Top 10 Tips for First-Time Landlords

Written on March 22, 2016 by , updated on December 9, 2016

Tips for First-time LandlordsI was once a first-time landlord but now I have over 10 years worth of experience investing in real estate and over 15 years of lending experience for real estate transactions.

During those years, I have seen and have personally made some serious mistakes, so I would now like to offer some landlord tips.

My hope is that this article will educate you so that you don’t make the same mistakes as I have. Here are my top 10 landlord tips.

1. Make Rent the Priority

Rent is your revenue. It’s amazing how many landlords are not aggressive in pursuing rent and late charges. It’s sometimes a good idea to work with people who generally need help … if they communicate with you.

But if your tenants just stop paying rent and ignoring your calls or texts, you need to start eviction proceedings. Otherwise, you could be six months behind on rent before you know it, which makes this probably the most important of all the landlord tips. 

Related: The Landlord’s Guide to Rent Collection

2. Partner With The Right Investor

I have an amazing business partner who is completely honest and transparent, two qualities that are absolutely critical when choosing business partners. For some reason, some new landlords are very willing to partner with somebody they barely know just because a deal looks good. This is usually a mistake.

I knew my business partner for over five years before we did a business transaction together.  

Additionally, we have the same end-goals and values, which is what ultimately influenced my decision to invest in properties with him.

Further Reading: 6 Ways to Avoid the Hidden Dangers of Co-Owning Property

3. Screen Tenants Properly

Screening tenants is a really big deal, and I am the first to admit that I have made some serious mistakes in this area. My first multifamily tenant had a 480 credit score, couldn’t produce previous rent references, and didn’t have a job.

Take a wild guess as to how that ended-up? Let’s just say that anything under 600 is considered bad credit. If you wish to be more prudent, here is the breakdown:

  • Excellent credit — 750 and above
  • Good credit — 700 to 749
  • Fair credit — 650 to 699
  • Poor credit — 600 to 649
  • Bad credit — anything below 600

Further Reading: The Landlord’s Guide to Tenant Screening

4. Don’t Allow Cats

Sorry if this is offensive to any cat lovers out there. I’m sure your cat is awesome. However, I’ve had a very bad experience with cats and will never forget it.

I renovated a property and was really excited about the new carpet I installed. I then rented the place to a manager of a local restaurant.

She paid on time for several months but then disappeared. She was relocated but didn’t tell anybody. She also “forgot” to bring her cat with her. The entire unit spelled like cat pee for several months, even after I installed new carpet. Lesson learned.

Further Reading:  The Definitive Guide to Renting to Tenants with Pets

5. Don’t Ignore Extra Income Opportunities

Most investors think 1-1. What do I mean by that? If somebody buys a house, they simply rent the house out and that’s it. But that method means you could be ignoring several extra income ideas that could improve your property’s return on investment.

Here are some out-of-the-box ideas to think about for earning extra money:

  • Could you install solar panels? Look into selling back any excess energy generated to the grid.
  • Is there room on the property to install a billboard and/or cell phone tower?
  • Is there an unused shed that you could rent out for self-storage?

Further Reading:

6. Know Fair Housing Laws

For some reason, many investors choose not to educate themselves on fair housing laws, and there can be serious implications if you violate them.

There’s no excuse to not educating yourself on the laws in the real estate industry. Landlordology has created several easy-to-follow guides on fair housing.

Further Reading: Beware of the top 10 Fair Housing Mistakes

7. Don’t Invest in Renovations That Won’t Produce Higher Rent

One of my friends has made a lot of money in his current profession and is now buying rental properties using all cash. There is nothing wrong with this.

However, he is absolutely going over the top renovating these properties. For instance, he is buying properties in what I would characterize as “B” neighborhoods.  

Then he renovates them by putting tile in the bathrooms, marble countertops in the kitchen, and crown-molding in the den. After renovating the properties, they are nicer than many owner-occupied homes.  

The problem is that these renovations don’t lead to a high enough rent rate to justify the expenses.

Further Reading: 5 Rental Home Renovations That Are Worth Your Money

8. Collect Rent Online

There is no reason for you to be collecting rent by a check in the mail. Not only is it time-consuming to go to your P.O. Box or mailbox, keep up with all the checks, and then deposit the checks, but it’s riskier.

The check can bounce, and then you’ll need to pay a non-sufficient funds fee and then contact your tenant for the rent and the NSF fee.

When you collect rent online, this whole process is negated, and the process is dead simple if you use Cozy.

Further Reading: Getting Started with Online Rent Payments

9. Use the Right Financing Strategy

I have a little adage that I say every day to anyone who’ll listen: A good deal with the wrong financing strategy is a bad deal.

A good deal with the wrong financing strategy is a bad deal. Click to Tweet

Most investors focus on the interest rate, but there’s a lot more to consider when financing rental property.

  • Is there a balloon payment?
  • How long is the amortization period?
  • Can there be an interest-only period when renovating the property?
  • Can we have a line of credit instead of a term loan?

Investors focus 99% of their time finding deals. When they get a deal, they then scramble to find financing. I have seen several friends lose good real estate deals because they didn’t have enough time to put their financing in place. Be just as proactive about financing rental property as you are about finding deals.

Further Reading: Cash Is Not King in Real Estate

10. Market Rental Properties Effectively

It’s amazing to me how many real estate investors still advertise in the newspaper and use yard signs. From my experience (12 years now) potential tenants who call you and pretend to be interested in your property are just nosy neighbors.

Using an online resource like Cozy to market your listing is great because tenants can view pictures of inside the property and get valuable information about the property without bothering you.  

This saves you an incredible amount of time.

Further Reading: Market Your Properties from Anywhere with Cozy Listings

Bonus: BE ORGANIZED!

Peter Drucker famously said:

“What gets measured gets improved.” Click to Tweet

Perhaps the biggest mistakes I see landlords making is that they aren’t organized, and they don’t keep proper records of revenue and expenses. So I couldn’t leave being organized out of a guide on landlord tips.

If you don’t keep proper records of revenue and expenses you have absolutely no idea how profitable your property is.

Further Reading: The Real Estate Investor’s Guide to Year-end Planning

Let’s Discuss!

Have you made a serious mistake or heard about a friend who made a major mistake as a landlord? Let me know in the comments, some of your landlord tips!

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16 CommentsLeave a Comment

  • Lucas Hall

    While I love cats, the future tenants of my rental property certainly don’t want their unit to smell like one.

    Oddly enough, my wife has “cat-dar” (cat radar), and she can tell (rather her allergies can tell) if a cat as lived in a unit anytime in the last 5 years – especially if there is carpet.

  • AB

    Thanks for this article. I have an all-hardwood floors in my unit (they’re beautiful). Can cats destroy my hardwood floors? How about dogs? The big majority of people contacting me have pets so I’m having a big dilemma of whether to consider them or not.

    • Maggie

      Yes, cats can pee on them. Dogs or cats may scratch a bit, depending, but so can people and furniture. But urine soaking into the wood is going to be the hardest thing to fix.

  • Bobbi Ann

    I think I am going to have legal issues with a tenant that is playing games with us. I want to know if there is any legal info. for landlords out there? The few free ones that I’ve seen are mostly for tenants. I want to protect myself before something is done, not after they sue me. Their lease is up in a few months and I’ve been very fair with them, but they seem to think I am made of money and they deserve some of it.

    Thanks in advance for any help you may be able to offer me.

  • George Curtin

    In regard to cats, this is GREAT advice. I had to replace an entire floor 1600 sq. of high end laminate because the tenant had an old cat that could not hold it’s pee. If you do not have tile in the entire house than NO CATS! Now dogs are our only policy on pets. No birds because they are just as filthy as cats. Dogs must be under 30 lbs. And only one dog at any time. Do not let your home become a kennel. And we charge a non refundable pet deposit of 250.00 so we can have a commercial pest control come in and spray for flees and ticks. Legal issues are resolved through the landlords knowledge on the states laws. I urge all landlord or potential landlords to get copy of your states law on renters rights and landlord rights. Good luck

  • Dave Miller

    Great list! Definitely agree with screen tenants properly, prioritize rent collection, and watch renovations – I would place them as the “top three”from this list! Thanks for posting!

  • Betris

    my son was on hospital bed for surgery that involve huge money and i also needed some money to refinance and get a good home then i have to seeks for Assistance from friends and when there was no hope any more i decide to go online to seek a loan and i find VICTORIA LAWSON Trust Loan Firm (marianlawson @ outlook.com) with 2% interest Rate and applied immediately with my details as directed. Within seven Days of my application She wired my loan amount with No hidden charges and i could take care of my son medical bills, Renew my rent bill and pay off my debt. I will advice every loan seeker to contact VICTORIA LAWSON LOAN Company with marianlawson @ outlook.com For easy and safe transaction.

  • cs Brunton

    Yes… but would apply to ALL pets. Dogs crap and pee also. I either have a NO pet policy for townhouses and $400 pet FEE for my houses. Wish I could charge a kid fee also as they are just as bad on the properties, but oh well. As for EFT payments for rent, its the only way to go. Thanks for the tips.

  • Kaylynn N

    Hello we recently inherited a house in another state but can not afford to maintain both homes but also do not want to sale our second home… so we are thinking about renting it out is there any thing i need to know before doin this??? are we making a mistake renting out the home??? thanks in advance!!! please in need of some advice…

  • DB

    My spouse owns a house that is currently upside down in market value by about $10K. Local rent rates would still leave us short on the mortgage by about $100 per month. Is renting this house long term a better option than selling and going out of pocket in one lump sum for off-loading it altogether?

  • John Cummins

    Lots of good ideas and a few arguable. As a landlord for thirty five years making 100% of my income from rent, I suspect quality of expert advice from those that only dabble or are flippers. Pushing products diminishes credibility.

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