Hey readers! Sometimes life gets in the way and I have been busying with work and working with my significant other to get our home ready for an extended work from home scenario. With the absence of a vaccine for COVID-19, I have been notified that I will be working from home for the rest of the year, at minimum. My posts have been sitting in the draft box, and I now have the time, energy and mental capacity to get back on track!
I officially became a landlord a little over six months ago when my tenants moved into the first unit of my investment property. I have had no prior experience on being a landlord, but like any business dealing with customers, you strive to give the best customer service experience. As a landlord, your duty is to provide the best experience for your tenants. To be sure to respond and address any issues within the unit in a timely manner. I will be going into how I run my business as a landlord (tenant screening, tenant selection, rent payments, etc.) I will also go into some of the issues that I ran into and what I’ve learned so far. Do you have what it takes to be a landlord? Do you have what it takes to add another full-time job on top of your full-time job? Spend extra money to make sure your rental unit is in tip-top shape? If so, this post may help drive you to become a landlord and come out every month with cash flow!
I’ve mentioned in the past that landlord reputation had been tarnished by individuals who value profits and their own selfish needs over tenants. I want to set the record straight and let people know that not all landlords are like that and I most certainly would never put profits over tenants. My tenants are my number one priority while owning an investment property, whether it is one unit or one hundred units. Their satisfaction means more to me than what my monthly return on investment will be. With that being said, how I run my business is catered to my preferences and level of care. As said before, what might work for me, might not work for you. Although I hope in some shape or form, that my methods can be implemented to fit your business.
I decided for my first tenants that I would use my agent to help get my first tenants, which worked out for the best. My agent did all the ground work of uploading the listings onto sites like Truilia.com, Zillow.com & Realtor.com for prospective tenants to see. I did all the showings of the unit to whoever inquired about the unit. My agent screened the tenants, pulled their credit history and did the background checks. I, however, did add in my own process in the screening process: I set up a sit down interview with prospective tenants that we really considered. Since me and my significant other were going to be living under the same roof with our prospective tenants, I believed it was best to take some time to get to know then on a human level. We vetted our applicants properly and ended up meeting with two prospect tenants (2 roommates that applied separately, but will be living in the unit together). What was supposed to be a one hour meeting turned into a three hour conversation at Starbucks and it was the BEST. We got to know them so well and they got to know us. This made us even more comfortable with potentially accepting them as tenants because we got to know who they really are as people, not customers/tenants. We accepted their tenant applications the following day because we felt a great connection with these two people and felt comfortable having them live in our unit. In the future, I will do this for all my tenants that are comfortable with sitting down with me to get to know who I am as a person, rather than just a landlord. This may not be common and take some extra time, but be willing to go the extra mile to know who you’ll be renting out your units to, it will definitely work out in your favor as a landlord in the long run.
Property Management Software
I am currently using Cozy.co for my property management needs. This software is free to use and easy to set up! I have my rental property set up on the website and am able to collect rent via Cozy every month! All I have to do is set up my account and rental unit and then invite my tenants to sign up and they can set up their accounts to pay rent, send maintenance requests, etc. Very simple! We have primarily been using the software to just pay rent and I am updating all the maintenance requests and issues onto the website for documentation purposes. Since I am an onsite landlord, I simply just have a group text with my two tenants, who I communicate with regularly to see how things are going for them. It’s definitely beneficial to have a great relationship with your tenants because it makes business flow smoother. I definitely have some of the best tenants so far!
Now that we’ve tapped into how I manage my rental units, let’s talk about what I’ve learned so far about being a landlord. Let me tell you this, I have learned A LOT!
Small maintenance story!
My first official landlord issue: A semi clogged toilet, LOL! Every outsider of real estate investing’s issue with potentially becoming a landlord usually starts with the phrase: “I don’t want to fix toilets.” I’ll be honest, when I got the text from my tenant saying that the toilet was flushing slowly, I was like “Oh no it’s happening….” Needless to say, it wasn’t that big of an issue. The biggest issue was I didn’t have a plunger yet (LOL). After running to home depot and picking up a plunger and some cleaner for the pipes, I was able to get the toilet flushing properly after a couple of minutes of plunging. Threw some cleaner down the toilet to clean out the pipes just in case and boom! First maintenance issue solved!
Anyway…so back to what I’ve learned so far as a landlord. I’ve come up with a couple of things that I have learned so far and what you should implement into your own business:
I do not have any experience in terms of plumbing, electrical or flooring. I am not as creative and cannot build anything from scratch or without a kit. I can do the basic handy stuff around the house and assemble furniture. Which is why it is important to have more than one person who is easily accessible. I currently have three handymen that I have been in contact with just in case one is not available. Definitely is important to keep a list of contacts in case there is an issue you can’t handle!
- Stay Organized
I cannot stress this enough. On top of staying organized during the home buying process, stay organized when you are managing rental units!!! I keep all my contacts, business bank accounts and all documents secured and stored just in case they are needed. These documents are also accessible to a select number of people that can manage the rentals for me in the event I am not available. The more organized you are as a landlord, the more tenants and rental units you will be able to handle in the future.
- Cash Reserves
At least six months worth of mortgage payments should be on hand when getting into real estate investing and being a landlord. I will be honest, I did not have six months in reserves when I bought my property, I had around 4 months in reserves and built it up right after getting the property. However, that was my risk tolerance, I was willing to get into the deal without being fully prepared with cash reserves. Besides, I was almost there! I do not recommend doing what I did, but if you’re so sure of your numbers and are on top of your expenses, you have the luxury of taking risks quicker than others. If not, play it safe and make sure you have six months cash reserve. Multiple six by the total amount it takes to keep the house operational (mortgage principal, mortgage interest, property taxes, homeowners insurance & water which landlords typically pay). That is your cash reserve! For me, my current mortgage payment is $2,454.00. So I currently have around $15,000 sitting in cash JUST FOR THE PROPERTY in the event I lose my job or the other unit sits vacant. The cash does not sit in a brokerage account or a money market fund, it sits as liquid cash in a 1% annual yield savings account.
If you are going to do something for your tenants, stick to it and get it done. There is nothing worse than a landlord that is full of empty promises. Tenants will lose their patience and it will overall be bad for your business and reputation as a landlord.
Always communicate anything that happens on the property to your tenants as they should be doing the same for you. If there is work being done in common areas, let the tenants know in advance. If there is a person that needs to access their unit, let the tenants know in advance. If you spotted some bugs and plan on having an exterminator, let the tenants know in advance. It’s very simple, let the tenants know in advance. I typically message my tenants at least 24 hours in advance before we have someone coming into their unit. This is an appropriate time to let your tenants know of anything that will concern them. Also if there are any last minute cancellations, let the tenants know. This way they are up to date and can continue their day. Effective communication between landlord and tenants are one of the keys to a successful real estate investing business.
I’m very excited for what is yet to come and the more things I will learn along the way as a landlord. I have some of the best tenants out there and I appreciate them to the fullest. We have a mutual respect for each other and always look out for one another. I’m proud to be a landlord and I’m proud to have the privilege to give my best to my tenants. At the end of the day, we are all human and we should be treated as such. No amount of profit will never be worth more than the satisfaction of my tenants.