5 Simple Keys to Successful Landlording

One reason many prospective real estate magnates hesitate to invest in rental properties is that they don't think they will make good landlords. If this describes you, fear no more. Remember these five key points and you'll have happy tenants and a healthy income stream.

1. Set a Reasonable Rent Set your rent based on local information. Check the local papers for other apartments in your neighborhood. What are they charging? What are the amenities? How do your units compare?

You can also join a local apartment owners' association and find out from them how the local rental market is doing. Members are often honest about their rents with fellow members. And you can learn from people with years of landlording experience. (If you’re not sure where to start, Rental Property Report maintains one listing of associations on its Web site.)

Consider giving your good tenants an incentive to stay. Experts suggest that it takes seven times more money to find a new tenant than it does to keep an old one. So reward your best occupants (those who always pay their rent on time, don't have complaints against them and obey all the leasing rules) with a discount on their rent.

2. Write an Enticing Ad When you advertise your rental units, do two things:

• Indicate the basic information about the property (size, location and price)
• Describe the unique features (washer/dryer, off-street parking, deck, on-site appliances)

Potential tenants usually know exactly where they want to live, how big a place they'll need and what they can afford to pay. Always include the rent and any security deposit requirements in the advertisement and you’ll automatically pre-qualify your tenants. If they can’t afford the rent or the security deposit, they won't call—and you won’t waste time talking to people who won’t be able to pay the rent.

Place your ad in several local papers and run it for at least a week. You especially want your listing to run in the Sunday edition of the paper.

Include a telephone number and be there to take the calls. If you have a Web page for the property, include that URL as well.

3. Screen Tenants Carefully
Most tenant problems could have been prevented with a good screening before the lease was signed. Always take the time to thoroughly check out each tenant, because as you know, evicting bad tenants costs both time and money.

Rental Application
Ask each potential tenant to fill out a rental application. On the application ask for employment, income and credit histories; Social Security and driver's license numbers; former addresses; and landlord references. Then verify each piece of information, being sure to obtain a credit report for each person and always calling references.

Know State and Local Laws
Make sure that your rental policies and procedures aren't discriminatory. Get a copy of your state and local landlord/tenant laws and familiarize yourself with the Fair Housing Act, which states that you cannot reject potential tenants for their gender, sexual orientation, race, religion, ethnicity or country of origin, marital status, age, disabilities or for having children.

4. Be Consistent Most attorneys will tell you that half of their case load is based on inconsistency; people not following their own rules.

Landlords cannot afford to be inconsistent. You must treat all tenants exactly the same each and every time you interact.

For example, if you accept partial rent payments from tenants even one time, you may not be able to evict them for nonpayment of rent later. The court may decide that you accepted partial payments before—that is, you set a precedent of accepting partial payments—so you cannot require full payment now.

Make a list of your policies and procedures concerning rent payments, late fees for late payments, security deposits, etc. Give this policy statement to tenants along with their lease. In fact, make them sign an addendum to the lease that states they have "read and understood" your policies and procedures and will abide by them. Then be sure you follow your own rules consistently.

5. Document Everything Assume from the very beginning of your relationship that you will have to evict the tenant and then save every document as if it were evidence in a trial.

Send late payment notices as provided by your state and local laws. Keep copies of everything! If you receive complaints about tenants, send a copy to the tenant and keep a copy for yourself.

Documenting every step of your relationship with tenants will help you in any potential eviction proceedings and will show you which tenants are doing everything right.

Reward the good tenants, and of course, document that, too.

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