Hiring Property Manager

It is important to consider hiring a rental property agent when investing in commercial or residential property. A good rental property agent can help you to reduce a lot of the day to day work you must handle regarding your property. The key to making this type of arrangement work for you; however, is in knowing how to find a good agent and what to look for. 

One of the main tasks which an agent handles is finding tenants for your property and depending on the terms provide the rental agreement. If you decide to use an agent you need to make sure that your agent covers several critical areas. 

First, they should always provide you with an assessment of the reliability of the tenant. Not only should the agent check the references of prospective tenants but they should also utilize other methods so they can be assured the tenant will care for your property and pay their rent on time. Before hiring an agent question them regarding the methods they use for this purpose. 

You should also make sure that the agent will be able to handle the collection of rent effectively. Speak with them regarding the methods they use for collecting back rent when a tenant fails to pay their rent on time. In addition, find out how the agent addresses the issue of bounced checks. 

In addition, you should speak with prospective agents regarding how often they will inspect the property and what they will look for when they perform those inspections. Furthermore, find out how they will record information and provide feedback to the tenant as well as to you. This information can be vital to ensuring a well operated rental property. For Instance, find out how payments will be passed on to you and how frequently you will receive rental payments. Not all agents have the same policy. Some agents will actually retain payments for a month so they can earn the interest on the money before they pass the payments onto the landlord. 

Of course, you should also find out how much the agent charges for the services they provide. Shop around to find out whether this fee is on-target for the service which the agent provides. If the agent is providing a good, reliable service it can be a benefit to you and your investment property and as a result it can be a good investment. 

Be sure you ask to review any forms the agent uses, especially the rental agreement. You should always know the terms under which your rental property will be rented. Keep in mind that on site managers usually charge more however, that cost can often be offset by the fact that you may be able to decrease maintenance costs by ensuring you have a well run property. 

Remember that having a good property management agent can essentially bring you more of a profit. Perhaps one of the biggest costs you will face when operating a rental property is the cost associated with changing tenants. When you figure in vacancy rates, the cost is even higher. Therefore, it is obviously in your best financial interest to keep good tenants. A competent property management agent can help to make this a reality. 

Choosing your agent carefully and ensuring that you understand exactly what the agent provides and what they do not provide in terms of services can help to ensure that your investment is successful and not a headache.

Show Rental Property

In order to succeed when you invest in rental properties it is necessary to show your property to potential tenants. Just as if you were selling the property, you must make sure that the property is appealing to tenants in order to rent it out and begin collecting rental income.

First, it is important to understand that curb appeal can be just as important to tenants as it would be to buyers. Prospective tenants are often put off by properties which seem to be dilapidated on the exterior. In order to attract good tenants, you need to make sure that your property is inviting and shows the care that you have put into it. Even small rental properties can create a good first impression.

Click Here to watch video on how to show rental property

Repair issues should always be addressed prior to showing a property to prospective tenants. It is never a good idea to show a property which is still in the process of being repaired or renovated. Wait until the property has been completely fixed up before showing it. Also make sure the property is extremely clean. There is nothing worse for making a bad impression on a prospective tenant than a filthy property. Above all, be certain that the carpeting is clean. Ideally, it is best to have the carpet professionally cleaned after one tenant departs and before you show the property to the next prospective tenant. Be sure to allow plenty of time for the carpet to dry before you actually show the property to anyone. Never put off replacing worn carpet as this can cause problems in attracting quality tenants.

Before you actually show the property, take the time to stop by the property to be sure that everyone is set to make a good first impression. If the temperature outside is quite cold or hot, be sure to stop by the property to set the temperature inside the property so that it will be comfortable. Generally, most people will not wish to remain inside a property that is either quite hot or cold. If the temperature is uncomfortable, there is a good chance that most prospective tenants will not stay around long enough to see the best features of the property.

In addition, you will need to make sure that you turn on the lights before you show the property. This is particularly important if you are showing the property at night. If the property is not well lit, prospective tenants may wonder if you are trying to hide something. The few dollars you will spend on having all of the lights on during showings will often translate into a good investment as you are able to attract good quality tenants to your rental property.

Do not hesitate to show off the exterior and the grounds of the property. If there is some interesting feature outside, make sure you show it off. The key is to give prospective tenants an idea of what it is like to actually live there and that includes showing off the grounds as well.

Finally, make sure you are always prepared for all showings. When you show a property, you need to make sure that you have a rental application on hand as well as a copy of the lease you use. You also need to make sure that you have decided on terms such as security deposit amounts, pet deposits and key deposits.

Choosing A Tenant

Choosing a tenant can be one of the most confusing areas of operating rental property for many people. On one hand, you want to make sure you choose the most responsible tenant possible; a tenant who will pay his or her rent on time and one who can be relied upon not to destroy your property. Yet, at the same time you must make sure that you abide by fair housing laws.

Before you actually begin renting out your property it is a good idea to sit down and determine the criteria you will use to choose that best tenant. Without guidelines you will have no choice but to rely on your instinct to choose the best tenant and this could result in trouble if you are only relying on your feelings to make a tenant selection. One of the worst risks you can take is to let your own personal opinions and biases guide you in your decision because this could open the door for a discrimination lawsuit. 

First, you should always make sure that you notify prospective tenants that you utilize a fair system to make your decision. Ideally, it is best to include this type of statement on all rental applications. For example, you might state “Our policy is to rent our units in compliance with federal, state and local fair housing laws.”

Beyond fair housing laws, it is important to make sure you establish criteria that is concrete by which to judge all potential applicants. 

For example, it is common to require that the applicant provide identification that is verifiable. You may require the applicant to present a photo ID with their application so that you can make a copy of it. This type of requirement is valid because you may need it in the future in the event you need to describe adult occupants of the unit. If someone co-signs the application, it is also a good idea to obtain identification for them as well. 

It is also quite valid to require information which would help you to determine that the applicant has a sufficient income to rent ratio. If the applicant were applying for a loan to purchase a home, the lender would require similar information. The general rule of thumb is to identify applicants that have a gross monthly income that is three times the amount of the rent. One way to document this information is by requesting copies of the applicant’s pay stubs along with their application. If the applicant is self-employed, you might ask them to provide their last tax return in addition to three months of bank statements. If you cannot verify the applicant’s income, this would be a perfectly legitimate reason to deny their application as you have no assurance that they would be able to pay their rent. 

Many property managers and landlords also check credit ratings and scores on applicants as well. The purpose of this is to verify the financial responsibility of the applicant. The general guideline is to obtain a credit report on all applicants as well as any co-signers who are over the age of 18. Keep in mind that you will need to receive permission to run a credit report; however, you can request this information on the rental application. Applicants with low credit scores could be legitimately denied on the basis on being unable to prove financial responsibility. 

In addition, you should check references. Typically, you should ask all applicants to provide the names and telephone numbers of individuals who can verify the applicant’s income sources as well as character references. 

Finally, make sure you follow-up to check that the applicant has been able to successfully rent a dwelling in the past and paid their rent on time. In the event an applicant is unable to meet this requirement but does meet all other requirements you may consider requiring the applicant to have a co-signer.

Rental Property Rates

Setting the right rent can be one of the most difficult areas for many people who are investing in rental property. If your property rents out in no time, it could be an indication that you are not charging enough rent. On the other hand, if your property seems to take a long time to rent out, it could be a clear indication that your rent is too high. So, how do you go about setting a rental rate that is in line with the current market?

One of the best places to start is the newspaper. It is imperative that you do some local research to find out what kinds of prices are driving the local market. Location is the most important factor in determining rental rates. For example, a three bedroom, one bath home in one part of town may rent for a $800 a month while another property on the opposite side of town may only be able to draw $550 per month. Most prospective tenants look for convenience when searching for a rental property. They are either looking for a location that is near their work or close to their children’s schools. Neighborhoods that are considered to be trendy or hip can also be a driving factor, as many people like the idea of living in certain neighborhoods. 

Of course, the budget of the renter will also play a role in determining how much they are willing to pay and can pay in rent. Due to the fact that most renters have needs that must be filled, especially in terms of space, it is quite common for square footage to also play a role in determining rental rates. This means that larger homes and units will typically be able to rent for rates that are higher than smaller homes and units. 

When setting rental rates; however, it is also important to keep in mind that there is a certain point when rental rates can reach a cap. When interest rates are low, if rental rates rise too high, renters will quickly make the connection that it just does not make sense to rent any longer when it could be less expensive to buy a home. 

It is also important to keep in mind that basic amenities can also play a role in determining how much rent you can charge for your unit or apartment. Some of the basics expected by most prospective tenants include off street parking, running water, washer and dryer hookups, dishwashers, etc. If these basic amenities are not available, you may find that you need to either offer something else that would attract prospective tenants or lower your rental rate.

Pitfalls To Avoid When Investing In Rental Property

There are potential disadvantages to owning rental property; however, you can help to minimize possible pitfalls by following certain guidelines to protect your investment.

First, always make sure that your expectations regarding investing in rental property are reasonable and realistic. You should always approach the investment of rental property with the goal of achieving a positive cash flow; however, do not expect that you will be able to buy a new vacation home within a year.

In addition, it is important to make sure that you take the time to do your research and ensure that you understand the rules and regulations regarding the ownership and operation of rental property. As the owner of rental property, you must abide by certain federal and state laws which provide specific information regarding your liabilities and responsibilities.

Along those same lines, it is important to be certain that any lease or rental agreements you handle are absolutely legal. If you handle a lease or rental agreement which is not legal, you may experience a number of problems if your tenant happens to violate terms of the lease. To be safe, it is best to have an attorney draft your lease and rental agreements.

Before purchasing any rental property, be sure to have the property inspected or else you may discover you are facing a set of expenses you did not anticipate. Having the property inspected by a professional before you sign on the dotted line will involve an expense; however, compared to the expenses you could face by purchasing a property without an inspection, it is certainly well worth it.

When you begin the process of renting out your property, take the time to run credit checks and call references. These are both steps which many novice landlords often overlook in their rush to fill their rental properties and begin turning a profit; however, it can be detrimental. Remember that having an empty unit is always better than rushing and having an irresponsible tenant who may destroy your property, get behind on their rent and ultimately prove difficult to evict.

Joining the Landlords’ Association in your local area can also prove to be helpful by putting you in connection with experienced investors and landlords. You can also gain access to reliable contractors, inspectors and other professionals who can make the process of operating rental property much easier.

It is also imperative that you make sure you have adequate property insurance as well as liability insurance. Property insurance will help to protect your investment while liability insurance will protect you in the event anything should happen to someone while on your property.

Finally, make sure you take the time to establish an emergency fund in order to cover expenses which may crop up unexpectedly. Remember that you are operating a business and as such you must be prepared for those times when expenses arise. The exact amount that you wish to contribute to your emergency fund is ultimately up to you; however, it should be sufficient to cover typical expenses that may arise. The general rule of thumb is to put aside 10 – 30% of the value of your property. To make the process of establishing an emergency fund easier, consider setting aside a certain amount of your rental receipts each month into a special account.