Single Family Investors: Reluctant Landlords In A Down Market
In a down market, even real estate investors who expected to be able to fix and flip their properties may wind up having to become landlords. If you are in this situation, you may be having nightmares about all of the headaches involved with being a landlord. But there are a few things you can do to make things easier on yourself. Here are some tips.
Be smart about screening your tenants. Don't just settle for the first people who answer your ad. And don't think that renting to a friend or relative will automatically solve your problems. Friends and relatives can actually be worse tenants than people you don't know. (In a worst-case scenario, they're much harder to evict.)
Have them fill out a tenant application form. You can find these forms at your local bookstore or online for a small fee. Take the time to make the phone calls to check their references. Make sure you call their last housing reference, and that your talk with their employer. Be friendly on the phone. The former landlord and employer may give you more information than you ask for if they feel comfortable talking with you.
In the current economic climate, bad credit is an increasing problem. But there are ways around that. If your local laws allow it, charge a large deposit fee. If you have first and last month’s rent, plus an additional fee for a damage deposit, your tenants will be much more likely to take good care of your property.
And make it clear in writing that the deposits will not be allowed to be used in place of rent. Include a clause that states very clearly that eviction proceedings will occur if the rent is more than three or four days late. That way, if your tenants don't pay rent and tell you that they want to apply their deposit, you could start eviction proceedings almost immediately, but you would have two full months rent plus a damage deposit to cover your cash flow until your property is available to rent again.
Another thing you can do to minimize your headaches is to offer a slight reduction in the monthly rent if your tenants pay it on time. This often works better for your cash flow than having a penalty for late rent. It makes you look like a "good guy", and it makes your tenants more motivated to pay their rent on time.
But if the worst happens, and you do have to evict a tenant, you may be able to get them out faster, and with minimal damage. This way, at least you can re-rent the property sooner and maintain your cash flow. Offer them part of their deposit back, in cash, if they vacate the property by a certain date and time. And specify that the property must be "broom clean". That means all of their furniture and belongings are gone, and all of their trash is removed. Now you can get your cleaning and fix up crew in quickly get the property back on the market as fast as possible.
Author and entrepreneur Bernz Jayma P. is the owner of a financial blog, dedicated to helping people expand their knowledge about their personal finances. Learn up to date investing strategies and retirement planning by visiting www.Invesmint.com.
Click the XML Icon Above to Receive Security Articles Via RSS!
