Now more than ever, individuals are concerned with economic security. Investing in rental properties has the potential to be quite lucrative, but only if done the right way. That said, successful landlords often share the same traits and business practices that help them achieve their financial goals. Property management takes time, effort, preparedness, and solid processes, whether you own one property or one hundred. So, if you are contemplating investing or looking for ways to improve your established portfolio, check out the tips below to become a successful real estate investor.
6 Traits of a Successful Real Estate Investor
Having money to invest is essential, but the key to success is a great landlord. Across the country, the ratio of rental households continues to rise, providing ample opportunity to jump into investing. Follow along below to discover key traits of a successful real estate investor.
- Treat it like a Business
- Get to Know then Local Rental Laws
- Protect Yourself with Comprehensive Landlord Insurance
- Implement Office Hours
- Control Your Privacy with a Google Voice Number
- Know When to Seek Professional Help
Treat it like a Business
Owning and managing rental homes is not the same as owning and living in your own home. Rental investing is a business and must operate as one. Therefore, a successful real estate investor sets in place the systems needed to separate personal and business affairs. So, establishing separate property accounts, investing in tenant screening software, creating ways to manage tenant inquiries, and saving for emergency maintenance are all part of building a profitable rental business venture.
Get to Know the Local Rental Laws
Where you choose to invest and the local laws that govern the area matter immensely. It is true, location is a top factor for potential renters but consider the implications for the landlord. Local taxes, licensing fees, restrictions on rentals, and code requirements are all factors to take into consideration when deciding on where to purchase investments.
Additionally, local and state housing laws set important standards regarding landlord-tenant rights and responsibilities. That said, every landlord does not need to be a legal expert, but a working knowledge is vital. Failure to comply can result in devastating fines up to or including a suspension of your rental license.
Protect Yourself with Comprehensive Landlord Insurance
Homeowner’s insurance is great, but a standard policy may not cover the vast array of situations landlords can encounter. Therefore, talking with a qualified insurance professional is an investor’s best bet for finding the coverage they need. Successful real estate investors know protecting their interests with landlord insurance is key to financial security.
Additionally, require incoming tenants to have their own renter’s insurance policy to cover liability and their personal belongings. For tenants, a widely accepted liability coverage amount is a minimum of $100,000 but could be higher depending on the property. As far as coverage limits for their personal items, that amount is their choice.
Implement Office Hours
Being a landlord is a 24/7 job, and you have to prepare for any potential occurrence. That said, being a landlord requires setting some basic boundaries and expectations for contact. Fail to do so, and tenants could call all hours of the day or night with simple complaints. Therefore, establish regular office hours and a voicemail system for after-hours calls. In addition to a system for regular calls, set up a protocol for handling after-hours emergencies and let tenants know how they should reach out as well as what to expect for response time.
Keep in mind, while marketing a property, landlords may need to be more flexible on office hours to accommodate inquiries of potential tenants. We recommend being available on some weekday evenings and at minimum one weekend day for tours.
Control Your Privacy with a Google Voice Number
Without question, landlords do not want a tenant to have their own personal cell phone number. Thankfully, resources are available to help, such as Google Voice. Investors can quickly and easily set up an account that will provide you an alternate phone number that routes calls to your cell. This is a convenient and inexpensive replacement for a traditional business line.
Additionally, Google Voice allows owners to create a schedule when the calls will connect, and when it will go directly to voicemail. Utilizing the technology available to your advantage can help maintain essential professional boundaries.
Know When to Seek Professional Help
Yes, an individual can attempt to do it all, but why would you want to? Nowadays, reputable property management firms offer a variety of services to fit your portfolio’s specific needs. Many investors cite cost as an excuse to shy away from professional help. However, the cost is not always measured in money, but also valuable time.
The daily tasks that go into managing and renting out an investment property are daunting for even the most successful real estate investor. It all comes down to efficiency and profits. So, the question is, where is your time better serving your overall goals? Is it bogged down in maintenance calls and sorting out rent payments? Is it out chasing the next big deal, or how about just sitting back and relaxing? Chances are, it is not being stuck doing endless administrative functions. Investing in professional property management is a tool that savvy real estate owners know saves them time, stress, and money in the long run.
Essential Policies for Success as a Landlord
In addition to essential business practices, a successful real estate investor needs to implement a few standard property management processes. Take a look at our top suggestions below.
- Set the Right Rental Rate from the Start
- Market Smarter, Not Harder
- Prioritize Tenant Screening
- Create a Legally Binding Rental Agreement
- Schedule Periodic Property Inspections
- Always Follow Through
- Happy Tenant Equal Better Returns
- Keep Records of Everything
Set the Right Rental Rate from the Start
Figuring out the best rental rate takes some research and honest conversation with yourself on the value of your property. So, first, check out the local competition and similar homes in the neighborhood. Check out both the homes currently on the market as well as ones that have been rented recently to gauge the average rent prices.
Always take into consideration local amenities and the property’s interior features or upgrades when determining the price. Whatever you do, try to avoid moving the rent price up and down multiple times; it could raise red flags with prospective renters. Pricing competitively and fairly in the local market gives investors the best chance of getting their property rented promptly.
Market Smarter, Not Harder
Nowadays, renters are bombarded by options in a competitive real estate market. So, making your listing stand out is just as important as getting it in front of the right potential renters. Therefore, the best way to reach a wide pool of applicants is to vary your marketing strategy to include traditional and digital means. Getting to know the area and target market is also essential. For example, if your property is located in a popular college area, alter your strategy by targeting campus message boards and news media. Consider the following options to get your property noticed:
- Post a “For Rent” sign at the property
- Create a virtual or 3D online tour
- Promote listings and virtual tours through social media
- Post property ads on online outlets such as Craigslist, Rent.com, GoSection8.com, and Zillow
- Advertise in local circulators and bulletin boards
- Create a business website and drive traffic through SEO
- Use Google ads to target online searchers
- Offer incentives for existing tenant referrals
Prioritize Tenant Screening
The success of your rental property business hinges on finding great tenants who pay on time and care for your investment home. Therefore, application screening procedures are never where you want to cut corners. From the start, create a standard list of rental qualifications that you will judge every applicant against.
The key here is to keep the qualifications the same for everyone to comply with Fair Housing Laws. Continue reading as we outline a few standard criteria successful real estate investors use to screen applicants below.
Criteria for Evaluating Tenants
- Income – Stable income means the ability to pay the rent each month consistently. Look for an individual who can document at least three times the monthly rent in income per month.
- Criminal Background – Avoid any individuals with a history of violent crime or drug activity convictions as this could spell trouble for the future of your property.
- Credit History – While overall score is a factor, always delve a little deeper. Credit reports illustrate an individual’s willingness to repay the existing debt. Therefore, take a look at their reported payment history and use that to indicate how they will pay you. Are they constantly paying late? Do they have accounts in collections? How about a recent bankruptcy? These could be red flags.
- Eviction History – Has the tenant ever been evicted? If the answer is yes, and it was within the last 7 years, that is a red flag.
- Landlord Referrals – Require tenants to provide a minimum of 3 referrals, with at least one being their current or previous landlord. This gives property owners a wealth of information if they take the time to follow through. Ask pointed questions to see how they cared for the property and ask whether the previous landlord would ever rent to them again.
- Never Discriminate – Landlords must strictly adhere to Fair Housing Laws, and they can vary slightly from state to state or even city to city. These special requirements ensure that tenants are treated fairly, and tenants under a protected class have access to opportunities as any other individual.
Create a Legally Binding Rental Agreement
The lease is the backbone of any rental property endeavor. So. Investors must have a strong lease agreement that adheres to state and local laws. It is daunting to keep up with all of the requirements, so we suggest having your lease document reviewed by a qualified attorney. This accomplishes a few things by allowing owners to rework provisions that open them up to liability and verify that their lease would hold up in court should an issue arise.
Schedule Periodic Property Inspections
You cannot fix what you do not see, and you cannot fix what your tenants do not report. Ideally, you will have a great tenant who recognizes trouble when they see it, but relying solely on them to report all potential maintenance concerns is unwise. Instead, schedule periodic property inspections either semi-annually or once per quarter for older homes. This allows a landlord to gain a proactive jump on any property maintenance issues or concerns.
Additionally, a thorough move-in and move-out inspection are essential for both landlords and the tenant. These particular inspections help determine the difference between normal wear and tear and tenant damage that could result in a forfeited security deposit. Overall unit condition is the main source of tenant disputes. Therefore, both parties should document and sign off on any damages before they move in. Also, do not forget to take lots of pictures and even a video to help document the beginning state of the property.
Always Follow Through
Policies are useless if they are never enforced, so stick to the rules you have laid out in the lease. One of the most commonly manipulated policies for landlords is penalty fees for late payments. Circumstances indeed occur, and the tenant may have a valid reason for not paying on time.
However, the due date is in the lease that they signed, and if you start the practice of making exceptions, you will never be left alone. Explaining policies and ensuring your tenants understand the rules are strict helps make sure that late payments do not become a habit. Additionally, as a landlord, you are depriving yourself of added income that could be used towards maintenance, savings, improvements, or profits.
Happy Tenant Equal Better Returns
Expenses are inevitable, but one huge and potentially avoidable expense is a vacancy. When an investor finds a qualified tenant, it is in their best interest to keep the tenant happy and satisfied with their choice to rent the property. Remember, the tenant did not just sign up to rent the property; they signed up for a relationship with the property landlord.
So, keep communication clear and professional, address repairs quickly, reward on-time payment history, and always treat tenants with respect. In the end, it is less expensive to keep your tenants happy than to risk a possible vacancy and the hassle of finding new tenants.
Keep Records of Everything
The days of doing business on a handshake have long since passed us by. Nowadays, a successful real estate investor understands the importance of accurate and complete records. Proper written contracts protect all parties involved and limit the chance for disputes in the future.
End of year closeout can prove complicated for rental property owners, so accurate records are vital in making it a smooth process for your tax professionals. It may take more legwork initially to set up legal documents, accounting software, or digital folios on tenants, but it is well worth the effort in the long run.
Are you an investor who is bogged down in the day to day operations of your rental property business? A successful real estate investor knows the importance of a solid team backing them up. Bay Property Management Group is a team of professionals who can take your business to the next level. Our experienced staff handles every aspect of the process, allowing owners the free time to track down the next big deal or kick back and relax with the confidence everything is being handled. We have helped countless owners elevate their business through state-of-the-art technology, convenience, and expertise. Give us a call today to learn more about how a rental manager can help you!