Managing tenants to optimize your investment property return
Whether you plan to turn your home into a rental property, or you plan to purchase a property specially as a rental property, the steps for finding a tenant are the same. You need to be aware of local laws, keep organized paperwork and accounting, price the property appropriately and vet the people who want to move in.
Regardless of whether you manage the rental yourself or hire a property manager, you’ll earn top dollar from your long-term rental property and save tenant headaches by understanding these 10 steps:
- Make sure you’re allowed to rent the property
If you live in a home owners association, check for rental restrictionsand find out if the local government requires a rental license or inspection. For example, if you plan to make your rental available to HUD tenants, there are additional requirements including an inspection. We know the local laws, but may not know your HOA’s rules.
- Know the local laws
Housing is regulated by both Federal Fair Housing laws and State regulations. Read through and become familiar with Minnesota’s Landlord and Tenant handbook.
Here are a few examples of why you should be well versed in Landlord Tenant code. In Minnesota, you must do a background check on anyone managing your property for you. Tenants have a right to withhold or deduct from rent if a major fixture (such as a furnace) goes unrepaired. There are also cold weather rules that both protect your property and the tenant from having heating utilities disconnected between Oct. 15 and April 15.
Evicting a tenant is never a fun or easy task. In Minnesota, it must be done through the court, and once a Writ of Eviction is granted, a tenant can only be physically removed by a law enforcement officer.
- Establish the rent
Do market research to set your rental price. See what similar homes are renting for on Craigslist, in the local newspaper, and on the local multiple listing service. If you allow pets, compare pet-friendly properties’ prices. If you are purchasing an investment property with us, we can research the rental history.
- Do your rental home paperwork
Here are a few things to consider if you are self-managing:
- Have a bookkeeping system to track tenant deposits and expenses.
- Make sure your homeowners insurance policy is updated as an investment property.
- Open an account with a company that does credit and criminal history background checks on prospective tenants.
- Have a local real estate attorney draft a lease and a rental application for you.
- Set the minimum credit score, credit history, and income you’ll take.
- Photograph your home with your furniture in it
Stage and take picturesof the rooms before the first tenants move in. That way, if your current tenants have awful decorating taste or are clutter bugs, you can use your pictures to show your house in its best condition when searching for new tenants.
- Advertise everywhere you can
Sites such as Craigslist offer free ads, but watch out for check scammers who answer your ad along with the legit renters. Facebook Marketplace or Hotpads.com are two other popular online sites. A flyer in a popular café or grocery store can also be effective.
- Group showings into one or two days per week.
When you respond to prospective tenants, showing the house every day wastes your time and annoys your current tenants. Having multiple groups viewing the property at the same time will make prospective tenants realize they could lose the place if they don’t make an offer.A Friday night showing gives you a jump on the landlords doing Saturday showings. Follow up with a Sunday showing to catch everyone who couldn’t make Friday night.
Be prepared for no-shows. It is common for people to make an appointment and not show up.
- Get completed and signed application forms
Get a completed application from everyone who wants to rent your place. The signed application also allows you to legally do a background and credit check. Some landlords charge a fee per application because it costs to run a background check. See what others are doing in your area to determine this fee. Anyone who won’t fully complete and sign an application or pay a nominal application fee isn’t a serious applicant, so don’t waste your time vetting them.
- Verify everything the tenant says on the application.
You’ll definitely want to weed out prospective tenants who give you a cell number that’s answered by a friend pretending to be the applicant’s employer or landlord.
- Look up the phone number for the employer and verify employment and income with someone in human resources.
- If you can, call your prospective tenants’ previous landlord — not the one they currently have. If they’re bad tenants, their current landlord may tell you they’re wonderful — just to get rid of them.
- You must consider all tenants that meet your income and credit requirements.
If you don’t, you risk violating Fair Housing Laws. When you make your selection and have a signed lease, first month’s rent and a deposit, contact everyone else who wanted your house promptly so they can move on.
If you are interested in purchasing property to use as a rental, give us a call. We would be happy to help you find a suitable place.