio. As a new landlord, take note of these tips from those who’ve been successful in the business.

Do Screen Tenants

Before you enter into a lease agreement with a tenant, it’s important to learn all you can about them. There are plenty of tools available, both free and paid, to help you do this. At a minimum, you should know a prospective tenant’s rental history, whether they’ve been evicted and why, whether they pay their other bills and if they have a stable job history. Some landlords have strict guidelines and won’t accept a tenant with any evictions or recent late payments on their credit report. Others look at each individual’s unique situation and may give some tenants who had problems in the past a second chance. As long as you comply with the law, it’s up to you but you should have a screening process in place and apply the same rules across the board to avoid discrimination complaints.

Know the Law

There are state and federal laws that prohibit housing discrimination. As a landlord, you need to know the reasons denying housing to an applicant is acceptable. For example, you may be able to reject a single mother of three because she’s been evicted from her last three rental units but you can’t deny her application simply because you don’t want to rent the apartment to someone with several children. A discrimination lawsuit could cost you a lot of money, even if you win. Avoid legal issues whenever possible by knowing the laws that apply in your state and locality.

It’s also important to know the proper way to evict a bad tenant. Knowing the proper procedure to follow before you even rent a unit can help you avoid costly mistakes when one of your tenants doesn’t pay their rent or commits a lease violation that results in eviction. While you might want them to leave right away, following the legal process can help ensure you get reimbursed for your losses and they have to leave your property. This is one area that a Phoenix property management company could help you with. Experienced property managers understand the eviction process so they rarely get it wrong.

Do Make Policies and Stick to Them

Your lease is going to outline when the rent is due and the tenant’s general rights and responsibilities. Other policies might not be appropriate for the lease agreement but they are still important. For example, if you will only accept money orders for payment of rent, you need to let your tenants know. If you don’t want to be bothered about routine maintenance, create a policy that includes a schedule so you’re tenants will know in advance when they can expect you to work on their units.

Do Outsource

Soon after becoming a landlord, you’re probably going to realize it isn’t as easy as you thought it would be. The good news is, you don’t have to do everything on your own. You could hire a Phoenix property management company to manage all aspects of your properties while you enjoy the benefits of owning rental property. If you want to be a hands-on owner and manage your own units, you could outsource some time-consuming tasks like landscaping and property maintenance. Outsourcing the duties you don’t enjoy will help keep you from getting overwhelmed and giving up before you reach your goals.

Do Be Professional

As a landlord, you want your tenants to treat your property as they would their own. One of the best ways to do this is to show them you take your business seriously. Set up an office before you start taking rental applications. Get a business phone line to avoid giving prospective tenants your personal number and set up a greeting so they know they’re calling a business. Always be polite and respectful to prospective tenants before and after they sign a lease. This professionalism will lead to referrals for quality tenants and make your job easier in the future.

Think Like a Marketer

In order to maintain full occupancy, prospective tenants need to be eager to move into your property. The best way to achieve this is to market your rental units to people who are most likely to want to live there. Knowing that current tenants are more profitable than new ones and that satisfied tenants are likely to refer their like-minded friends, the way to prosper in this industry is to keep the people happy who pay you on time every month. Talk to them. Find out what improvements they would like to see in their community. An Arizona property management can help you with marketing to ensure you get the most qualified tenants in your door when you need to fill a vacant unit. Giving people what they want is going to ensure you don’t have half-full buildings, causing you to have to lower the rent in order to get people to move in. Remember, low rent isn’t the best way to find ideal tenants. Make your property irresistible and renter will pay whatever you ask.

Be strategic when you invest in renovations. The improvements you make should be ones that will help you make more money. For example, adding a fitness center or a pool could be a wise investment whereas updating the flooring to expensive hardwood might not. This is where researching other nearby rental properties can be invaluable. Find out what other landlords charge and what amenities they offer. Focus on communities that demand higher rent when you have money to invest in upgrades.

Do Respect Tenant’s Privacy

You know a lot about your tenants because you did a background check prior to renting them a home. That information needs to stay confidential. Before you release any information about a tenant, get a signed release from them documenting the information you can tell. For example, you might get calls from lenders or schools to verify a tenant’s address. If the tenant hasn’t already prepared you for this call and you cannot reach them, only release public information. Telling anything the tenant doesn’t want the caller to know could get you in legal trouble. Of course, you should always comply with law enforcement, even though you may have a policy to require subpoenas before you release information.

It’s important for you to give tenants notice before you enter their units for anything other than a true emergency. Whether they paid their rent for the month or not, you cannot legally enter the unit while they occupy it without giving notice. Your lease agreement should specify the reasons you might need to enter and the length of notice you will provide. Also, establish a preferred method of contact with tenants to ensure they’re informed before someone enters their unit. A written notice could blow away but a phone call or email to confirm the appointment will ensure tenants aren’t surprised by your knock on the door.

Do Allow Tenants to Feel at Home

Tenants understand they don’t own the property but because they’ve signed a lease and pay you to live there, they have the right to feel at home. Allow them to make minor improvements to the unit, such as painting the walls or adding hardware for window treatments. The more tenants feel at home in their rental property, the more likely they’ll be to renew at the end of the lease term. In order to allow tenants to feel comfortable, you’ll have to release any emotional attachment you have to the property. It might be your building but it’s their home.

Do Place Limits on Pets

Pets are part of the family for many people. Telling tenants they cannot bring their pets might limit prospects and could result in vacant units. Instead, place limits on the type of pets you’ll allow. For example, you might not mind having dogs at your rental property but because large dogs and certain breeds present more of a liability than others, you might limit tenants to one dog under 20 pounds. Another option is to require tenants to pay a deposit or add a fee to the rent for tenants who have pets. In addition to the liability they might cause, large dogs are also more likely to damage the interior and exterior of your property. Essentially, being pet-friendly can be an asset but being too pet-friendly could cost you a lot of money.

Don’ts

You have a screening process and clear policies in place to avoid unnecessary risks. In addition to all the things that are important for you to do as a landlord, there are several things you should avoid.

Don’t Rent to Family or Friends

Doing business with family and friends rarely ends well. People who are close to you are more likely to expect an extension on the rent or even to pay less than other tenants. Since you started this business to make a profit, it doesn’t make sense to rent to people who are most likely to cost you money.

Don’t Make Friends with Tenants

There’s a difference between being friendly and being friends. Being friendly will help your tenants see you as a real person who deserves respect. Be sure to treat all of the tenants with the same friendliness to avoid the appearance of favoritism. On the other hand, making friends with your tenants is likely to backfire. Once you start making friends with tenants, they may start asking for or expecting favors from you, like not increasing their rent when their lease expires. It’s not worth the stress or financial loss.

Don’t Own the Property in Your Own Name

If you’re going to manage your own rental units, you shouldn’t own them in your own name. Owning rental property in the name of a corporation or LLC gives you the opportunity to claim you don’t have the authority to make decisions and therefore need to ask someone else. This won’t absolve you from having to make decisions but it could prevent tenants from getting upset with you when you have to tell them no. After all, you’re only relaying messages from the owner. Your tenants won’t blame you personally for things that go wrong and they’ll give you a chance to consider their special requests.

Don’t Chase Rent Checks

If you screen your tenants thoroughly, you should know whether they’re going to pay their rent on time before they move in. To avoid having to chase a security deposit, require it in full before a tenant gets any keys. Nice landlords who take less than the full amount upfront are only asking for trouble down the road. You need to set up a system to collect rent so you don’t waste time every month chasing your tenants’ rent money. Make your policy clear at lease signing and give tenants more than one option to pay you. You might give them the option to pay by money order or by making a credit card payment to you through a secure online portal. Many Arizona property management companies steer tenants toward online payments because they can set it up automatically with their bank. Whatever option you choose, make sure your tenants know they will have to pay extra if the rent is late. Charging a late fee discourages most tenants from procrastinating or even forgetting to pay on time.

Don’t Attempt to Do Repairs you Aren’t Qualified to Do

As a landlord, you’re responsible for keeping the building safe and livable. Things are going to go wrong and you are going to have to get them fixed. Doing your own repairs is not always the most cost-effective way to handle maintenance. In fact, if your knowledge of plumbing only consists of using a plunger to pull out a minor clog, you need to have a professional on call. Trying to make repairs you don’t know how to do is going to frustrate your tenants and cost you more in the long run. Before you rent your first unit, connect with professionals who can do basic apartment maintenance. You’ll need people who can do basic appliance repair, plumbing, drywall work, minor roof repairs and HVAC maintenance. Having people you can call to complete work quickly will help you look professional in the eyes of your tenants and convince them they made the right decision to rent their housing from you.

Don’t Invest all of your Time

Being a landlord, if you do it right, should result in positive cash flow. Use some of this extra money to take time off and enjoy yourself. Your tenants aren’t going to miss you if you take a week or two off in the middle of the month. If you’re worried that something will go terribly wrong in your absence, hire a Phoenix property management company to take care of your properties. As long as you screen your tenants and they have a track record of following your policies, there’s no reason you need to be available to them 24 hours a day. Ideally, tenants only need to see the landlord when they need repairs or when it’s time to sign a new lease. Get your tenants into a habit of emailing you for non-emergency issues and you’ll have a lot more free time.

Real estate investing is one of the fastest paths to generational wealth. New landlords are bound to make some mistakes but those mistakes should not put you out of business. By following Arizona and federal laws, treating tenants with respect and getting help when you need it, you’ll be off to a great start.