Manage the Property Buying and Holding Property for Income and appreciation

Flipping and rehabbing houses are great ways to make money, but they’re not the only way... and they’re definitely not the best way. There are not many real estate investors who have made their millions by flipping and rehabbing real estate. The best way to make money in the real estate business it is to buy, hold, and rent property. Doing this can be one of the best long-term investment moneymakers available... if it is done right.

Attracting the Best Tenants

To find good tenants, advertise for them. You can do this using various types of mediums:

·    Flyers
·    Postcards
·    Classified ads in the newspaper
·    Easy-to-read “For Rent” signs
·    Posters

...and use bold print!

In your advertisements, include such information as location and a description of amenities, as well as whether the property has been remodeled recently. Make sure in your advertising that you also include your contact information, especially a phone number so that people who are interested can contact you.

Be sure to leave a detailed description of the property on your voice mail for those times when a potential renter is unable to reach you. Include the address, location, directions to the house, number of rooms and bathrooms, amenities, whether smoking and pets are allowed, when it will be available, etc.

When people respond to your ads by leaving a message on your voice mail, it means they’re interested, especially after hearing a brief description of it. So be sure you return these phone calls the same day you get them. When you return the call, get the person’s name and phone number first, then ask what they’re interested in.

However, instead of telling potential renters how much you’re asking for rent, ask the potential tenant how much they’re looking to spend a month on rent. This gives you more freedom as you can either agree to the price or raise your offer to meet what they had in mind.

Next, it’s time to make an appointment to show the property. (Note: This is not always possible, as some people who are moving from out of state do not have the opportunity to look at a property before moving in.) But if potential tenants are able, set an appointment that is convenient for them. The time needs to be convenient for you, as well, since you need to make sure the property is in good condition for showing purposes.

Always be positive when you show the property or talk to potential tenants about the property. Point out the benefits and show potential tenants that you have the ability to take care of their needs. And always, always be nice and courteous; a friendly attitude says a lot to the potential tenant about how easy it will be to deal with you as a possible future landlord.

Before potential tenants come to a showing, tell them they must bring references with them, as well as their rental history. One of the most important steps to getting responsible tenants is to screen them beforehand! It’s better to have an empty house for six months than to have one bad tenant that costs you a lot in lost rent and repairs. You want people who will pay their rent on time, take care of your property, and who are long-term tenants. So make sure you call their references and that you contact at least two previous landlords for good recommendations before you begin talk about signing contracts.

If the visit goes well and a prospect is interested, and you have looked into his/her references and gotten some good recommendations, the final step is to have him/her fill out an application, put down the required deposit, and set up a move-in date.

Retaining the Responsible Tenants

In most cases, it costs you more to get a new tenant than to keep the good tenant you already have... trading the one who pays his/her rent on time and takes good care of the property for the irresponsible tenant who doesn’t pay rent on time and who may cause damage to the property, resulting in repair costs that not even the deposit will cover.

Plus, when a tenant leaves, you may have to pay anywhere from $500 to $1,500 or more repairing the rental and preparing it for a new tenant. Also, there’s the lost rent from the property being empty anywhere from 30 to 90 days. And another cost is the money that will need to be put into advertising the vacancy. Thus, losing a good tenant is costly.

It’s better to keep good tenants happy. While you must be firm and business-like with a tenant, you can still treat him/her fairly and friendly. Thank your responsible tenants... let them know they’re valued, and make sure they know that you’ll work with them to meet their needs.

Note: Evictions should occur only when necessary.

Collecting Rent
To help your tenants be responsible tenants, set up a good rent collection system that is easy for them to follow and easy for you to enforce.

For example, make rent due the same day of every month (e.g., rent is always due the 1st of every month) and rent will be considered delinquent if it is not received within five days of the day it is due (e.g., it is considered delinquent if it is not received by the 5th). If rent becomes delinquent, the fees will start to accrue at a set rate stated in the contract. And finally, if rent is not received by the 20th day from the due date (e.g., the 20th of the month), then the eviction process will begin.

Tenants should read through your rent policy and sign it, stating that they understand and agree to abide by these rules. Let them know there are consequences if they do not... from eviction, to a bad credit mark, to turning the matter over to a collection agency. If they understand the policy and the consequences, they are more apt to pay their rent on time

However, it doesn’t all have to be negative. You can encourage and reward tenants who pay their rent on time by offering a discount for on-time payments. This may be reason enough for them to get their payment in on time.

Policies & Procedures
Policies and procedures are a big part of any successful business, including the business of being a landlord. There will be policies and procedures that you must adhere to as the landlord, as well as policies and procedures that the tenants must adhere to.

Below is a partial list of possible tenant policies and procedures you may want to include in the contract (this is by no means a complete list, just a few ideas to get you started):

·    Paying rent on time
·    Being mindful of other tenants and respecting their privacy and personal property
·    Keeping noise down to a certain level after a certain time
·    Being responsible for cleaning up after pets
·    Paying for damage they’ve done to the property
·    Allowing for an annual inspection (on a pre-specified date)
·    Contacting the landlord when problems arise
·    Maintain access to property (porch, patio, balcony, etc.)
·    Registering pets with management
·    Notifying management for contract renewals
·    Being moved out by the date specified on the contract
·    Leaving the rental unit in the same condition you found it (normal wear and tear on property is taken into account)

The landlord policies and procedures may include the following (again, this is a partial list to help you get started):

·    Collecting rent
·    Issuing late notices
·    Answering all rental calls promptly and following up with tenants
·    Coordinating annual inspections
·    Resolving tenant complaints in a timely manner
·    Drawing up new leases and lease renewals
·    Evicting tenants when necessary
·    Maintaining the property
·    Enforcing policies and procedures

Make sure you write up the policies and procedures and include them in the contract the tenants sign. You may even want them to initial in a space provided next to the policies and procedures section of the contract that states they understand and agree to the policies and procedures.

Once a tenant understands and agrees to adhere to the policies and procedures, it is your job to enforce those policies. In the contract you may want to include consequences of what could happen if the policies and procedures are not followed.

Lease-Options

Lease-options benefit both you and your tenant. In a lease-option, you negotiate a long-term lease with a tenant, giving him/her the option to purchase the property by a specified time at a specified price.

Note: You should only offer this option on properties you want to sell or that you don’t plan to hold for a long time.

A lease-option is better than rent, with benefits for both you and the tenant.

Your benefits:

·    Option money is not refundable.
·    Great incentive for the lease-purchaser to pay on time, as the contract states the option money and payments are forfeited if the rent is paid late.
·    Tenants contemplating on buying the house will stay.
·    Lease-purchasers are responsible for repairs (check state laws).
·    You receive more money upfront.

Tenant’s benefits:

·    Pride of ownership.
·    The right to purchase the house.
·    Part of each monthly payment goes towards a down payment on the property.

It is a great option for potential home owners with minor credit problems or debts.