Landlords tend to have firm opinions on this subject! However, not all rentals are alike. When deciding if they want to manage long-term vs shorter termed leases, these are some factors Landlords need to consider:
- Rental Housing Type: single-family homes vs. multi-family units.
- Location: Downtown living is much different than living in the burbs.
- Financial Outlook: Is this rental a long-term hold?
- Time to Manage: Another 9-5 job, age, and team dependability are factors.
Let’s take a deeper look into each of the above points.
Rental Housing Type
The Single Family House
Single-family homes seem to be a common first step for entering the real estate investment market. The upside to owning a single-family home is that when renters move in, they are likely to stay put until they save enough for a home of their own or need to move out of the area. The idea of having a garage for the hot-rod and a yard for the kids and dog to run around in is appealing. As landlords, you can also usually require a longer lease upon entry, typically two years. Note: if you select this option, do yourself a favor and build an automatic rent increase of at least 5% (or max rent control allows) after the first year.
The downside is that once you sign them into a long-term lease, it is challenging to get them out. Now, this will depend on if your rental is in a tenant-friendly state, how well you vetted their application, and how detailed your lease is. Let’s look at the following scenario:
Tina the Tenant
This tenant applies to rent your single-family rental. Tina makes plenty of money to cover the rent, has a concrete reason for wanting to live in your neighborhood, has excellent credit, and positive previous landlord referrals. You don’t even mind that she says she has a sweet little chihuahua. It should be a slam dunk, so you approve her application for a two-year lease because you are anxious to get the income flowing in.
As landlords, we know it is impossible to keep our best tenants forever, but it’s certainly worth trying! Some tenants only stay a short while. Be it new to the area and not sure what part of town suits them best, a recent change in relationship, or maybe they are saving to purchase a home of their own, but some tenants prefer to rent for the long haul. Below are some landlord tips on how to improve tenant retention in your rental property.
Tenants come and go, but if we treat them well, they might think twice before deciding to move on. Along with having a solid lease and doing regular inspections, we recommend the following tips to create a professionally run rental property business that makes tenants feel secure and confident about living in your property long term.
Effective September 2018, California enacted Senate Bill 721, the Deck and Balcony Law. This law came about after six college students died from a dry rotted balcony collapse in Berkley, California. The following information pertains specifically to California rental property owners. However, deaths and injuries from unsafe decks and balconies are happening everywhere and ALL landlords should be aware of the standards and how the Calif. deck and balcony laws affects your rental property, regardless of what state it resides in.
California Landlords Whom This Law Pertains To
The holiday season is upon us! Where this is a busy time of year, it’s always nice to remember those who rent from you. Isn’t the true meaning of the holiday season to share the spirit of community and humanity? Whether you have one single family home rental or several multi-family units, here are 5 ways to show your tenants kindness during the holidays:
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Remind them about options for package delivery
Between Black Friday and Cyber Monday your tenants may be getting a lot of packages delivered. If you have a leasing office and packages are delivered there, have your staff create a quick email/text template to let tenants know their package has arrived and is waiting for them to pick up.
If packages are delivered straight to their doorstep, maybe send an email prior to the holidays reminding them that theft is on the rise and to consider asking a neighbor to grab them if they will not be home soon, sending them to a friend or someone with a secure doorstep who will be able to bring them in to safety on their behalf. Another option is to recommend them using a shipping locker that is available at most grocery stores. The company sends them a code to scan when they pick it up and the locker opens up with your package safe and sound.
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Maintain icy walkways and parking lots
With increased package delivery and guests visiting this holiday season, consider providing your property with a service or the tenant with the proper tools to remove ice where someone can slip and injure themselves. If using a de-icing product, choose pet and environmentally friendly options. This shows them you care and let them know they have nothing to worry about should they have a 4-legged friend living with them.
Part of owning any business is keeping your paperwork in order. For rental properties, it is imperative to know where every document is located. It does not matter if you prefer paper trail or electronic files. What does matter is keeping your rental property documents, photos, and records organized.
Documents You Need For Each Unit
We have one file for every tenant. In this file, we keep:
- All documents used to process their application.
- Signed lease copy with addendums.
- All maintenance requests. Plus notes on who, what, and when maintenance was performed.
- Papers and notices served.
- Inspection reports, photos, notes on conversations with the tenant about lease violations found.
- ALL documented correspondence between you and the tenant, including emails, text conversations, and notes written about personal conversations.
- Photos: before move-in, inspections, all maintenance requests, and final move-out inspection (or link to digital file)containing these.
- Move-out security deposit disbursement papers with the tenant’s forwarding address.
If you keep a combination of paper and electronic files on each tenant, make sure you notate the location of electronic files (photos, scanned leases, etc.), plus passwords in case someone else needs to take over management unexpectedly.
How to Organize Documents For Each Property
Tenants come and go, but keeping your rental property documents organized is an essential business practice. With that said, it is also important to have separate, organized files that pertain to each property you own.
If you prefer the paper file method, choose a file drawer/box or accordion folder and create monthly files for receipts. Include receipts for all expenses like completed contractor work, paid utility bills, and maintenance supplies specific to THAT property. The organization of your expenses will make your bookkeeping at the end of the year much more manageable. If receipts pertain to items specific to a tenant (repairs made they must reimburse for), make a photocopy and place it in their file as well.
Good Options for Electronic Receipt Filing
We have found Expensify or SmartReceipts are most highly regarded for electronically storing and organizing receipts, especially when on the go.
Expensify is great on the go. You can snap a photo of the receipt with your phone, and it will pull out the vital information needed (Business name, date, amount, etc.) and save it in your cloud. You can also link it with your credit card for easy downloads of receipts and bookkeeping software like QuickBooks.
SmartReceipts is another convenient option for turning your phone into a scanner. Here are the top benefits of this app:
- Customize PDF, CSV, or ZIP format reports you can export
- Free and open source
- Take receipt photos or import them from your photo gallery
- Tag receipts you’ve captured with metadata to help you find them later
- Track your mileage during travel
- Sync your receipts and reports with Google Drive
- It has an OCR feature to recognize text from your scans
Included with your receipts, you should have a copy of your rent roll. This tool is a monthly statement of what rent and income you earn per property. Typically your bookkeeping software provides this, or you can create a spreadsheet to track it. Having all of your income and expenses in one place makes it easy to evaluate the value of the property and the returns on your investment.
For documents and items that have no time stamp, consider using a binder to store:
- Warranties on machines.
- Maintenance logs (to record when you serviced appliances last)
- List of all makes and models for appliances and HVAC units.
- Back-up keys for units, mailboxes, gates, garages, etc.
- Copy of the updated declarations page for your liability insurance.
If you are more electronically inclined and prefer access to your files from any device, we recommend creating a Google Doc or using Evernote to store the above files in the cloud. The ability to share these files with maintenance personnel from anywhere is worth it. Back-up keys may be an issue, but many units are switching to an electronic key entry, so needing key copies may no longer be a consideration for some. Are you beginning to understand why keeping your rental property documents organized is an important business practice?
Businesses should have Operations plus Policy and Procedures manuals.
An Operation Manual
This manual describes all of the essential practices for operating your rental property business. Additionally, it should explain the following:
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It’s that time of year where the leaves start falling, and there’s a nip in the air each morning and evening. Time to put away the tank tops and pull out the sweaters! For landlords, Fall is the time of year for seasonal maintenance on their rental properties. Here are some reminders on what you or your property manager should be checking out as preventative maintenance:
Inspections
Do a periodic inspection on every unit/property. We schedule one day in November to visit each property, along with our contractor. Generally, we will email all tenants approximately two weeks before the inspection day, describing what we will be checking for in the interior of their unit: water & gas leaks, mold, testing and changing batteries in the smoke/carbon detectors, changing their air filter, checking the heater and thermostat (change batteries), making sure electrical plugs are not overloaded, checking appliances, etc. We also ask them to advise us if they have had any issues to remedy when on site.
Read more: Fall Seasonal Maintenance for Rental Properties
To know all the ins and outs of our periodic inspections, read our blog
Why Landlord Inspections Are Essential.
If we do not hear back from them one week before the inspection, we send a reminder notice to each tenant. Again, describing what actions we will perform and ask if any issues need our attention. This time we ask them to please confirm receipt of the email and acknowledge acceptance of the inspection. If we do not hear back from them at that point, we begin daily calls or texts to them until we receive confirmation. They could be on vacation or simply busy, but we must have their permission to enter the unit to perform this maintenance.
We plan and advise them two weeks prior, so if the contractor cannot fix any issues, we can arrange for the proper repair person to meet us at the property to correct the problem. Think appliances not working, or rodent or bug issues. Maybe it’s time to get the chimney cleaned or have the HVAC tech check the heater. Generally, it takes a few days to get these tradesmen out, so advanced planning is essential.
For the exterior, we tend to do more preventative maintenance to our rental properties during the Fall than any other time of year. We will perform or oversee the completion of the following tasks:
Clean the gutters and downspouts.
Leaves and muck in gutters can cause them to rust and corrode. Clean the gutters, and then make sure the downspouts are clear by running a hose at high power from the top. We’ve seen pods from trees the size of a golf ball caught in the downspout, not allowing the water to drain. Blockages back water up into the gutters causing it to spill over. Continual water exposure like that can cause dry rot damage to the facia boards at the roofline.
Put away patio furniture or cover and move to a protected area.
This depends on what climate your rental is in and who owns the furniture. For our multi-family, we manage the patio furniture. However, the worst weather we usually get in California is rain, so we remove pads and securely cover them to protect the finish. We also own a single-family rental home in California, but we do not supply patio furniture for those tenants.
Turn off all sprinklers and irrigation.
For cold weather locations, open the water valve to release water caught in pipes if needed. Unless you are in a warm climate like the desert or Florida, most states will not need to run their sprinkler systems during the winter months.
Do you complete Fall seasonal maintenance on your rental properties?
Download our FREE Fall Inspection Checklist!
Inspect pathways.
Make sure there are not any cracks or raised areas larger than 1/8″. Check gravel and asphalt areas to make sure there are no washed out or broken areas. Inspect stairs for loose nails or steps and make sure the railings and handrails are tight. Adjust timers and make sure the pathway lighting and motion sensors are working correctly.
Make sure there is a plan in place to maintain walkways during freezing weather. Whether you hire a maintenance company to come out on a scheduled basis or write it into your lease that a tenant must manage snow removal, a plan needs to be in place.
Inspect all fire safety components.
Check that the fire extinguishers are secure and in good working order and that the escape plans are easy for tenants to locate, usually near all exits of the building. Make sure all exit lights are on and working. Check that fire escapes are not blocked and work correctly or that the escape ladders you provide are in an easily accessible area within the unit(s).
Make sure to clean all sewer drainage areas of debris.
Leaves and garbage clogging a drainage pipe can cause flooding to your home or basement. Even if this drainage is not on your property but in the public roadway, take a minute to check it out. Municipal agencies tend to get overwhelmed with the first rainstorm and they may not get to it promptly.
Cover or insulate exterior hose bibs in areas with freezing weather.
For our homes in the mountains, we use these outdoor insulated faucet covers. They’re easy to install; simply slip over the valve and tighten the Velcro! They come in different sizes, depending on your application.
Keep cold out.
Inspect all exterior doorways for proper weather stripping, and that windows seal tightly. Maintain exterior window caulking to keep water from leaking through into the windowpanes, down into the wall, or the unit. This issue is a prime opportunity for mold to grow.
Check the roof, chimney, and wood stove.
It’s essential to be ahead of the game on roof leaks. First, look for missing, curled, or damaged shingles. Next, check the metal flashing around the chimney, vents, and valleys for damage. Finally, make sure the chimney cap is present and attached correctly.
If the fireplace is used often, have a chimney cleaning company out to clean soot from the flue, or it’s been longer than three years since the last cleaning. Make sure you can open and close the damper to the flue.
For wood stoves, inspect all components for corrosion, cracks, or loose joints. Toxins can leak out of the stovepipe if these ailments are present. In addition, make sure the wall protection is correctly installed and (if provided) a child-proofing fence is in place.
Inspect trees surrounding your property.
Look for low-hanging or weak branches that could break off and potentially injure someone, block walkways, or bring down power lines in a storm.
Check HVAC units and replace air filters.
Every other Fall, we have our HVAC tech out to inspect the heaters. We have them check for any cracks or corrosion that could lead to carbon monoxide leaks, plus make sure the pilot light is lit and all electrical components are safe. They also check the thermostats to make sure they are functioning correctly.
Although it is stated in the lease that replacing the air filter is the responsibility of the tenant, we do it ourselves. Why? Quite frankly, they never do it. Having a clogged filter can cause the heater or AC to work harder, therefore shortening it’s lifespan. Also, it’s just not healthy to have all that dust matted within the filter that is supposed to be keeping the air clean. Many tenants have no idea that there even is a filter that needs to be replaced! Sometimes the air filter is hard to access as well so it’s just easier to add it to our tasks to complete during inspections.
Finally, we replace the batteries in the thermostat as well. Nothing worse than getting a late-night call that the heater is not working, only to find out the batteries running the thermostat had died! TIP: So you know when they were last changed, use a permanent marker to write the date on the batteries and the air filter before you install them.
Walk the exterior and check for cracks or peeling paint.
Sometimes you do not need a whole house paint job but nipping these issues in the bud early on will keep your future paint maintenance minimalized. If needed, caulk and seal cracks to keep water from penetrating behind siding or trim. If you find peeling paint, sand it and get a good coat of primer on there before touching up.
Also check these items:
- Look at fences to ensure they are secure in the event of strong winds.
- Check that the gas wrench is still attached to the gas meter for easy shut off in case of a fire or leak.
- Inspect sump pumps in basements and under the home to make sure they are cleaned and working correctly.
As you can see, most of the preventative maintenance is for the exterior of the home. Of course, the location of your rental property will make a big difference in the timing of this maintenance. All our properties are in Northern California, so we have a reasonably mild climate. This allows us to wait until November to perform these duties. For landlords in areas with freezing and snowy winter climates, you might want to start this maintenance in late September or early October. Regardless, you won’t want to avoid planning your Fall seasonal maintenance for your rental properties.
We hope you find this guide on how to raise rents without sacrificing a good tenant helpful in your landlord journey. We started Your Landlord Resource for this reason!
Prefer to listen to our podcast on Fall Maintenance and Year End Prep? Check out these episodes!
Fall’s Checklist: Rental Property Maintenance for a Hassle Free Winter
Fall is the time to prepare for a potentially harsh winter ahead. So, we are in Northern California and with the exception of our mountainous areas, we don’t see exceptionally harsh winters.
But that doesn’t mean that we do not prepare our rental properties located here for the winter months. We still get pretty big storms with high winds and last year, quite a bit of unexpected rainfall. The point is inspections are always a good idea. Even more so just before the cold winter months set it.
In this episode we give you suggestions on what fall seasonal maintenance items you should be doing for your rental properties, especially if they will experience freezing temperatures this coming winter season.
Where we touch on the things you should focus on inside the unit, most of the tasks are for the exterior of your rental property. We discuss what to do and why it is important. The rest is up to you.
Winter and End of Year Prep for Your Rental Property Business
Where we do this in the Spring season, one of the best times of the year to perform these tasks is during Fall, in preparation for the winter months.
This week on the podcast, we are discussing what landlords should focus on to winterize their rental property.
We also dive deep into year-end business preparations in the office, which is something that really should not be overlooked. Budgets, analysis, planning, and tax prep are just a few of the items we will be discussing.
Check out our other blogs to guide you on your self-management journey as a landlord:
How to Raise Rents Without Sacrificing Tenants
A Landlord’s Guide To Fire Safety In Rental Properties
Security Deposits: 5 Tips Landlords Should Know
Cash Reserves for Rental Properties, How Much is Enough?
Tips for Taking Great Rental Property Photos
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Looking for a community of DIY landlords you can ask questions and bounce ideas off? Join the Your Landlord Resource Facebook Group, a discussion group for support, tips, and guidance to help create successful landlord-tenant relationships.
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October 8-14 is National Fire Prevention Week, and being that many of our relatives are firefighters, we thought we would honor their employment by offering up tips to keep them from having to work too hard! But seriously, for landlords, this guide to fire safety is essential to follow ANYTIME when managing their rental properties.
Many elements can potentially cause fires in any home. Still, when it comes to rental properties, these potential fire hazards likely occur from tenants just not thinking thoroughly about their surroundings. As a rental property owner, it is your responsibility to do periodic inspections. We do ours twice yearly in spring and fall. Ensure there are no maintenance issues to be fixed, no lease violations you need to address, and absolutely no fire hazards that the tenant needs to remedy.
Below you will find our landlord tips to guide you when inspecting fire safety in your rental properties.
Know Your Local and State Fire and Building Codes
Codes differ from state to state, but many are just plain common sense. Please know you may not be covered by insurance if you violate fire codes. Some items you will find addressed in these codes are:
How many persons can live in the unit? In California, a single-family home rental is capped at six separate tenants. In apartments, our state goes by the two-plus 1 rule. This rule allows two persons per bedroom and one additional for the household. It is important to remember that these are guidelines, and should no health or safety issue be present, we cannot discriminate on familial status.
What is the requirement for fire extinguishers based on square feet of living space? This code may differ for single-family homes vs. multi-family complexes, but the theory is the same. You need to provide fire extinguishers for the tenants to use in the event of a fire. More on how we handle that below.
What kind of fire escapes or ladders do you need to provide for rentals with more than one story?
Where do I need to post escape plans?
Do I need to install sprinklers in my rental property?
How many smoke detectors do I need in each unit?
Can I have a locked gate at the entrance of the property? If so, how will fire and police access the property in the event of an emergency? Does said locked gate need to swing outward to allow easy and quick escape for my tenants?
To find general information on the fire code for your county or region, visit the National Fire Protection Agency Code Finder Page.
Install Smoke Detectors
OK, so this one is obvious, but there are some things you should know about the type of detector you provide and where the placement should be. You can choose to provide standard smoke detectors with 9v or newer ones with 10-year batteries. As they are new, we have had several units fail and find some kinks the companies need to work through.
There are newer smoke detectors that are wireless/battery operated but interconnect to communicate with the other sensors in the home. For example, if a fire starts in the living room, that detector will trigger the hallway one and continue until all sensors signal a fire warning for the tenants. You have on average less than three minutes from the time you hear a smoke alarm to escape a fire. The sooner you hear an alarm, the sooner you can get out safely. Smoke alarms that link together so that when one goes off, they all go off, are called interconnected alarms. These alarms provide more warnings in more places, giving your family more time to escape a house fire. Houses built after 1993 are required by building codes to have interconnected alarms that are wired into their electrical system.
We use this wireless interconnecting smoke detector in our 100-year-old single-family home rental. For under $30, you really can’t beat the price considering the advanced safety you receive.
If you’d like to add an interconnecting smoke and carbon dioxide combo unit, this is the one we recommend.
How many smoke detectors do you need to provide?
Every six months, we spend an entire day at our six-plex doing inspections and routine maintenance. However, when checking on our single-family rental homes, it only takes 1-2 hours at most. Inspections may seem like an invasion on the tenant, but it is standard procedure for most business-minded landlords. Keep reading to understand why landlord inspections are an essential element to operating your rental property successfully.
We do our inspections and routine maintenance every six months, regardless of when the tenant entered the rental unit. But, of course, if it’s only been a few weeks, we do pass on that unit.
We like to structure the inspections to be completed in the fall and spring months, usually November and April, respectively. Working in these gentler weather months allows us to prep for the most impactful winter and summer seasons. For efficiency, we inspect all units in the building on the same day.
When we say routine maintenance, we are referring to items within the units themselves. We do not perform exterior maintenance these days, which occurs more often and does not impede on the tenants or their units.
Behind the Scenes
Before we discuss the actual tasks performed, it is important to note two items.
- Make sure it is written in your lease that you are allowed to do periodic inspections. Do not say quarterly or semi-annual. Use the word periodic. Why? Leave yourself open to do checks more often if you suspect the tenant is violating lease terms. This terminology is not a hall pass to enter the unit weekly. That is harassment. It also allows you some grace if you cannot perform the inspections as often as you’d like. Life happens. Build yourself some leeway in case you need it.
- YOU MUST GIVE AMPLE NOTICE to the tenant before the inspection. For most states, at minimum, you must give 24-hour notice. However, we opt for at least 48-hours, usually more. Ample warning allows the tenant time to tidy up the unit (hopefully) and be ready for you to spend an hour or so working in there.
Notice can be via email or text. Our advice is to make sure it is in writing, as all correspondence with tenants should be. Explain in the notice precisely what you will be doing during that inspection and maintenance visit. Ask the tenant to let you know if there are any issues they have noticed that need to be addressed. This is a perfect opportunity for your tenant to let you know that the window won’t close all the way or if the toilet is running. Now you can have parts ready to repair the issue or schedule the appliance repair person to fix the screeching noise on the washing machine.
If you give them more than 48 hours’ notice, send a reminder email the day before, letting them know the approximate time you will be in the unit. We usually will give a 2-hour window. If they want to be present, they can make arrangements to be home when you are there. Conversely, if they prefer to be out or need to change the window time due to a remote meeting, you can work around them.
Still with us? Keep reading to see why inspections are so essential to a landlord’s success.
The Inspection: Use Your Team Members
When we schedule the inspection date, we also hire our contractor to join us that day and assist us with it. We pay him his hourly wage, and he will take part of the list and check the items he can repair right there on the spot. Most common repairs will be a running toilet, leaky faucet, loose handles on cabinets or drawers, closet doors that have come off the track, and loose door handles.
It is also why we ask our tenants in advance about any issues they are noticing. Then, we can make sure our contractor has all the necessary parts to repair those issues right there on the spot. If necessary, we can plan for a specific repair person to be present if needed as well. Often, we will need to have our appliance repairman out during that day to check on a refrigerator or a washing machine.
Our contractor inspects the unit before the tenant moves in, so he is acutely aware of the level of wear and tear and how easy or rough a tenant may be treating the unit as he does this semi-annual inspection along with us.
What To Inspect:
Being a self-managing landlord is not difficult if you have proper organization, written policies and procedures, and the right business mindset. Check out our top 10 business operating tips we recommend for all DIY landlords.
1. Operate your rental property as a business
Owning rental property and being a self-managing landlord means you must operate professionally and be customer service-oriented. Tenants are your customers, and to generate income, you need to treat them properly. There are processes to follow to ensure you select great tenants, laws to avoid legal action against you, and efforts to properly maintain the rental property to minimize tenant requests for unit repairs.
For those renting out a personal home you recently moved out of, leave your emotions at the door. That property is no longer your home, so getting upset over a junky car in the driveway, cluttered rooms, or dirty appliances will not help your stress level. Instead, control what you legally can and let the rest go. By the way, properly vetting a tenant can help avoid these issues. Check out our FREE 6-page guide: The Residential Landlords Guide to Placing Their Ideal Tenant Every Single Time.
Know all the laws for rental properties
Know your state AND local landlord-tenant laws and ordinances. You can find this information by searching “Landlord-Tenant Laws in ____ (insert your state or county).”
There are national-level laws for Fair Housing as well. Please get to know these as much as possible as they can be easy to violate unknowingly. For instance, you cannot ask a potential tenant where they work. It is discriminatory to assume they have to have a job to qualify to rent your unit. They may be a voucher household or have income from a private source like a trust fund. Another common violation is to ask an applicant if they have children and what their ages are. Although you are just being friendly, this question is discriminatory against familial status. You can only inquire about age if you rent out age-specific residences like a senior living facility. To read about HUD’s Fair Housing Laws, check out their website here.
2. Properly screen a potential tenant
The saying “no tenant is better than a bad tenant” is very accurate. If it takes you two weeks or a month to find the right tenant, then so be it. The frustration of having a tenant who does not pay on time, is destructive to the property, or does not follow the criteria set out in the lease can be stressful and costly to remove. Create standards for your approval process, so you avoid violating Fair Housing laws. If you don’t want smokers to rent the property, make sure your list that in the ad. Do you require a specific FICA score or minimum rent to income ratio? Better list it in the marketing for all to see.
Prescreening Applicants
Prescreen potential tenants before meeting them and accepting an application. Prescreening is a simple short interview to make sure they have read the criteria in the marketing or advertisement. Often, potential tenants will only look at the photos attached to the ad and not read the written criteria required to qualify. They then show up at the unit asking questions CLEARLY indicated in the ad, only to find out they do not qualify. This oversight has wasted your time traveling, opening the property, and getting it ready to show. Time is money! Download our Top 5 Prescreening Questions We ALWAYS Ask to get you started.
The Application
Have a thorough application. It should include these areas to complete:
- Their current address
- Date of birth
- Social security number
- Driver’s license or government ID information
- At least three past rental history locations
- Employer information or source of income
- Three personal references
- An emergency contact
- Roommate information
- Pet information
- Felony conviction information
- A signature authorizing you to pull credit and inquire with employer and references
Again, state and local ordinances may apply to what you can or cannot ask of a potential tenant on the rental application. Check with legal counsel or find a state-specific application from another landlord or a state/local rental housing association.
CHECK EVERYTHING ON THE APPLICATION! First, get a copy of their government ID, the last two pay stubs, and a bank statement for their primary account. Next, call the employer, ALL past landlords, and references. This procedure takes time for everyone to get back to you. We tell applicants it takes a minimum of 48 hours to gather this information and evaluate it. If they are in a hurry, then move on. If any advice sticks with you, remember, you do not want to rush the process because you are anxious to place a tenant.
Learning anything with these top 10 tips for DIY landlords? Keep reading!
3. Create a comprehensive lease
The term “cover your assets” could not be more accurate here. Our lease is 33 pages long! In California, we must include information about specific laws in place (Rent Control, Bed Bugs, and Lead-based paint). Therefore, it is essential to seek legal counsel to create a state-specific lease to ensure compliance. Addendums are your fail-safes; Use them. We use them for everything from no-smoking policies to requiring additional deposits for the use of satellite dishes. Use blank addendums to document specific criteria required, like who is responsible for lawn care, snow removal, or repairs on non-essential appliances.
If you are not aware of what you need to include in a lease, talk to other landlords to see what they suggest, meet with a lawyer, or join a local or state rental housing association. They usually provide leases for free with a membership or you can purchase state specific leases through EZ Landlord Forms. Use code: STACIE15 for 15% any new form or membership!
4. Collect a sizable security deposit
Your state may mandate a maximum amount allowed to collect for a security deposit, so again, know the laws and ordinances around security deposits. In California, we can only obtain a security deposit up to two times the rental rate for an unfurnished unit and three times for a furnished unit. If you do not collect enough for the security deposit, you may have to go after a tenant in small claims court should the damages exceed the amount you hold for them.
Understand normal wear and tear versus damage. For example, holes in the wall for a few photos are wear and tear where thousands of staple holes from a tenant putting up noise insulation foam are damage. A dirt trail on the carpet around the area of the bed is wear and tear. Large stains or holes in the carpet are damage. A small dent in the refrigerator is wear and tear. The handle missing from the dishwasher door is damage.
For more information on security deposits, check out our blog post: Security Deposits, 5 Tips Landlords Should Know.
5. Inspect units every six months
Your lease should state that you have the right to enter the unit for inspections periodically. We inspect every six months, usually in the fall and spring months. You could choose to inspect six months into each lease, but that means multiple trips for inspections for multi-unit properties. We inspect units in our multi-unit properties all on the same day, twice per year.
During the inspection, we check for leaks, mold, and lease violations. We also check to ensure the smoke/carbon dioxide detectors, door locks, and cabinet doors are functioning correctly. As well as change batteries if needed.
Doing this inspection allows us the opportunity to be proactive with maintenance issues. For example, we can resolve the problem before dry rot or mold occurs if we find a water leak. It also gives us a pretty good idea of how the tenant treats the unit and, should the lease not be renewed, what cleaning and damage repairs we can expect.
Ok, we are halfway through our Top 10 operating tips for DIY Landlords! Keep reading to learn more about the behind-the-scenes business practices that are just as important as tips 1-5.
6. Create a solid team to support you
We cannot stress this part of DIY landlording enough. The people you call on for all needs when running a business can make or break your experience. You know your strengths and weaknesses and find others to serve those functions you cannot do yourself.
Find yourself a reputable contractor to call for maintenance issues you cannot remedy yourself. Our contractor can handle almost any maintenance request, and because he is licensed, insured, and bonded, we can trust him in units without us having to be present. He is also willing to be on call when we are traveling. Our contractor has saved us so much stress and anxiety when on vacation!
Other significant team members would be a CPA or tax advisor, real estate lawyer or legal counsel, your bank, pest control company, landscaper, appliance repairman, painter, or a cleaning crew. For our top 5 team members and how we found them, check out our blog Landlording: A Team Sport.
7. Have substantial cash reserves
If 2020-2021 has taught us anything, it should be the importance of cash reserves for the unknown. I know some real estate professionals disagree, but we are of the mindset of “it’s better to be safe than sorry.”
Included in our financial planning for our rental property business is the goal to set aside 10% of earnings each month. We save for vacancies, nonpaying tenants, repairs and maintenance, roof, driveway, appliance replacement, and property upgrades as needed to remain competitive in the market. These funds are your “oh crap, what now” savings account. If we did not have a substantial cash reserve, we would have borrowed money to get through the pandemic. We would have been fine but, the reassurance and confidence we have knowing we are financially secure is an enormous stress reliever.
To learn more about cash reserves, read Cash Reserves for Rental Properties: How Much is Enough.
8. Keep your documents, photos, and records organized
Part of owning a business is keeping your paperwork in order. For rental properties, it is imperative to know where every document is at all times. It does not matter if you prefer paper trail or electronic files.
For each unit, have a file for every tenant. This file should include all correspondence with the tenant and their application, lease, unit photos, and move-out paperwork.
For each property, have files for receipts, warranties, rent roll, maintenance logs, information for machines, and backup keys for units, mailboxes, gates, garages, etc. Also, a copy of the declarations page for your liability insurance.
For the business, you should have operations and policy and procedures manuals. The operation manual will describe all of the essential day-to-day practices for operating your rental property business. This manual is vital should you become incapacitated, so another person can step in and run your business on your behalf.
The policy and procedure manual contains all of the criteria you require to rent one of your units. This manual will state such policies as pet, smoking, financial requirements, what you repair vs. tenant responsibility, etc. It is essential to have these written (and check for legal compliance) if you find yourself in court over a discrimination lawsuit.
To learn more about organizing your landlord documents, check out our blog: Keeping Rental Property Documents Organized.
9. Properly account for your finances
There can be a lot of coming and going of funds when owning a rental property business. You must educate yourself on tax laws and know how to account for your income and expenses. There are a lot of ways to save money on rental income. Having a CPA with knowledge about rental properties to advise you is key.
Stay on top of your bookkeeping. You should know from month to month where you stand financially. If you only work on your financials every three months, you could miss out on potential financial growth opportunities.
Always know the value of your properties and what market rents are. Then, should the opportunity to refinance the property come along, having your finances in order can expedite your loan process, enabling you to use the extra cash to purchase your next rental property.
10. Make sure you are adequately insured
Liability insurance policies depend on the type and size of your rental property. Single-family homes, condominiums, and apartment buildings all have different types of policies and coverage. For example, apartment buildings with more than five units are considered commercial property and have additional coverage that a 4-unit building may not include.
If you own a single-family home and rent only a room or two, you will need to take out rental property insurance to cover the liability, contents, and loss of rent coverage.
Single-family homes and condominiums usually do not include comprehensive liability insurance, just general liability coverage.
Whether you hold your rental properties in an LLC or not, consider getting umbrella insurance for additional liability coverage.
Each insurance company has different levels of coverage, so it is a good idea to have a conversation with your insurance broker to assure yourself the coverage you have is satisfactory.
Lastly, we require our tenants to hold a renter’s insurance policy. There are many reasons why we enforce this policy. Read why in our blog: Why Landlords Should Require Renter’s Insurance.
Love these top 10 operating tips for DIY landlords? Check out our other blogs to guide you on your self-management journey as a landlord:
The Who, What, When, and Why of Residential Vacancy Insurance
Offering Tenants Incentives Upon Lease Renewal
Make It a Family Affair: How Landlords Can Employ Children for Tax Breaks
Marketing Your Rental Property, Get to Know the Neighborhood
Tips for Taking Great Rental Property Photos
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Looking for a community of DIY landlords you can ask questions and bounce ideas off of? Join the Your Landlord Resource Facebook Group, a discussion group for support, tips, and guidance to help create successful landlord-tenant relationships.
Tenants, termites, and tenting, OH MY! A few years ago, we had the unfortunate situation of termites in our six-unit apartment complex. This blog covers how to navigate the process of termites in your rental property. We cover how we discovered them, the tenting and fumigation process, communication and method of guiding our tenants, and all the nuts and bolts that came along with this experience.
Discovery
Our termite story begins with a tenant informing us that she noticed a few tiny pinholes around her front door frame and molding. On the floor directly underneath, she saw fine dust. Under the advice of our pest control company, she was asked to place blue painters’ tape over the holes. If the hole appears through the tape again, we have termites. Indeed, holes were there a few days later. Ugggh! How could we have termites in our rental property?!
After picking our stomachs up off the ground, we immediately scheduled our pest company out for a complete pest inspection. The apartment in question is in the front of our six-unit building. After investigating the basement, the inspector confirmed there was a small infestation of dry wood termites. Dry wood termites, unlike subterranean termites, live inside the wood, making soil treatment pretty much useless.