TFK Checklist Of Overlooked Things You Need When You Own A Rental

If you’re a real estate investor looking to get into rental properties – smart move. Rental real estate is such a powerful way to invest because it brings in cash flow and, in my opinion, that’s the number one thing you need to grow your investing business.

So if you are just starting out with rental properties, you probably have questions and maybe you’re even a little scared. What should you have in place to make sure that it’s a simple, low-maintenance investment? Here’s what I recommend:

Rental Strategy #1. Create A Tenant Profile

A tenant profile is the ideal person you want in your rental property. Businesses create a similar kind of profile about their customers, called an “avatar” – it’s a description of their very best customer. You should do something similar in your investing business by creating a tenant avatar.

For example, your avatar might include: young couple, no kids, no pets, non-smokers, both working at their jobs for more than 12 months. That’s just an example but it illustrates what I mean (and of course your tenant avatar might be different in your location than what I’ve listed here – and make sure you ALWAYS comply with local laws in terms of determining who to rent to).

Rental Strategy #2. Tenant Application

Always always always have your prospective tenants fill out an application to rent from you. Once they’ve filled it out, review it carefully and use it to screen your tenant and decide whether to rent to them. Don’t skip this step and don’t trust your gut – rely on the details that are written down on the application and use that (and only that) to determine your rental decision.

Rental Strategy #3. Rental Agreement

Always always always have a rental agreement that you and your tenants sign. Make sure everyone gets a copy. The rental agreement should spell out exactly what everyone’s expectations are so there are no questions or loopholes. Even if you’re just starting out in real estate, have an attorney read over your rental agreement – it will cost you some money but the money you spend early on is an investment that will save you money in the future if your tenants try to break the agreement.

Rental Strategy #4. A Schedule Of Annual Rental Agreement Review

Built into your rental agreement should be a scheduled annual review of the rental agreement, including the amount of rent you are charging. Your schedule should also include the various circumstances and factors that will go into determining your review, such as any change in the condition of the property or any breakage in the rental agreement. Why should you have this? The reason is: many rental property owners get scared about talking to their tenants about rent reviews and rent increases, or they (understandably want to avoid the other problem of just showing up every couple of years to break the bad news about rental price increases. So the purpose of this strategy is to give you a clear reason to maintain an open dialogue about the rent regularly, so reviewing it and increasing it slightly won’t seem burdensome to your tenants.