Monday, September 8, 2014

12 Real estate investment tip for great renters and landlord-friendly leases.

Owning rental property is one of the best investments you can ever make. In fact, 94% of millionaires surveyed say they have significant real estate holdings in their portfolio. Yet many people with the means to buy rental homes are intimidated by the prospect of dealing with tenants. But with a little strategizing, you’ll attract great tenants who pay on time every month, putting plenty of money in your pocket as rents and home values go up. Many people chose to enlist a property management company to have them handle it all, like Vienna Property Management. But whether you outsource a property manager to eliminate all your renter headaches or chose to take it on yourself, you should understand these strategies to get the best renters and earn the highest rents.

1. Put a big sign in the front yard advertising the rental, listing the features (2 bedroom/2 bath, big garage, fireplace, new carpet, back patio, etc.) but not the price. You’d be surprised how many people find rentals through signage, and will be intrigued to find out how much you’re charging. You can even put a few directional signs at nearby busy cross streets to pull in traffic.

2. The phone number on the sign should ring to a voicemail that details all the specifics about the property – including price, credit requirements, whether you allow pets, the deposit amount, and when it will be available to show. The voice message can also offer your email address so they can contact you that way – which is far more efficient than phone calls.

3. Very soon, your phone will be ringing. But instead of driving out to the property every time someone says they’re interested (and hoping they show up,) host two scheduled open houses every week. That way, whenever a potential renter calls, you can tell them that there will be an open house on Wednesday night between 5-8pm, or Saturday between 10am and 2pm, etc. 

4. When you call these potential renters back, get their email address and send them plenty of photos of the inside of the home, a detailed “spec sheet” that lists the features, average utility costs, and rental requirements. Also, you can email them an application to be completed and brought to the open house – or emailed back to you ahead of time. 

5. Advise potential renters that there’s a fee for submitting an application – about $15 to cover the cost of pulling their credit history. This will weed out all the applicants who aren’t serious or motivated enough to put a little bit of “skin in the game. “

6. I suggest you avoid renting to friends or working out special deals, trades for work performed, etc. Those almost never work out! Keep it simple and clear and do not deviate from a smart business arrangement. 

7. Talk to your neighbors, letting them know the property is for rent and give them one of those spec sheets you emailed out. People love to get their friends, coworkers, or family members as neighbors instead of some random person, so they’ll be happy to spread the word.

8. Once you have your open houses and have a few great renters who are interested, you (or your property manager) will pull their credit. But don’t forget to do a criminal background check on them and call their employer and references to verify everything. If you’re ready to offer the property to someone, give them a small window (maybe 48 hours) to sign the lease and bring a significant good faith deposit toward the first month’s rent. That way, they won’t be able to waste your time or even worse, sign the lease but then walk on you when it’s time to move in.

9. You can generate interest for your rental and sweeten the pot for a renter by offering some fun bonuses they normally don’t expect. For instance, offering free cable television or Internet for six months or a gift card to a grocery store once they move in will garner interest and put you ahead of other rental options- your competition. Remember that you want as many serious, motivated, and realistic people to apply as possible so you can make a great choice – not settle.

10. Keep the rent low to attract plenty of great tenants but you can make up for any perceived losses by negotiating utilities and extras. Write into the contract that the tenant pays for landscaping, water service, etc. to recover a few dollars. Prorate an early move in date before the first of the next month to gain a chunk of change. Write in the contract that they’re responsible for small fixes – perhaps, under $50 – so you won’t have to deal with changing every light bulb, fixing every clogged toilet etc. 

11. Keep rent low but have high penalties for late payments in the contract. If a tenant does what they’re supposed to do, they’ll benefit. But if they start paying late or miss payments, you’ll be well compensated for your time and inconvenience. 

12. Yearlong rental contracts have little benefit to the landlord (in certain markets) because if a tenant is going to move out, they’ll do so anyways. So consider a month-to-month lease with slight rental increases built in – like 5% every six months. Keep the increases small so they barely notice but explain this is how you can afford to charge lower rent from the start. It’s much easier – and cheaper – for them to stay put and not go through the hassle of moving all over again.

If you have any questions or just would like to know what rents are going for in a certain neighborhood, give Vienna Property Management in Rocklin, Ca a call – they’re great people and do a wonderful job turning rental properties into efficient cash-flowing investments!  

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