Okay, I understand it. I’ve been there. You’re tired of working for somebody else. You want to be your own boss. You want to make money. Houses are still selling rather cheap, depending on the area, and you think, now is the time to become a Landlord! Just buy a house, rent it out and money rolls in, just like that.
Every time I read somewhere that someone has just bought a house or building they plan to rent out, and sense how excited they feel about it all at the moment, that their next question is, “But what do I do now? Yikes, they’re asking these questions now?
I see more and more people buying buildings for rentals who don’t have a clue what to do with them once they have them.
Being a Landlord is a very serious business!!!! I can’t stress this enough. The life of a landlord can be exciting and challenging, but it is 24/7 and it is a business of people management, and doing things legally and doing things right, and making decisions, bad or good.
This is a business of evictions, of fires, of break in’s, of damages, of being responsible for other people’s lives. What THEY (your tenants) do affect YOU!
There are laws to follow in order to make your building(s) legally rentable. One is to have a C of A(Certificate of Acceptance) this is decided upon by the state or county or city where you live. They have to approve this home to be a rental. Then you receive a C of O (Certificate of Acceptance) decided upon again by the local or state or county authorities. This states the home has been approved and available to be a rental. And some of these must be applied for every time a tenant moves. So check your state laws.
There are Landlord Tenant Laws, Building Codes, and laws that are not laws at all but based on a Judge’s opinion of whether or not a tenant did wrong or not. For instance, normal wear and tear. Judges have various opinions on what they deem normal wear and tear.
This is an Industry of thinking skills. This is an industry of holding your temper and implementing your lease agreement no matter what. You need to think like a Judge. You need to think reasonably.
You need to be a good listener. You need to be in control.
Once you buy a house you need to know how to keep that house and how to keep your tenant's long term.
You need to know how to be all things in order to keep your tenants happy, yet make them know the rules that lay within the realms of their Lease Agreement, or Contract, and how to be good tenants.
I always say that one is only as good as the tools they have. You could be the greatest landlord in the world in mind and action, but if you don’t have the equipment, or the education, or the money to invest in the proper tools to make you successful, then you will never make it in this business.
It takes my breath away to read the stuff online by new investors. And I understand that right off the bat there is no way they can know what they do not know unless someone teaches them.
My husband and I were very successful in the business. (We are retired now due to his cancer). But we owned a huge house. And every time someone would come over and do work on something on the house, they would ask, “Wow are you a doctor?” and I would say no. And they would ask, “A lawyer?” And I would laugh and say no.I’m just a Landlord. And they would say, “Wow and that’s all that you do?”And I’d laugh again and say, “Yep that’s all that I do”.And they would reply.“Wow, I think I’ll become a landlord too”.
And that is the mindset of a new investor. When I say that’s all that I do, let me tell you what to expect in the life of a landlord and all that they do.
At 3 am Christmas Eve Tenants call-Furnace went out. I get up, phone calls made, (emergency calls), expensive triple overtime bills sent to me from the Heating Contractor, Tenant now has heat. Tenant Happy.Landlord sleepy.
At 2 am Fire Dept. calls. Fire at such and such a place. We get dress. Blizzard outside. Drive to the home. Access the damages. Look at the big hole in the roof from the fire dept. Plan our strategy. Talk to tenants. Get our guys out to put a tarp over the roof. Meet in the morning with everyone to solve the problem, now what to do with tenants, whose fault, where to go from here.
You do “Drive-By” inspections and find tenants parking their cars on the lawn
You notice tenants having unauthorized guests
See them doing drugs as they sit on the porch with their friends.
You see they have a dog they shouldn’t have
Inspections show they are Hoarders
Find out they are constant complainers
(In my case…drive by shootings, bullet holes in rentals, thievery) was the norm in some areas
Water abuse in apartment buildings
We find a Dish on roofs when forbidden to have one on the roof
And so much more
On top of being ready to take care of emergencies any time night or day, and solving tenant issues. You need to also take care of the following.
Fixing up a vacant rental so it can be rented out again. (We had handymen to do most of this, but with 40 rentals my husband and I had to pitch in a do the labor ourselves as well. I would paint the house and garages. Husband would fix the repairs inside
Taking care of advertising the homes (usually, we had more than one vacancy at a time)
Take phone calls and screen tenants
Schedule open houses
Staging the house
Interviewing the applicants
Making sure I double checked their application forms
Making sure they met our criteria
Verify Employment
Verifying funds and income
Typing up the lease and making sure they understood the lease
Making sure the Tenants abided by the lease agreement
Making sure the tenants paid their rent on time
Sent Notice to Quit for Non Payment of Rent the very first-day rent is late.
Deal with evictions
Landlording is about making a tough decision and doing things you don’t like to have to do.
Landlording is a Business.
You have to not LOVE YOUR HOUSE. I can’t stress this enough. If you don’t know or understand that this is a business of evictions, damages, and injustices, and fixing this house up over and over again, you aren’t going to be happy let alone successful.
How I wish I could be there for every new investor to help them understand what it’s like to be a landlord BEFORE THEY INVEST. But I can’t and that’s really a shame because it something every new investor should dig into before they invest.
One last thing. Yes, you need to have an accountant to file your taxes for you at the end of the year. Our industry involves huge sums of money as well as dealing with other people's money. An Accountant knows how to get you back more money at the end of the year because they know the tax laws, not you! So please don't be cheap and try doing it yourself. QuickBooks will help you give your Accountant exactly what they need to help you.
THE FIRST MONTH (THE HAPPY PHASE)
During the first month of a rental period, the tenant is happy. They wanted the home, they got the home and everything is fine. THEY ARE VERY HAPPY! You spent a lot of time at the signing of the lease telling them what you expect from them and what they can expect from you. They seemed to be happy and they nodded in understanding.
THE SECOND MONTH
Somehow during the second month, when the newness wears off and the happiness falls into a routine, the new Tenants become confused. They seem to forget what the rules are and when rent is due (even though they have a written lease agreement to refer to). If they are one of the few tenants who does not get confused during this time, this means they have jumped from the Second Month phase into the TESTING PHASE which may cause a few problems, but I will talk about that in a few minutes.
To help the Tenants not be confused during the 2ND MONTH PHASE, I always bill my Tenants their rent 10 days before it is due. It's during the 2ND MONTH PHASE that I will answer any questions they may have and not make them put it in writing.
TESTING PHASE (May begin as early as the 2nd month):
The TESTING PHASE is a very crucial phase. Whether the tenants and you get along is determined during the TESTING PHASE. More Tenants than not like to Test the Landlord. If they had gotten away with it with their previous landlord, chances are, they feel, they can get away with it with you.... so they will try. They will pay their rent when they want to, putting you last and live the way they want to regardless of your rules.
It is very important to nip this in the bud during the TESTING PHASE, because if you allow the tenant to get away with things such as paying their rent when they want to and doing what they want, then chances are you will never proceed past the TESTING PHASE.
THE THIRD MONTH:
If you make it to the third month, that is good. But it is also very crucial during this time as well to make sure the tenant stays on course. The Third Month strengthens your position as to who runs what. During this time you want to make sure that the tenant keeps paying their rent on time and keeps obeying the rules. One little falter on your part can throw the tenant back into the TESTING PHASE. It is very important that you guide them during this time as to what you expect and want. And important that you gain their trust and respect during this time.
THE FOURTH MONTH - THE COMFORT PHASE:
The Fourth Month through the first year is THE COMFORT PHASE: the tenant becomes accustomed to your rules and is starting to feel comfortable. If you have handled everything correctly, being strong when needed to be, and doing evictions when needed, the Tenant will feel secure because the Tenant will know what is expected of them and will feel comfortable and will want to stay. (Tenants usually feel comfortable with stability and sameness).
AFTER THE FIRST YEAR:
After the first year, the COMFORT PHASE becomes more stable and each year thereafter. It's just a matter of keeping your Tenant happy, yet, making sure they don't slip into the Testing Phase from time to time. Even old time Tenants will want to go to the Testing Phase if they see their Landlord falter, get too over-generous or too understanding.
When that happens the Tenant's stability changes because the rules are changing throwing the tenant into the Testing Phase again, so we don't ever want to falter but always stay strong and in control.
THE MOVING PHASE:
During the moving phase the Tenant, no matter how many years they have been with you, seems to forget everything again. They become babies and they revert back to the TESTING PHASE. Once again they never refer to the Lease and must depend on you for answers.
During the MOVING PHASE, the Tenant can change personalities quickly. It's like they drank a potion that changed them from Jekyll into Hyde. They become this fiend, this villain that could destroy you and is probably the hardest phase of all the phases.
It is during the MOVING PHASE, that you must be cool, have all your wits about you and be prepared, yet still be cordial so as not to enrage the monster that seems to be lurking in your Tenant during the MOVING PHASE (as there is NO ANTIDOTE to calm the savage beast once it takes form). If by chance this happens, it is best to not confront the beast but to keep your distance until the courts can set it free!
With time everything will fall into place as long as you treat Landlording as a business!
Rent On!
Nancy Neville
