types of rental property can be lucrative, so I suggest that you jump in wherever you have your first opportunity, because no rules mandate your starting position.
Renting Your Property
One of the first and most important lessons I learned when I started in property management more than 40 years ago is that vacant real estate isn’t a very good investment. You need to fill those vacancies and keep them filled with tenants who pay on time. Just try looking in the mirror and telling yourself that all the rent came in last month. I bet you can’t do it without smiling!
Renting your property and retaining your tenants don’t magically happen, of course; those tasks require having a plan and doing a lot of work. But you want to work smart, not just hard. In the following sections, I cover some of the best practices for preparing your rental units, setting your rents, attracting qualified prospects, and closing the sale.
Chapter 4 expands on where everything begins: acquiring the rental property. Part 2 helps you position your new rental property within the rental market and discover how to find good tenants.
Preparing the property
Before you can rent your property, you have to make sure that it’s ready for a tenant to move in. But you can’t simply put up a “For Rent” sign and expect to rent to the first caller; you need to spend some time preparing the property properly. And by some time, I mean a lot.
Relax! Tear up your applications to those reality shows that renovate your fixer-upper for free, because you can prepare your property yourself. Just remember to focus on the inside as well as the outside. Chapter 5 shows you the best way to determine what to upgrade and renovate to meet the needs of your target market. I also explain how to ensure that your property’s curb appeal (exterior appearance) makes potential tenants want to see the inside — not keep driving by or swiping to the left to the next property on the list.
Preparing the unit properly also often requires the use of outside vendors, suppliers, or contractors. What you don’t contract out — tasks such as basic cleaning, maintenance, and painting — you need to do yourself. You also need to know how to perform a careful inspection to make sure that the unit is ready to show. I give you details about how to accomplish all these tasks in Chapter 5.
Knowing how much to charge
Understanding what you can charge your tenants is far from arbitrary. Setting the rent in particular can be tricky — especially if you’ve just spent hours investing your time and sweat in renovating and scouring your rental unit to make it sparkle.
In such cases, you may overestimate the market value of your unit because you have so much personally invested. But your prospects aren’t likely to be impressed that you laid the tile; instead, they’ll quickly point out that the flooring color doesn’t match their furniture. But if you lower the rent $300 per month, they’ll consider taking the unit off your hands, almost as though they’re doing you a favor. You may be able to structure some mutually beneficial rental concessions, but don’t be a pushover.
Many rental property owners are simply too nice. Maybe you’re someone who has trouble bargaining and holding out for the top fair-value dollar. You may be kind of like my mother-in-law, who was a sweet but overly generous woman — especially when it came to yard sales. My wife and I are glad that no one ever offered Rita 50 cents for our car!
In addition to setting the rent, you need to make the following decisions before a tenant moves in:
The amount of the security deposit: Setting security deposits is a function not only of market conditions, but also limitations on the amount you can charge and whether that amount is fully refundable. These restrictions are set by state laws. Determining whether you want to pay your tenants interest on the deposits you hold is also subject to law, but certain advantages can warrant doing so even where not required (especially for long-term tenants). The best way to decide on all the details of the security deposit is to conduct market surveys to see what others are doing. If everyone else has security deposits set at approximately half of a month’s rent, requiring your new tenants to come up with a security deposit of two full months’ rent on move-in is difficult.
The type of rental contract: Another important decision that has lasting consequences is deciding whether a lease or month-to-month rental agreement is best for your property. Although the residential rental housing industry is trending away from leases because they tend to favor only the tenants, you should reach your conclusion after conducting a market survey and understanding the pros and cons of each type of contract.
Check out Chapter 6 for more info on determining how much to charge, setting deposits, and figuring out what type of rental contract to use.
Capturing prospects’ interest
A successful property manager needs to understand the role of marketing in creating demand and meeting the needs of local renters. Fortunately, your marketing and advertising possibilities have increased dramatically with the advent of the Internet and social media. You (or in my case, my grandchildren) can develop a fantastic website with digital photos, floor plans, and 3D tours. Just make sure that you follow all the fair-housing laws as you work to generate rental traffic.
In Chapter 8, I review various electronic and nonelectronic options for promoting your rental property and attracting prospective tenants.
Turning interest into property visits
The ways to attract potential tenants are endless, but the fundamentals of getting them to visit your property center on your ability to answer their questions — typically online at first, and later on the phone or in person. You also need to be sure that you understand fair-housing laws when you prescreen an interested party, as discussed in detail in Chapter 11. You need to understand how to qualify your prospects properly and legally, for both what you want in a stable, long-term resident and what they need to call your rental property their home
