Love them or hate them, you can’t generate regular cash flow without tenants.
Speaking from experience, the larger your portfolio grows, the more likely you are to run into a few bad eggs. Personally, I’ve had some doozies across my 200 properties.
When it comes down to it, things like damage and unpaid rent are a cost of doing business which you need to be prepared for. A cash reserve and the right property insurance helps with this.
However, prevention is always better than a cure. So, here are a few tips that have personally helped me reduce nasty rental surprises.
I’ve seen properties in such bad condition I didn’t know whether to laugh or cry. I managed to buy them cheap because owners were liquidating them at any cost, to prevent more ongoing losses.
What they didn’t understand was that the problem was not with the property itself, but rather its condition.
Whereas I knew that with a slap of paint, some new carpets, fittings and maybe a cosmetic wet area renovation they could be transformed into good little earners. When done well, this shouldn’t cost more than a few thousand dollars.
It simply comes down to this. If you as a landlord can’t show respect and care for a property, how do you expect your tenants to do so?
Properties that are neat and well maintained will attract better tenants, who in return will respect and maintain the property.
These properties will also attract better rent, making these small cost effective improvements worthwhile.
If your property is on par with the average rental stock in the area you may want to invest in something to make yours stand out. Be cautious, don’t go overboard installing solar panels or swimming pools.
The best value comes from things which appeal to the majority of people like built in wardrobes, air conditioners or even scheduled gardening. For example, a home without air conditioning is a deal breaker for many people, installing one in can increase interest in your property.
The rental search and approval process is very quick. Unlike home buyers, who investigate all their options, renters spend less time looking and visiting properties.
If a property ticks all the boxes, it will be inspected and possibly applied for. However, if there is a shred of doubt about it, it will probably be overlooked.
For example, if a property has no internal photos then most people assume that the owner is trying to hide something. Similarly bad quality, dark photos can make a nice home appear like a cramped dungeon. Having professional, attractive, light-filled photos will draw the right kind of attention.
Be sure to include a detailed description which showcases all the best features. This should be written in a way which appeals to your ideal tenant. Include floor plans if they are available.
Make sure inspections are scheduled at a convenient time for your ideal tenant. If they work then don’t schedule this between 9-5 on a weekday.
When it comes to price, target the sweet spot. A high price will attract desperate people. A low price will make people assume there is something wrong with the property.
4. Due Diligence
Assuming you have done all you can to attract the right tenant, you need to sus out whether you have snagged the right one.
Review their rental application for inconsistencies. Have they missed filling in fields? Have they got mismatching addresses on their paperwork and ID’s? If so, could they be hiding something?
Do a full background check of their rental history, have they been in arrears? Also, check if they have been listed on the tenant default database.
Make sure to call references and be smart about it. Drop in a few incorrect details about their work or rental arrangements to see if the referee corrects you. If they don’t, they may be an impersonator who is not across all the details.
You can’t overlook a face to face meeting. While it’s important not to discriminate, you can tell you a lot about a person by meeting them.
How do they present themselves? Do they look well-dressed and well-groomed? Are there children well behaved and disciplined? Do they smell of cigarette smoke when their application states they are a non-smoker?
If the tenant has poor personal hygiene, chances are that will extend to the property. If they appear over eager, be wary as this may be a sign of desperation. Do they have a black mark on their rental history? Are they a less than ideal tenant?
5. Property manager
In the end, a lot of this comes down to your property manager. A property manager is more than just a debt collector.
A good one behaves like an asset manager, doing all they can to make sure you get the best performance out of your investment asset.
They will be able to keep on top of maintenance work by doing regular inspections, understand the type of renter you are trying to attract, and advertise the property in a diligent way.
Property managers also have access to tenant default databases – an invaluable source of information that can prevent you from choosing someone with a bad rental record.
With 200 properties under my belt, having the right property managers is crucial and is why I founded Blink Property Management.
Self-made multi-millionaire property investor and real estate entrepreneur.