Rich Dad Education Blog

Assume that you have purchased a good rental property, one that will produce a nice positive cash flow, and now have it rented to a properly screened tenant. What do you do next? Just collect the rent and hope for the best? It isn’t quite that simple. It seems that everybody has ideas about how to be a great landlord. Some suggest that a landlord be a hard-nosed business person that doesn't give an inch and rules with an iron hand. Others advise landlords to love their tenants like their own family, be kind, and gentle. What should you do?

As with most things dealing with real estate, there is no foolproof, absolutely right way to be a perfect landlord. Everybody has their own personality and their own strengths and weaknesses. Realize that many people are not cut out to be a landlord or just don’t want the hassle. If you bought the property right, you always have the option of hiring a professional management company to manage your properties. As you increase the number of properties you own, you will probably find that hiring a management company is not just an option, but a necessity!

Before you jump into the landlording business with both feet, you may want to determine if you are cut out to be a landlord. Start by asking yourself these questions:

• How well do you communicate with people?
• Do you like to work with people on a one-to-one basis?
• How well do you deal with uncertainty?
• Are you willing to stick to a long-term plan?
• Can you make quick decisions?
• How do you deal with conflict?
• Are you able to defuse potentially volatile situations?
• How much time can you devote to your job as a landlord?
• Are you willing to give up some or a lot of your time and freedom to be a landlord?
• Are you tough enough when you need to enforce the rules?
• Are you willing to work with people and provide them a great place to live?
• Can you respond to issues in a timely, professional manner?

Make the right decision. If you don’t think you are cut out to be a landlord, hire a professional management company to manage your properties.

However, most of us at one time or another will need to take on the role of being a landlord, even if it’s only on a temporary basis. Therefore, it pays to know something about being a landlord. Here are some tips that may be helpful to you in your adventures in landlording.

Landlording Tips

1. Invest in the right market segment. You do have a choice as to where you invest. There are all sorts of communities that you could invest in, so pick a community that has people you will be comfortable dealing with. Are you comfortable dealing with high-end clients? Do you feel more comfortable dealing with people in working-class neighborhoods? Are you comfortable working in low-income neighborhoods?
2. Take good care of your property. If you take good care of your property, your tenants will most likely take good care of your property as well. Starting with your first contact with a prospective tenant, begin building high expectations. Let the prospective tenants know that you like to provide a clean, well-kept home for them and that you expect them to take good care of the property. Treat your property with respect and they will likely follow suit. Inspect the property regularly and have a lease that spells out what the tenant is expected to do as far as property upkeep. For single family homes, the tenant should be responsible for all the yard work. Have the property in nice condition when they move in and expect the tenant to keep it that way. Send thank you cards to tenants who are keeping the property in good condition.
3. Create a relationship with your tenants based on mutual respect and courtesy. Always be friendly, pleasant, and treat your tenants with respect, but keep the relationship professional and businesslike at all times. Return phone calls promptly. Be responsible for repairs. If a repair is going to take awhile to get to, for whatever reason, keep the tenant informed about the status as often as necessary to minimize their concerns. If you show concern for your tenants, there is a better chance they will respect your time and your property.
4. Make sure your tenants know all the rules. All of the rules should be spelled out in clear language in the lease agreement. During the initial interview with the prospective tenant, the rules should be discussed. Again, during the lease signing, the rules should be covered in detail and signed by the tenant. Having a spot for the tenant to initial next to each rule is not a bad idea. Then if you ever end up in court and the tenant says, “I didn’t know I couldn’t raise pit bulls in the second bedroom,” you will be able to point to the pet policy section of the rules that they signed. Don’t leave anything out.
5. Enforce the rules. Make sure you enforce the rules for all the tenants. Special privileges for some tenants and not others will get you into big trouble. If your rules say that the tenant will get an eviction notice if they are more than three days late with their rent, then if they are three days late, post the eviction notice, no matter what their excuse. If they pay their rent, they won’t get evicted, but it lets them know that there is no flexibility in the rental policies. If your tenants know the boundaries and those boundaries are constant, they will be more comfortable and content. Yes, you need to be concerned about your tenants and let them know you care, but you need to be tough. Are you up to it? If not, you may need to rethink your decision about becoming a landlord.
6. Communicate clearly, openly, and early. Do you like surprises? When it comes to business, probably not. Surprises can lead to misunderstanding, and misunderstandings can lead to unnecessary conflict. Your property is your tenant’s home, a very important element in their lives. Communicate clearly and early if you are going to change anything, like raising the rent or working on the property in a way that might disturb them. And after you have communicated with your tenant, make sure they really understood what you said.
7. Try to keep your good tenants. Replacing tenants can be very costly. So if you have good tenants, try to keep them renting from you. You still have to enforce all the rules, but if a rent increase will force them out of the rental, then you may want to rethink the rent increase, especially if the rental market is on the weak side. A few other hints: remember all the names of your tenants, including their children. Remember tenant’s birthdays with cards or small gifts. Do maintenance promptly. Thank tenants for keeping the property in good condition. Do what you can to really make them feel like you want them to stay.
8. Your tenants could be buyers for property you have for sale. Even though you hate to lose good tenants, they could very well be an excellent buyer for properties you may have for sale. Get to know your tenants and find out what their long-term plans are. Are they looking to buy as soon as they can? Do they need help with credit repair? You can help them with credit repair by reporting their on-time rental payments. You can direct them to credit-repair education or reputable agencies that help people. If they are renting a single-family home from you, you could even put them on a rent-to-own program and eventually sell them the property. Do what you can to help them.
9. Don’t become a burned-out landlord. Keep a balance in your life. Landlording can be very demanding. Make sure you plan before you have too many properties to handle on your own. Get the help you need. Be willing to delegate some or all of the work. Don’t forget you have a life outside of landlordship. You are supposed to own your investments; your investments should not own you. If you are tied to your properties night and day, your properties own you, and you really just have a job. That is why it is so important to buy properties right so you can afford to have the properties managed and still get a good, positive cash flow.

Landlording isn’t for the faint of heart. It can be a great experience, but make sure you are up to the challenge. Know when to get the help you need; don’t become a slave to your properties!