Great...you're building your wealth through a proven method...real estate! Managing your investment can be a rewarding and profitable experience while saving you 7% to 10% in property management fees. However, like most endeavors it takes dedication, effort and a system to be successful. Key points to becoming a successful landlord include:
Count to 10! Attack with a smile and counter attack with kindness but be firm. Never get into an adversarial relationship with your contractors, city officials or clients. These are the people in your world you depend on.
Be firm with your standards: if rent is due by the 5th and it is late CALL YOUR TENANT that day! Waiting until the 15th sends the wrong signal and will be interpreted that you are weak and can be pushed around. Send a letter summarizing the issue immediately.
Note: sometimes the tenant has no choice but to pay late. When it does get a firm payment receive date which includes your principle and late fee!
If your tenant is late twice in a row, send a 7 day notice of eviction, then call them to discuss the situation.
If a tenant fails to met the agreement date send a 7 day notice. If they lie once they will do it again and again. Remove them fast from your life otherwise it is money down the proverbial drain.
Know your rights and be firm but fair with enforcement: the FHS contract outlines the landlord - tenant responsibilities...know them. Many FHS properties will be furnished with HUD S-8 tenants which may test you by asking you to do every little thing for them...do not get caught in this trap...learn to say no!
S - 8 tenants are especially good about keeping the rules once you've set the groundrulles; they don't want to lose their S-8 subsidy! One warning letter usually does the trick to putting everyone on the right track!
Give back some love; tenants are paying your investment's property taxes, insurance, and mortgage payments. We suggest hiring a contractor (i.e. FHS) twice a year to trim the hedges, weed/feed the lawn, clean out the gutters or some unexpected services (total ~ $175 investment per year is all) which will send a positive message to both the tenant and the neighborhood.
Avoid court but When you go...go all the way: starting and stopping sends the wrong message and you just lose money
Respond immediately to tenant complaints...keep them happy and avoid conflicts: people asking to be heard need to be heard otherwise there will be a fallout. If a complaint is valid correct it right away otherwise the tenant will probably hold back the rent until the problem is corrected. Generally, if a renter is more than one month in the rears you'll never receive another payment. They know it will take 2 months to finalize an eviction judgement so at $800/month rent you have now lost $1,800, or in their view they have pocketed $1,800! Plus you pay the legal fees
Have a good record keeping system. Keep important files locatable and at you fingertips including; tenant correspondence, contractor contacts, lease agreements, City contacts. Learn the local housing ordinance, your lease conditions, and spend time to know your tenant so you will can better deal with them. If you get pushed respond accurately to maintain a positive image.
Qualify your tenants: FHS has placed a qualified tenant in your property. A background check via a web based company (check credit and evictions) and the references furnished were contacted. You should be set. Periodically contact your tenant to insure you have an accurate contact number.
Don't buy junk in Bad areas & keep your property up: problematic properties in deteiriating neighborhoods will attract similar tenants. You are not renting out the Hilton but systems need to function properly (plumbing, windows open/close, electrical).
Buy right and charge appropriate rent. The best ROI property is one that keeps the client in the building avoiding replacement costs. Charge a fair rent, review it annually and adjust accordingly. Don't over pay for property and keep your equity in it!
Rent-to-Own: speaking to a long time realtor in Toledo recently, he mentioned the wealthiest man in town was a landlord always leased his properties out as a R-T-O. It provided higher then market rental fees and provided the tenant with a pride-of-ownership. Cut a deal; maybe the renter pays the taxes, or all the maintenance, or charge them extra rent (to be applied to the purchase) or a larger downpayment. Hardly anyone buys the property but if they do it's at a profitable markup. And if they do not purchase the property then you have collected increased rents! And they usually take care of your investment better.
FHS Support: as an FHS customer we can provide you with forms, letters, spreadsheets, and contracts FHS uses to manage our business. Give the office a call!
In summary, for 25 years I have successfully managed my own investments located all across the Eastern US using the simple rules listed above!
Happy Investing!
John O Evans
Federal Home Services, Inc P.O. Box 531238 Livonia, MI 48153