History has shown that investing in real estate has proven to be very lucrative. But owning real estate is not necessarily a “hands off” investment if you decide to take the realty management into your own hands. There’s a few things you need to know in order to keep your property fully rented with as few vacancies as possible together with developing some skills of selecting the right tenants as well as keeping them happy while they are with you. Furthermore knowing what to do when disputes arise is also paramount. So let’s look at a few of these points one by one.
Hopefully your property is located in an area that has a relatively low vacancy rate which will make the selection of tenants more abundant. However selecting the right tenant is crucial and you want to make sure that you don’t end up with a tenant that is not going to pay the rent or be a nuisance to you and your other tenants. In order to do that, here are a few pointers.
Always ask the prospective tenant for a full application that will provide you with all their pertinent information including where they currently work, how much they earn, where they currently live and have lived for the last 3 years together with past landlord contact information. Having this information is necessary so that you can do your due diligence confirming that the information they provided is accurate. That, of course will require you to pick up the phone and confirm it all. If I could make a point here with regards to asking past landlords for references, make sure that you not only call the current landlord, but the landlord previous to him/her. Remember if they are troubled tenants, you may get a good reference from the current landlord because he wants to pass his/her troubles onto you. This is not always the case, but not unusual none the less. Ask the past landlords if they were good at paying on time, if they caused any trouble and did they give the past landlord proper notice when they left. You may also want to ask the prospective tenant to provide with a copy of the credit report at their expense. My experience has shown that although this is something I always ask for, I don’t necessarily rely on it completely because sometimes good tenants have not so great credit. I usually rely more on past landlord’s references then the credit report but this is something you’ll have to make a personal judgment on.
Lease preparation is very important because you want to make sure you have everything in writing. Furthermore you also want to make sure that your lease is properly executed within the boundaries of the law so that if there are disputes in the future, the document is not rendered invalid because it contained sections that were not in line with the tenancy rules and laws of your state or province. So the short answer here to consult with a lawyer that is clear on this section of law and spend a little money and have this important document properly drafted.
Obviously keeping the property in good repair will not only protect the capital appreciation of your investment, it will also enable you to draw on a good quality tenant. It is important that all maintenance be done in a good workmanlike manner so having some contacts such as plumbers, electricians, and handymen will enable you to not only keep your tenants happy but keep your property in good repair.
As I mentioned earlier, owning real estate is not a “hands off” investment and from time to time you may run into a situation with an unreasonable or unhappy tenant. That’s why I said that it is important to have everything you and the tenant agreed upon at the time they moved in, in writing. So if you and your tenant have reached an impasse, it is important that you follow the process of terminating the tenancy to the letter of the law. Become very familiar with the required documentation to do so and make sure that it is properly executed so that if you are required to go to court or a tribunal, the termination is not granted because you were sloppy with the paper work.
Hopefully this article has provided you with some good information about realty management and please don’t hesitate to contact us if you have any questions.