Friday, October 22, 2004

Becoming a Landlord - Is It Right for YOU? Part III

Being a landlord isn't always easy. It's a good idea to assess your personality to know if you're right for what is essentially a job, a business.

Temperament is important because you may have to deal with frustrating tenants, or the frustration OF your tenants. You may have to deal with some gruesome messes. You very well may have to clean some up, so assess your constitution.

Can you be fair but firm? If you are easily "walked over"? You may have tenants who will stretch limits as far as you let them. And that's not good for you or your tenants. If you can be fair and even-tempered, you'll do well.

The abiity to "read" people will be important, too. Sometimes honest folks get into financial straits, and your rent may be late. You'll have to learn to know the difference between an honest temporary problem a tenant has, or that you're being taken advantage of. You may have to evict someone. It's not a pleasant thing; but it happens. It might be a very hard thing for you to do, but it sometimes has to be done.

Are you handy? Hopefully, you are, because you'll have to be able to fix things, or at least be able to paint an apartment. Do you know good carpenters, electricians, plumbers, etc.? You'll need to form good relationships with skilled tradespeople who can help you, and sometimes quickly. When a furnace goes out in the middle of the night, you have to be ready to remedy, or be able to call someone to go out in the cold.

Do you want everybody to like you? It's important that you be friendly to your tenants, but don't make them friends-- it will do neither of you any good.

So, check your personality, temperament, personal style, sensitivities-- because being a landlord isn't for everyone, but it might be just right for you!

Wednesday, October 13, 2004

Becoming a Landlord - Is it RIGHT for You? Part II

Okay, you've found and purchased rental property! Now what? Time to look for tenants.

Tenants are certainly out there. In the White Mountains of Arizona area, rental property is scarce with demand out-pacing supply. In a perfect world, though, there'd be all perfect tenants, but we know that this isn't a perfect world. So, you have to screen tenants. First, start by knowing The Law. The Fair Housing Act prohibits discrimination according to race or color, national origin, religion, sex, familial status, and handicap or disability. Observe these provisions dutifully.

The application process should involve background/credit checks. If you don't feel comfortable performing these yourself, LandLord411 is a really good resource. Alternatively, if you don't particularly want to hand-manage your rentals, locate a Property Management firm, such as Century 21 Sunshine Property Management to professionally manage your rental property for you.

But prior to interviewing tenants, know the discrimination laws and what questions you're permitted to ask the tenant. Don't rush through the tenant-selection process. Formally develop a set of criteria or standards to help you decide who would be a good tenant. And make absolutely certain applicants know what the standards are when they apply. These standards may include the number of occupants, rent price, pets, security deposits, who pays utilities, minimum income requirements, among others.

Standards to consider

Income -- You can set a minimum. A common criterion is a gross income that equals at least 3.5 times the annual rent amount. You can require that other bills, such as contracted debt (rent, credit cards, etc.) not exceed a specified amount, but contracted debt can not include such things as utility bills, cable bills, etc. when doing the math.
Employment or income stability -- Lenders require at least two years in the same line of work to buy a home. You can require something similar.
Length of time at last residence -- Preferably at least two years at the last residence.
Evictions -- If the tenant has been evicted, you may not want him.
Home life -- You can take into consideration the length of time at the last residence, or complaints from previous landlords or neighbors.
Number of occupants
Number of vehicles
Smokers vs. non-smokers
Bad credit -- A tenant who does not pay someone else may not pay you either. Look for consistently late payments and collections.
Unverifiable information -- If you can't verify what the applicant has written on the rental application, do not rent to him.
Source: Jon Petrie, author of Landlord Secrets

Once you've found your tenants, you will need to execute a Lease Agreement. Make sure that the terms of the lease agreement conform to State guidelines. Here is an Arizona Sample Lease Agreement that you might consider using. Make sure that you collect enough rent security/pet damage/cleaning funds up front. You might be glad you did later on-- but be sure to check what are the reasonable rental charges for your particular area. You don't want to "price yourself out of the market". And make SURE you have a positive cash-flow. This is, after all, an investment that should pay returns.

To Be Continued - How Hard is This? Are You Right For the Job?

Read Part I

Monday, October 04, 2004

Becoming a Landlord - Is It Right for YOU? Part I

The stock market hasn't been particularly rewarding lately, and bank interest is pitiful, so many individuals are turning to investment property (rentals) as these can return investment proceeds more reliably. Here in the White Mountains of Arizona, rental property is typically at a premium - high demand/limited availability. So, you might want to consider contacting us Find White Mountains Investment Property regarding suitable investment property. But, there are many things to consider BEFORE you think about becoming a landlord.

  • Remember to buy carefully. Tour the prospective neighborhood, both during the day and at night. Why? For many reasons. During the day a neighborhood may be largely empty with residents at work, children in school. See what happens when people come home. Is it quiet and peaceful? Are vehicles parked in driveways and not lining the streets? Also, you may be called there in the middle of the night to tend to some emergency or other. If it's a neighborhood that gives you concern about going into at night, better think again. If you see more than a few For Sale or For Rent signs, that could imply a low demand for housing in the area, an area beginning to decline, or an oversupply-- consequently you may not be able to demand much for rent.

  • Know your target tenant market. Families? How close are the schools, playgrounds, shopping, goods and services, medical emergency personnel, etc. The White Mountains of Arizona area is varied with some very remote ruggged property (some "off the grid") that wouldn't be suitable for families with children, single parent families, OR perhaps elderly tenants. The proposed investment property must be researched thoroughly for these considerations. It's important to work with a Realtor who knows the area and can guide your choices.
  • Carefully explore and learn the rules, laws and state statutes regarding rental properties (Landlord Tenant Law), so you know how to deal appropriately and legally with various issues. In Part II of this Series, we'll discuss some of these beginning with the screening process. Because you'll need to know things like when you may and may not evict and how to accomplish an eviction; when you can and can't lock someone out of the property, among many other possible situations.

Part II