Editor’s Note: Today is the first of a series of guest posts. I’ve invited several people in the real estate and property management communities to contribute and the first one comes from somewhere close to home. Enjoy!
Hi everyone! I’m Chris’s sister Carolyn, and I’ll be your guest blogger today. My life in the world of real estate began when I was three months old. I spent a large portion of my infancy sleeping in a car seat on top of the filing cabinet in my family’s property management firm; when my parents worked evenings and weekends, I learned to play with office equipment. Although I have absolutely no intention of following in my parents’ footsteps, I’ve learned more about their business than I like to think. The last date I went on, the young man loftily informed me that he owned three houses and was fixing them up to rent, and the date (which was already going badly) ended in shambles when I couldn’t bite my tongue hard enough not to gently inform him he bought in a bad area, should have hired a building inspector, and no, gunmetal grey is not a good interior colour. What appear to be Mysterious Trade Secrets to most people are the most natural common sense in the world to me. What kind of things got drilled in my head despite my own total disinterest?
Function Trumps Form Too many people become obsessed with giving their rental properties the right "look". What’s more important is making sure a building is clean, accessible, structurally sound, and safe. When it comes to aesthetics, all your tenants care at all they care about what they will do with a space, not what you’ve done with it. They will be far more grateful if you make sure the pipes work and the electricity won’t spazz out than if you use your best interior decorating skills to sponge-paint the walls hot pink and lime. I’ve seen it. In the same room. With purple. (If you’re wondering, my favourite solution to painting over neon is grey primer, then the real primer and paint)
Get Good Tenants Let’s pretend you’ve just got a new rental unit all lined up. Rent is $1000 a month, the damage deposit is $250. Which of these is better?
1. You rent out your new house to the first applicant you get, a week after it’s been on the market. The tenant pays rent on time the first month, but doesn’t pay the second month. After stringing you along for three weeks with vague promises (what a nice, understanding landlord you are!) the tenant throws a wild party, leaves the house trashed and causes $750 worth of bills for cleaning and repair, and leaves town with a few friends. It takes you two weeks to make the house rentable. You lose: $2,750. You earn: $1,250.
2. It takes you a month to find a tenant you’re happy with. Nobody else really checked out–past landlords complained about them, they had a history of being fired from fast food outlets, they had bad credit ratings, of they were likely to move. You finally find the perfect person who moves in, pays rent on time, and looks like they’ll live there for several years until they can afford a home of their own. You lose: $1,000. You earn: $2,000. (The tenant, being a good tenant, will likely get his $250 back upon leaving) Ask for references. Check credit and income. Being choosy is originally troublesome, but it will save you in the end. Oh, and in checking references, don’t ask their current landlord; ask the landlord before that. After all, if they’re a bad tenant, some landlords will say anything just to get the person to leave.
Use Professionals It’s so hard to get good help these days, not to mention expensive. Why hire a plumber when you can wave around a pipe wrench with the best of them? Why use a Realtor or a lawyer when you’re certain you can muddle through things yourself? Or, more easily, why don’t you paint and re-floor the place yourself? Well, friends, the cautionary tales on this one are legion. I can contribute a few of my own. All I can say is, if you want to fly solo, be certain you can. Very certain.
Read the Legislation Do-it-yourself books are wonderful, but they don’t always know the vagaries of your location and situation. A very simple solution is to go to the government with authority over building and fire codes, and tenancy issues, and actually obtain the legislation, which should be freely available. Then sit down and read it. Legislation is actually written more clearly than you think. When you don’t know, it’s better by far to get information directly from the horse’s mouth, and if you’re going to have to defend yourself in a lawsuit or small claims court, they’ll try the case by the law and not Real Estate Investing For Dummies.
Good luck with your investments, everyone!