Once you’ve taken the time to make sure your property is ready to show and you’ve written a great rental ad the next step is to screen the prospective tenants that call you.
Many people are content to exchange emails with potential tenants to set up viewing times and I have seen others that encourage text messages. You can do that, but you are missing out on a great opportunity to screen your tenants and you will absolutely waste time going to show your property for the wrong people or people that do not show up.
We’ve learned that if someone won’t pick up the phone to speak with us to set up a time to view the property, they really aren’t that committed or interested in the rental property. These are the folks that will email you to set up a time to see the place and then never actually show up or call to tell you they aren’t coming. And when they show up, a good percentage of the time, we would not rent to them because they want a shorter lease, too many people are going to live in the property, they don’t have jobs or there is some other challenge that we could have covered quickly on the phone and saved us all the trip.
My recommendation – get your potential tenants on the phone before you get up off your comfy couch and show your property. It’s up to you … but it’s been a much more effective way of handling tenant showings for us. But, what do you ask the tenants when you get them on the phone? I’m glad you asked … I shot a video to help you with just that very question:
Tenant Screening Questions to Ask Before You Waste Time Showing Your Property to the Wrong People:
When you are asking questions you’re listening for things that might be a yellow or red light. Not sure what I mean, check out this video Dave shot for you on our simple screening tenant screening process:
When you do get set up a time to show the property, here’s how to get ready:
Finally, if you aren’t sure how the whole rental process works, here’s 5 Steps to Rent Out Your Property and Handling Tenants Who Break Their Lease (prevention is the best medicine). Tenants are your customers. You will not be a successful real estate investor without them. However, you need to find the right ones for you and your property to minimize the stress and strain you can feel. It takes work but a little effort finding the right people will go a long way! Good luck.
If you want more help on picking great tenants for your property, grab a copy of More than Cashflow. There’s an entire chapter dedicated to finding great tenants – plus the whole book will help you understand why you get bad tenants and how to prevent them.
It’s not much of a secret that I am not a fan of managing my own properties. I tried it, learned a lot and then decided to leave it to the professionals. I wouldn’t say I failed miserably but I would say that I discovered that it’s not something I enjoy.
There are few things I love more than accomplishing my objectives.
When I plan my day and it goes as planned then it’s an awesome day for me. When you’re dealing with tenants you can forget about that plan! And you better believe the tenants won’t care about your final exam, your child’s soccer game or your family dinner. If their toilet is overflowing or the pilot light on the furnace went out in the freezing cold of winter then you must deal with that over everything else in your life.
That’s where I failed miserably. I wasn’t prepared for such calls and I certainly struggled with being flexible with my schedule.
Today we look for landlords like me. The tired and cranky landlord presents an enormous opportunity for a real estate investor. If you are prepared to handle the potential problems a property can have and you can spot someone who can’t then you’re quite likely to be able to pick up properties at a discount and be saving someone from an early trip to the grave.
But if you’re going to be taking over other people’s problems, and fixing them then you need to know how to succeed where the other landlord has been failing. You need to be prepared. You need to be relaxed and ready to roll with what is thrown at you.
The top five things you need to do to succeed as a landlord:
1.Be Prepared: Your tenants will call you with toilet troubles, furnace issues and other maintenance requests. Unless you want to be rushing out to the property to handle every little issue it’s a good idea to find a good handyman that you can rely on. We found a great guy that lived just around the corner from the Toronto triplex I tried to manage myself. He was able to pop over in the evenings or on the weekends and check out the little issues. One time the shower was spraying everywhere. Another time the door was sticking. For a small fee he would go over and check it out, and he was almost always able to fix the problem right then and there. Without him I truly would have lost my mind. First of all, at the time the only problems I could deal with were related to toilets. I grew up in a motel and would follow Dad around as he repaired and dealt with toilet troubles in the motel rooms. But beyond basic toilet troubles, I could barely change a lightbulb at the time. Second of all, sometimes I wasn’t even in Toronto when the tenants would call so having someone nearby that could handle the call for me was critical.
If you aren’t sure how to find a good handyman, ask your neighbours. Go to the local real estate investors club meetings and ask them. Or fire up your computer and check online. We found our handyman by asking around. One of my classmates at the time had a handyman cousin the area … and that is who we ended up using.
2. Remember – your customer is your tenant. It’s so easy to forget that your tenant is your customer when they are calling you on Saturday night in the middle of a romantic dinner with your spouse requesting you to fix the pilot light on the furnace (this happened!).
If you owned a restaurant and someone complained about your service, if you care about your business at all, you’d listen carefully to their concerns and try to fix the issue. As a landlord you should treat your tenants with the same courtesy. Remember they probably have options and can move somewhere else. If you always remember that the tenant is your customer and that it’s your tenant paying your bills then I think that everything will be a lot easier to handle as a landlord.
3. The keys to success are in the systems you implement. Find simple systems for managing the emails, voicemails, paperwork and even the keys to the properties. A simple system for the regular things you handle as a landlord will save you time, money and stress.
Let’s take keys for example. The keys to enter each property need to be labeled and stored in an easy to use way.
I can’t take credit for this idea (I got it from Robert Elder ofQuick Start Landlord), but I can tell you that even with just a handful of properties you are going to want to pay close attention to this little trick. It will save you time and money. The trick is to label every key with some sort of code that allows you to identify the address as well as to indicate the date.
Why? As someone who has a key to my aunt’s place, my home, my parking garage, and a friend’s place I can tell you that I already forget which key is which. If I also had to figure out which key opened which rental property I would be standing in front of a house for an hour trying to find the right key. When you add to that the fact that you’ll find yourself changing the locks on the home every few years, you could end up with dozens of keys that don’t even open any doors anymore!
And, while you’re at it, why don’t you go to your local hardware store and buy a little container that is normally used for organizing nails and screws and use it to store the keys for each of your properties? Ahhhh simplicity.
4. Master the art of marketing. I’ve written about this over and over. In fact, in the February 2010 issue ofCanadian Real Estate Magazineyou’ll find an article I wrote on “Attracting the Best Tenants”. That article is all about marketing secrets to make your business successful at finding tenants to rent to. The bottom line is that you need to understand what the tenants in your area want. What are the features and what are the benefits of your property as they relate to the wants and needs of your tenants? This is often things like proximity to a good school, ease of access to public transportation or market specific needs like air conditioning or covered parking with plug ins for vehicles. When you understand what your tenants want you will have no problem composing compelling advertising that fills your inbox and voicemail with messages from prospective tenants.
5. Do whatever you can to reduce tenant turnover– it’s your biggest ongoing expense! Cutting corners will eventually cut your profits. If you try to show a unit without first getting it ready to be viewed, you’ll struggle to attract good tenants. In the end you’ll end up with lower rent rates and a more troublesome tenant renting from you. But the biggest thing you’ll find hurting you in the long run is tenant turnover. It’s almost always better to charge slightly lower than market rent to keep a tenant in there longer than it is to squeeze every dollar of possible rent out of the property but have tenants leaving annually. It’s also better to address tenant requests and concerns as quickly as possible. Keeping your tenants happy in their home and comfortable with you can result in loyal residents. Plus, we’ve found, our tenants are often the best source of other high quality renters. Because they are happy renting from us they tell their friends and we often get emails asking if we have any places available for rent because our current or former tenants have recommended us as landlords.
Many worn-out landlords look at their tenants as a pain in the butt. They weren’t prepared for the calls. They forget that their tenants are in fact the ones paying their bills and should be treated like the valuable customers that they are. They also don’t realize that simple systems like the one I mentioned for keys will make all the difference in streamlining and simplifying your business to make it easy. And finally, inexperienced or tired landlords probably have never taken the time to master the art of marketing to attract new tenants nor have they taken the time to try and keep the good tenants happy in their home.
If you tackle these five success secrets I am confident you’ll find yourself succeeding where other landlords have failed.
Being a rental property owner means dealing with maintenance, repairs and tenant upgrade requests. Even if you’ve hired a property manager, you will still have decisions to make regarding the upkeep of your property.
In general, you should set a maintenance schedule that keeps your property and the unit(s) in your property in the best shape possible. There are several reasons for doing this, but the biggest one is that a property that is kept in good condition attracts and keeps good tenants. The second big reason for doing this is that regular maintenance is often a good way to keep costs down. If you leave things unfixed for long periods of time it can cause other issues. For example, a leaky sink left unfixed could be damaging the cupboards and even the floor underneath the sink.
If you have a property manager ask about their schedule for doing the following things. If you manager your own property, then here’s a suggested schedule for checking on things.
Monthly: Walk the exterior of the property and pick up garbage from around the property. Make sure the lawn is mowed, weeds are pulled and everything is in good shape. If you have laundry facilities, check that the lint is being removed from the dryers and take out any money if they are coin operated.
Quarterly: Check windows, doors, and exterior of the house for any leaks or damage. It’s also a good time to check on the furnace or air conditioner and change filters.
Semi-annually: Change the batteries in the smoke detectors, check carbon monoxide detectors, clean gutters, check appliances, plumbing and electrical outlets in the house. Check for things that might be loose as well (door knobs, railings, or screws). You aren’t looking for things to fix but you want to be aware of things that may require maintenance when a tenant moves out or trying to find little things to repair cheaply as a way to prevent bigger problems later on.
When tenants move out: Have the carpets and drapery cleaned. Paint the walls if necessary (and usually it is), and get the unit professionally cleaned (including the stove and fridge).
Planning for this regular maintenance on your rental property makes things fairly easy. You will have a good idea of when major expenses like a new roof, a dishwasher or a paint job will be required. You can set aside a little extra rent money to cover these costs. The trickier part can be knowing when to make improvements to a rental property when a tenant is asking you to spend money.
In our Toronto tri-plex we recently turned down our tenant’s request for blinds in the living room of one unit. But at the same time, we agreed to put in a new toilet in another unit. Our tenants can easily figure out that we’re bringing in nearly $4,000 in rent per month from this property, so they may think we’re being stingy by refusing their requests. But, you have to keep in mind that, while you want to keep your tenants happy the money your spending needs to either prevent or reduce an expense or it needs to generate revenue.
In the case of a renovation or upgrade requested by a tenant, we ask ourselves a few questions when we’re considering whether to do the work the tenant is asking for:
What are the costs of not doing it (is the tenant likely to leave and what will that cost if they do?)?
Is there another way to address the problem?
Are there any issues with delaying the expenditure?
After we consider these things, we use a final formula to calculate how long it will take to recover our costs.
Total Cost of the Upgrade or Repair / New Money Earned (or Money Saved) each Month = # of months to repay the expense.
On items under $1,000, as a general rule of thumb, if you can recover the cost in 12 to 18 months then the money is well spent.
In the case of the blinds, the tenants wouldn’t pay more rent just to have blinds. Instead we agreed to pay for dry cleaning the curtains which will be less than $100. There’s no direct return on this – but the tenants wanted the “dirty curtains” replaced so this will keep them happy and it’s not a large expense – especially given that the tenants have been long term.
For the toilet replacement request, we decided that getting rid of the grungy old toilet will not get us higher rent, but it will make it easier to attract and keep good tenants. And, if we replace it now, our tenant’s father (an experienced plumber) will install it for free. Finally, we’re replacing a water guzzler with a low flush model (est. water savings of $10/month) that will qualify for a $75 water conservation rebate from the City of Toronto. The formula of benefits looks like this:
$250 – $75 rebate = $175 Cost of the Toilet
$175 / $10/month water savings = 17 months to pay off (PLUS we save $80 on installation).
The cost savings plus the added benefits of saving installation costs made it a very appealing use of our cash. Just remember – real estate investing is a business and you need to get a return on any money you spent – even if that return is simply in cost savings!
If you are managing a property yourself there’s some great books out there to help you. Two books definitely worth checking out are:
I know that’s a lot of information to digest and a substantial list of resources, but your monthly cash flow is dependent on you maximizing your rental revenue and minimizing your expenses – so this is pretty important stuff to know!