Hope for your financial life and beyond

How to Be a Successful Landlord: 5 Key Areas to Focus On

If you are a frequent visitor to Luke1428 you know I have an affinity for rental real estate. I purchased my first property five years ago, mistakenly paying a bit too much for it. I didn’t know how to be a successful landlord then and let my excitement cloud my judgement.  But I simply wanted to get started – that was all I cared about.

how to be a successful landlordI’ve learned many things since then and survived my share of dark moments. You may remember my post from last fall about the nightmare I went through during my first eviction. Ending up in front of the county judge to settle that dispute was frustrating but valuable all at the same time.

Nobody should become a landlord without doing some serious reading on the subject. That will help eliminate some mistakes you could easily make. But head knowledge can only take one so far. Some things are only learned through experience.

5 Tips on How to Be a Successful Landlord

If you want to know how to be a successful landlord, there are five key areas to focus on that will help facilitate your success. The more you think through these things before starting the better your chances of long-term success.

1. Treat it Like a Business

Many people enter the rental real estate business through the back door. Because their property has gone down in value, they don’t want to lose money on the sale of their home. So they choose to rent it out when they move, praying that home values will increase in the future. “Hopefully,” they project, “I’ll be able to break even.”

Or maybe they experience relocation for some reason. Faced with the prospect of carrying double mortgages, they choose to rent out the former house to cover their payment.

In either of these cases, if the truth is known, the individual doesn’t really want to be a landlord. The position is taken reluctantly, out of a sense of desperation and a feeling they will be harmed financially if they don’t.

Granted these are not the best ways to become a landlord. However, even if this happens, you can still choose to be responsible. Put the sour feelings of how you got into this mess aside and treat it like a business. If you can’t, then it would have been better to stay put until your house sold or you figured out some way to carry double mortgages.

If you don’t have the ability or desire to treat it like a business then you shouldn’t be doing it in the first place. It’s not a circus sideshow that can be ignored all month except on the day the rent is due. There are financial books to keep, tenant phone calls to return, background checks to do, repairs and upgrades to be made, legal issues to be aware of and property taxes to pay.

If you develop an “I’ll treat it like a business, not a sideshow” mindset your chances of success and enjoyment will be much higher.

2. Focus on People, Not Profits

Wait…what? I thought you just said treat it like a business? Isn’t treating it like a business all about making money? Why should I focus on people?

Because without people, no business exists. Without a business, no money comes into your pocket.

The people-first mindset can co-exist with the “treat it like a business” mindset. If you think about it, what I’m really talking about here is Customer Service 101 that would be taught in any business school. Treat the customer like you would expect to be treated.

People are important because they have lives too, filled with ups and downs. They have their own dreams. They are families with kids who need a safe house and a warm bed to come home to at night.

What they need most is a landlord with a passion to care for their needs, within reason, so they can live their lives in peace.

It may sound like I’m advocating reducing profits to meet the needs of people. To a point, I am. That may not be a popular position among real estate investors.

For me, it’s more important to help someone find that perfect place to rent. I have it built into my business plan that I might not make as much profit as my competitors. I enjoy the feeling of knowing I’m helping people along the way and maybe giving them a monthly rent bargain.

Yes, I know my rents run a bit cheaper than comparable properties in the area. I’m fine with that. So are my tenants! It’s helped me keep my properties filled and secure new tenants quickly. I’ve never had a property that is ready to rent, sit vacant for longer than a month.

Focusing on people, doesn’t necessarily have anything to do with how much you charge them for monthly rent. That’s just one way I’m working this philosophy out in my business. It’s more about meeting their needs in whatever way you can so they can enjoy their experience in the property.

Related Content: Simple and Fun Ways Landlords Can Treat Their Tenants Well

3. Set Some Business Goals

I’m a huge advocate of making goals in all areas of life. Rental real estate is no different.

Making money from your property should be a prominent goal in your business plan. In addition, it would be helpful to decide what you want the business to become. Are you content with just one property or do you want to build an empire? The answer to that question will determine how your business plays out over the long haul.

Developing other goals will assist you in running the day-to-day affairs of the business effectively. It will help guide and keep you focused as issues arise.

What other goals could you create? Here are a few I’ve put into my business plan:

Respond to general phone calls or emails within 24 hrs.

Respond to emergency phone calls immediately.

Fill vacancies within a month of properties being ready to rent.

Complete background and credit checks within two days of receiving an application.

Abide by all terms of the rental contract (seems like a “Well duh!” goal but you would be surprised how many landlords don’t).

Connect with tenants the day after rent is late.

Purchase additional properties in no longer than three-year intervals.

These are just a few of the goals I’ve set. I don’t always succeed but at least I have a target to shoot for. Set some for yourself based on your circumstances and business model.

4. Accept Challenges and Move On Them

Your air conditioners are going to go out. Plumbing is going to drip. Roofs are going to leak. Pets are going to stain carpets. Tenants are not going to pay rent.

Challenges are part of the business. Why are you pretending that they shouldn’t be happening and getting frustrated about it? Do you know how many dents get put into the walls at my personal home with four kids running around? So will it be at your rentals. Those walls will need to be patched and repainted between tenants.

It’s fine. Just do the repairs without complaining. Spend what money you need to so the situation is livable again. I once had to drill a new well because the old one at a property I owned dried up. You can imagine how expensive that was. It had to be done though or I could have been in legal trouble for being negligent to a basic need.

I simply breathe deep and accept challenges when they come. I’ve found it helps reduce my stress levels and limits tension developing between myself and the tenants.

Believe me, tenants pick up on how you respond to requests for attention. Whenever, I get a phone call for assistance, the tenants are so apologetic because they know they need help. They believe, rightly or wrongly, they have done something terrible. Their experience in other life situations tells them you (the landlord) will be ticked off because it will take money to fix the problem.

The best thing that can happen when that phone call comes is to remember your “Customer Service 101: People First, Not Profits” mindset. Kindly reassure them everything will be fine and work quickly to resolve the issue.

Related Content: 6 Ways We Survive the Dark Side of Rental Real Estate

5. Build a Team

Even though I have a good deal of experience from my days of working for a construction company, I don’t have all the skills necessary to excel in every aspect of being a landlord.

I also know this…I certainly don’t have unlimited time.

So building a team will be of paramount importance. Who’s on that team will be up to you.

For married couples the team starts at home. Both spouses must be on the same page when starting this business. You will need the support of each other as you decide how best to use the monthly proceeds and manage the time it takes to run the business.

Your next main team member will be the tenant. You will want them to treat the property with respect. So connect with them and establish a good rapport from the beginning.

What other people do you need on the team? I would suggest you consider connecting with a(n):

Real estate agent

Lawyer

Accountant

Repairmen (electrical, plumbing, painter, roofer, heating/air)

Handyman (for minor repairs)

Landscaping/Lawn care

Appliance repair company

Locksmith

Insurance company

Mortgage lender or banker

Home inspector

All of these may not be relevant at the beginning but you should work over time to build out your network. After five years of running our business, I’ve consulted with everyone on this list at least once.

I would suggest building a database in whatever format suits you. I keep my network of potential contacts in a Word document file. Of course, I keep numbers stored in my phone of team members I am in frequent contact with such as the tenants, our real estate agent and repair companies.

Is Rental Real Estate For Me?

Only you can answer that question. But you have to learn how to be a successful landlord. I’ve really enjoyed my experience and am looking forward to adding some more homes in the future.

If you can treat rental real estate like a business, focus on people – not profits, set some worthy goals, be fine in dealing with challenges and build out a solid team, then you have a great chance to be successful.

Questions: What would you tell someone about how to be a successful landlord? Would you consider sacrificing some profit to keep your property filled with a quality tenant? How’s your attitude when it comes to problems coming up at your property? Do you complete most of the repairs or do you hire that out?

Next Post: This One Stock Chart Could Make or Break You Over the Next 20 Years

Prior Post: If You Do Anything in 2014, Please Consider Receiving This Gift

I hope you enjoyed that post. Want more?
Sign up to receive my blog posts via email and get your free gift...
99 Ways to Spend Less and Save More

Privacy Guarantee: I will not share your email with anyone.

Comments

  1. Wow, great article. All points are important to become a successful landlord, I agree that treat it like a business but make sure that your customers or people are happy with your facilities and services which you give to them. If they are happy then you can make more money and set your business on that position where you want to reach.

  2. I was wondering if you ever screen check and background check your tenants? If you do, do you suggest it?

    • Yes…we absolutely screen and do background checks on tenants. The two main things we do are call employers to verify employment and salary (if we can) and use an online service called E-renter to do credit and background checks.

  3. The single most expensive event at my rental properties is turnover. Once you factor in repairs, vacancy, leasing fees, advertising, etc. it all ads up. I have many units that are rented under market rent because the tenants are good and they pay on time.

    I also recently went through my first eviction… boy those are fun :-/.

    • The eviction process is absolutely no fun. I went through my first one last year and it was a mess…ended up in front of a judge. I’m glad I went through it though…the experience taught me a lot. Now that I know how the process works I will be better prepared next time it happens.

  4. Student Debt Survivor says:

    Great tips here. We’d really like to get into buying rental properties. We’re thinking we’ll purchase something in Maine (by my folks) so my step-dad can help us with any maintenance that needs to be done and he also has a bunch of contacts in construction if anything major were to go wrong (heating, water etc.). Because property here in NYC is so expensive we’d never be able to afford to buy multiple properties here (well at least not now).

    • Long distance property management can be challenging. That would be a good setup if you have family living close to the property who is willing to help manage it and keep an eye on things.

  5. I would like to get into rental real estate but it is so expensive here in NYC that it’s tough enough purchasing a primary residence. We’re looking at co-ops here…and many do not allow you to rent them out. In anycase, I’ve worked in housing court before and if you have a bad tenant…it can really tough to evict them so I agree with Charles that you need to screen tenants and be nice to the good ones so that they are long term tenants.

    • I can imagine how expensive it is for you Andrew. We had some friends years ago who rented in the NYC area and I was amazed how much they paid for their little apartment.

      The biggest piece of advice I would give to anyone going through some tough times with a tenant is to document everything and keep all bills/receipts from work you’ve had done. You may need to use that as evidence in court.

    • Some of the best advice I’ve ever received was “live where you want to live, but invest where the numbers make sense”. Just because you live in NYC doesn’t mean you have to invest in NYC. I actually only own 1 rental property in the city I live in and the rest are in 4 different markets in 2 different countries.

      An excellent property manger is worth their weight in gold by the way.

  6. Charles@Gettingarichlife says:

    I’m a huge fan of real estate, my most popular post was about my real estate investments. I look at it as a my business when I screen my tenants. Once they rent from me I’m a big softie, that’s why I have long term tenants.

  7. Laurie @thefrugalfarmer says:

    Love this, Brian! We are seriously considering a jump into the real estate investing market, so this is very timely for us. Can’t wait to read more!

    • That’s great Laurie! My suggestion would be to pay off as much of your personal debt as possible before investing in real estate. It does eat money from time to time and you will need a good business emergency fund to account for that.

      • I second the need for a good business emergency fund. What I do is take all of the net cash flow from a new rental property and stuff it all into an emergency reserve account until it reaches a certain number. Then, and only then, will I start to use the net cash flow for other things (paying down mortgage debt, life, vacations, etc.).

  8. I think the point about treating it like a business really underlies everything here. I think a lot of people get into real estate simply because they’ve heard it’s a great way to make money without understanding the very real work and planning that has to go into it. It can certainly be a profitable venture, but only if the right effort is put into it. Great stuff here for sure.

    • You really do have to start with that business mindset. Everything else flows from that type of thinking. If you have the business mindset, you will naturally want to do all the other things.

  9. Kim@Eyesonthedollar says:

    Excellent topic today and one I certainly cannot read enough about. I know we are not ready to deal with some of those issues, so property management works great at this point with the residential property. I will be dealing with the day to day things on the commercial property, and having a good team is essential. We can do minor repairs and landscaping, but it’s important to have that go-to person to call when something has to be fixed right away.

  10. Great advice, Brian. So many people want to add real estate to their investment portfolio because they think it is easy. Well, it can be but it’s not a hands-off investment, unless you have a property management team taking care of everything for you. Like you said, things break, renters leave, renters don’t pay, etc. Some people assume it’s purely passive income and it’s not. It can still be a great investment and opportunity but you have to do your due diligence to make sure it’s a good fit for you. We don’t own any rental properties and it’s nothing something we intend to do at this time. I guess I’m more comfortable with investments than property. 🙂

    • It’s definitely not passive income…there is enough work put into it not to call it that. I really have to give credit to my wife for getting me turned onto real estate. It really wasn’t on my radar as a potential revenue source 10 years ago. I was only focused on investments. She started reading about it and eventually I bought in.

  11. Great advice. As a tenant, I appreciate that someone like you puts more stock into making your tenant happy and comfortable as opposed to just it being a money maker. I think that’s when landlords get such high turnover. I don’t know if something like this is right for me NOW, but if I ever live in a more affordable area then perhaps.

    • I won’t return to stores where I get poor customer service. So I would be looking or an out if my landlord was sticking it to me at every turn. That’s not a situation I would want to be in.

  12. Done by Forty says:

    Brian, we currently rent out a room in our house, and one of our goals in 2014 is to purchase a single family rental property. I love your approach of putting people first. I’d love to follow in your footsteps here, and look forward to learning more about your unique approach.

    • I believe putting people first just makes sense. These are people you will be establishing a relationship with over time. Best to do what you can to make that relationship amicable.

  13. Loved this write-up, Brian! I am a landlord (of our basement) and have had my fair share of challenges. I liked your point about reluctant landlords, and I think they have the same chance of success if they have the right attitude. I know multiple people who have become reluctant landlords and they always have a little more trouble/frustration than those who willfully become landlords.

    • Reluctant landlords are simply not 100% emotionally invested in the deal. So they have problems because they are angry/frustrated they had to take that route. Consequently, it affects their decision making.

  14. John S @ Frugal Rules says:

    I love your point on focusing on people and not the profits. The money is nice, of course, but I’d much rather have a happy client than trying to wring every last cent out of the property while making the tenant unhappy. We’re don’t invest in real estate yet, but want to someday. Though, we’ve had enough experience renting in the past to know we were much happier with landlords who actually cared.

  15. Someday, I would love to start investing in real estate. Like you mentioned though, I am afraid of all the emergencies I may run into like phone calls from tenants at 2 AM. I think I would definitely sacrifice a little profit for a quality tenant that doesn’t cause me a ton of issues!

    • Fortunately I haven’t had the 2 AM call yet. Early morning ones but never in the middle of the night. You hear many horror stories about emergencies but I’ve had very few that required immediate attention.

    • Want to know the best way to avoid the 2 AM phone call?

      Use a professional property manager! When you are looking at properties to invest in makes sure you run your numbers including the cost of professional property management. If the investment will make sense with the cost of the property manager (usually 5%-10%) then it will definitely work managing it yourself.

      Other than avoiding the dreaded 2 AM phone call there are many other reasons why a professional property manager is an excellent idea. First of all, they know all the legal ins and outs, the have developed relationships with contractors that typically result in extremely fast repairs at discounted rates, etc.

      All of these things usually add up to happier tenants because their needs are being met faster since they are dealing with professionals who have been managing properties for a long time. I would bet that using a property manger has actually SAVED me money over the years and it has also allowed me to invest in emerging markets where the CAP rates are juicy rather than here at home where I would have to subside the rental income to cover the mortgage.

Trackbacks

  1. […] Fourman @ Luke1428 writes The Attitudes of a Successful Landlord – There are five key areas to focus on that will help facilitate your success as a landlord. […]

  2. […] Fourman @ Luke1428 writes The Attitudes of a Successful Landlord – There are five key areas to focus on that will help facilitate your success as a landlord. […]

  3. […] Fourman @ Luke1428 writes The Attitudes of a Successful Landlord – There are five key areas to focus on that will help facilitate your success as a landlord. […]

Speak Your Mind

*

CommentLuv badge