First of all, congratulations on your loan approval from the bank to buy your very first dream house! However, you are not planning to stay in it and instead, you want to rent it out as an investment. After a few weeks of searching around, you finally found one and you think you got an independent source of income for as long as it takes. Then, all you have to do is just sitting around and collect the rent. It sounds right but is that really all?
Many landlords have the misconception that renting out their property is a piece of cake and thus tenant problems plague landlords almost every other day. In fact, renting out a property involves much attention because you are dealing with different kinds of tenant personalities and a huge sum of money. The most vital thing to note before renting out your property is to make sure that you rent out for a long-term to avoid finding other tenants over and over again as it is not an easy task and can be a waste of time and money.
In this article, we have summarized the best tips and guidelines of tenant management from experience landlords so that you can build a good landlord-tenant relationship and maintain your property business at the same time.
1. Interview and Screen Prospective Tenants Personally
If you plan to stay out of trouble, better to play safe and sorry. The best way to rent out to only good and reliable tenants is to screen the prospects personally. If you are hiring a property manager, don’t rely on them 100% as they only have the interest in closing the deal than renting to the right tenant for you. Insist on meeting the tenants yourself and get to know them as intimately as possible.
Failure to find reputable tenants will cost you greatly in time and money. During the interview session, you should find out about the items below:
- Their employment details to ensure that they can afford to pay the rental
- Run a thorough background check such as criminal check, their rent home history, and reasons for moving into a new home. This is to make sure that they aren’t evicted by their ex-landlord.
- Run a credit check to see if they are a good debt payer.
- Checking references and call previous landlords.
- Verify job status and current income levels
Try to get proof of your tenant’s employment and ask for a bank statement to ensure that they have cash flow or some sort of assets to pay the rent on time. Ask for more than one landlord reference to make sure that the current landlord does not lie just to get them out of their property. With this checklists, you will be able to narrow down your potential tenants to those who are best fit to live in the property.
Bonus Tips: You should also use tenant screen software to cut down on time needed to conduct the screenings.
2. Invest In Properties nearby Your House
Invest in property within 30 mins driving time or within 10km from your workplace or your home so that it will be much easier for you to reach on-site immediately if there are any problems occurs with your property. Besides, you are able to drive by your house every now and then to make sure everything looks fine from the outside. If you have friends and relatives who live nearby your property, you may also ask them to help keep an eye on your tenants just in case something fishy happen.
3. Rent Out To Young Couples
It is always better to rent to one source rather than renting to a few people. This is to prevent either one of them can’t pay for the rent. Often than not, properties nearby universities are occupied by mostly students who contain up to 6 people. If one of them is unable to pay the rent, the others have no extra money or are not obligated to pay for them. Thus, it will affect your profitability. Instead, look for a mature and responsible student or a young adult with leadership quality and assign him to collect the rent for you. Of course, reward him for taking up the responsibility for you.
4. Set A Tenancy Agreement and Stick to Your Rules
- The standard deposits include 2 months of rental and 1 month of utilities.
- Ask them to show you a photocopy of utility bills once every six months to ensure all bills are paid on time.
- Tenants have to bear any minor repairs below RM 50 per item
- If it is a major repair, ask the tenant to compare prices from various sources and get your consent before proceeding.
- If there is any damage such as plumbing system, electrical items or anything else within the house, the money will be charged to the tenant and deduct from the deposit.
- If the rental is not paid for more than 2 months, property owner has the right to enter the house without informing the tenant and take over the property
Make sure your leasing documents clearly outline the property policy. It should also include a list of “dos and don’ts,” which will provide helpful guidelines for your tenants. Moreover, make sure that your tenants know when the rent due, payment methods, and what the consequences are if they are late with a payment. Present these documents with a legal stamp so that your tenants are likely to treat you with professionalism.
It is also important that you stick to the rules and never waive a late fee. If you do so for even once, you are telling your tenants that there isn’t any penalty for paying late or it is not as serious as they thought it was. Rules are made to be followed. By establishing a professional environment with your tenants from day one, rentals will appreciate your consistency and responsibility being a property owner and are more likely to follow the rules.
5. Automate Rental Collection
To make everybody’s life easier, you should also automate the rent collection process and get your tenants to do an online transfer every month automatically. This method can save you a lot of time and energy just calling and reminding them every month before the rental dateline.
6. Respect your Tenant’s Privacy
Everyone needs their own privacy and same goes to your tenants. As a property owner, you do not have the right to disturb your tenant anytime you want unless you receive a consent with your tenants before going over. Furthermore, bear in mind that during the invitation, do not judge the decoration and taste of your tenants such as the color of their couch, the material that they used, furniture arrangement and so on because nobody likes to be judged. Keep in mind that if you see any part of the home fixtures are not taken care of, try to sit down and talk nicely to them and settle it professionally.
7. Rent Out To Professionals or Foreigners with a Valid Work Permit
Rent out to tenants who have either a professional steady job or foreigners with a valid working permit. This is to provide security to yourself that they are able to pay the rent on time without any problems. Most of these people are keen to stay near their workplace and do not mind paying a higher rental because they could afford it. However, do check the similar rental properties in the area so that you do not set an outrageous rental.
8. Rent out Unfurnished Property
If you do not want to worry whether your tenants will destroy your favorite furniture, it is best to rent out an unfurnished property. Many property owners have a bad experience with bad tenants. When the contract is over, they found out that there were burnt marks all over the kitchen cabinets and scratches all over the furniture. Therefore, better to rent at a lower price with unfurnished property and worry less with damage furniture.
9. Take Tenants’ Complaints Seriously and Execute Immediately
Complaints such as broken toilet fixtures, pipes, air-conditioners, faulty wiring are common issues in a property that requires immediate attention. Try to fix these problems outright so that the problems do not get worst and thus higher fixing cost. You can also ask your tenant to find someone to fix it if you are too busy to handle and deduct from their monthly cost with the receipts.
10. Build a Good Relationship with Your Tenants
Establish a good relationship with your tenants in order to maintain a long-term relationship as a good tenant management skill. However, do keep a distance with your tenants as they may take advantage of you. Therefore, treat this as a business relationship and keep it professional. Be frank with them that you expect prompt payment and cleanliness.
11. Reward Good Tenants
You can create your own rules of rewarding your good tenants who pay their rent on time and take good care of your property during the rental period. Rewards can be in the forms of treating them a meal during your visit, maintaining the same rental fee, and giving extra vouchers from Parkson, Giants, or Tesco. This is a good way to build a relationship and show them you are committed to being a good landlord or landlady.
Always remember, respect each other is the key to avoid any struggles in the future and it is also the key to letting you walking towards a successful property investment journey.
Taking Care of Your Tenants, Your Property and Your Finances