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13 Points to have a Successful Rental
Today we want to talk about thirteen points to having a successful rental property. Now, this video may be a little bit longer, but I’m confident that it will be well worth your time.
Let’s jump right into it with number one. Treat your rental like a business, because it is a business. This is foundational to the other twelve points, and I’ll explain why that is.
Let’s go into number two. Have a financial reserve in a separate bank account that’s set aside for rental properties. We recommend having three months in reserve. We could hold that reserve for you, or you can hold it in a separate bank account to draw upon. This will help you cover some of the unexpected items that may happen.
Number three is to expect the unexpected. Something’s going to happen at some point in time, whether it’s a tenant that has a job loss, or a larger repair, something will happen at some point, so we have that reserve in place to help cover some of those items.
Number four is that savvy real estate investors budget, and plan on 10-15% of their rental income to put back into the property each year in the form of maintenance, repairs, capital improvements, things like that. Think of it as investing back into your retirement account, except in this case it’s for upkeep, maintenance, tenant turnover, etc.
If you plan on investing back into your property, when things happen, or if there’s repairs, or things that need to take place it’s not going to be a pain point. It’s going to be something that you were planning on, and that you were budgeting for.
Number five, plan on maintaining the property, and allowing your property manager to keep the property in good repair, looking nice, and up to a good minimum recommended standard. This will allow you to have better tenants, better long-term tenants, rent the property quicker, which will allow you to have a better return in the long run.
This is number six. If you have an underlying mortgage, plan on being a month ahead of the rental income. For example, use June’s rental income to pay July’s mortgage payment. Doing this is simply financial common sense.
Number seven, maintain a good liability rental investment insurance policy, which additionally insures your property manager. Oftentimes you can get discounts by having a property manager in place.
Number eight, keep the landscaping simple. If you have flowerbeds, remove the flowers and lay bark or rock. This will make turnovers much easier, and your tenants will thank you for making their lives easier. Remember, with landscaping less is more. It really is. Tear out all that complicated flowers, and everything that’s going to be a real hassle for the tenant.
Number nine, don’t leave the washer and dryer, unless it’s in an area that requires stackable. You know, those tight areas by the corners, or in closets. That’s the only case, or sometimes in multi-family properties. You rarely will get more rent, unless it’s in an apartment complex. Oftentimes the tenant will have their own. If you provide one, you will need to maintain it, which can be costly.
This can be market driven, too. Sometimes there’s areas in marketplaces where it’s just super common and expected to have the washer and dryer, but in most cases the tenants, if they don’t have one they can go on Craigslist, or local classifieds and find one for a couple hundred bucks for the set.
Number ten, similar to number one, treating it like a business, disconnect emotionally from the property, and don’t get too attached to the flowers, or the fact that you may have lived there at some point. Remember, since you decided to turn your property into a rental, it should be treated as a business.
Number eleven, allow your property manger to manage the property. Keep an arm’s length relationship with your property and allow the professional you’ve hired to make day-to-day decisions on your behalf. An owner that manages the property and tenant by telling the property manager what to do, is most always a recipe for a failed management strategy. We’ve seen that from time to time. It’s important that you have that arm’s length approach, passive approach, and that you respect the fact that you hired a property manager so that you wouldn’t have to manage.
Number twelve, be okay with not knowing all the details. Since you treat it as a business, know the key financial and performance metrics. Leave the rest to your property manger to handle.
The last one, remember that since your property is being professionally managed, it’s subject to Fair Housing laws, and other laws. There’s going to be situations where the property manager has to make a judgment call on the type of tenant. We can’t screen tenants according to the protected classes, and we can talk to you about those if you have questions on Fair Housing, and some of those restrictions that you as an investor and property managers have.
I hope this is helpful for you. We believe that if you follow these thirteen points, and these principles, that the likelihood of your rental being successful is far greater than if you don’t.