Now that you’ve selected your first rental property, you’re ready to list your openings and earn an income! Much like in other businesses, your tenants drive your success and your profits. If you want your investment to pay off, you’ll need to manage your tenants well, take care of their needs, and set clear terms for your rental agreements.
For first-time property owners, tenant management tasks like setting rates and fielding requests can be overwhelming but investing in this market will eventually prove that you’re investing in yourself. If you need a little help developing a strategy for managing your renters, keep reading.
1. Choose Reliable Tenants
One of the best ways to ensure that your rental will succeed is to screen your tenants before approving their rental applications. Bad tenants can cause serious damage to your property and jeopardize your rental income, so you need to be selective.
A good way to identify a good tenant is to check their financial history. Most landlords will verify potential tenants’ income and check their credit history to judge their financial standing. These steps ensure that the applicants can afford the monthly rental fee and that they are managing their debt and bills responsibly. Both of these factors prove to landlords that the tenants are able to make monthly payments on time.
2. Establish Clear Rent Deadlines
It’s good practice to select tenants who appear to be able to pay their rent on time each month, but you need to have a system in place for instances when rent is late or unpaid. Sometimes, there are good reasons for tenants to need extra time to submit their payments. Other times require a solid plan for dealing with an unpaid balance.
Many landlords institute late fees and grace periods for tenants whose payments are late. Grace periods–which usually last for 3 to 5 days after the initial due date–are added into lease agreements to account for regular payment problems like bounced checks, deposit turnover times, holiday bank closings, and more. After this period ends, tenants can be charged a late fee that is usually 5% or less of the monthly rent.
This process offers some flexibility for tenants with unexpected payment issues and tight monthly budgets while still allowing landlords to set firm boundaries with their tenants. Most landlords prefer to have policies like this that defer potential repercussions of unpaid rent, like eviction.
3. Handle Requests & Issues
Another responsibility that falls onto landlords is tending to their properties at their tenants’ requests. Sometimes, tenants will notice malfunctioning appliances, broken fixtures, and other household hazards that the property owner is responsible for fixing. To keep your tenants safe and happy and keep the terms of your agreement, you will have to resolve their issues and address their concerns.
One way to do this is to DIY a lot of property maintenance needs. Handy landlords can take on minor plumbing problems, fixture replacements, and appliance repairs themselves, but you can hire separate property managers or service companies to do those jobs if you have the funds.
4. Consider Potential for Growth
To make the most out of your rental investments, in the long run, you should view these tenant management experiences as a starting point. Get comfortable working with your first few tenants and consider upsizing for your next rental property purchase.
If you do choose to expand your portfolio with more rentals, you can exponentially increase your rental earnings. There are commercial financing options available to help you buy larger properties, and as your operation increases, the opportunity for you to step back from your landlord duties and serve primarily as an investor will make your passive rental income even more satisfying.
If you’re anxiously preparing for your first tenants, keep these tips in mind and develop a strong strategy for managing their needs as well as your own. Despite the stresses and struggles, properly managing your property and your tenants will pay off for you in the long run!