The line between being a successful landlord and losing the shirt off your back is thinner than most think. But if you study those on the winning side of things, you'll find that their formula for success isn't as sophisticated as it might initially seem. For the most part, they focus on proven principles like these:
1. Make Your Money When You Buy
There's a common saying in real estate investing that you "make your money when you buy, not when you sell." In other words, the profit comes from buying a piece of property at the right price point, which allows you to lower your expenses and generate more cash flow.
Don't get suckered into buying a property because it speaks to you on an emotional level, or you're tired of going through the time-consuming process of searching for properties. Wait until you've found the right deal. Then - and only then - should you pull the trigger.
Patience is extremely important. You might get turned down 25 or 30 times before you ultimately get an offer accepted. But this patience will pay off in big ways - both in terms of monthly cash flow and future profits (should you decide to sell the investment at a later date).
2. Get Serious About Tenant Screening
You must take tenant screening seriously, even when it feels time-consuming and wasteful.
"As a landlord, you don't want a rental to remain vacant for long periods of time. After all, you're losing money every day on a vacant property. While you might be tempted to rent the property quickly, sacrificing tenant quality may cause costly, time-consuming problems down the road," industry insider Andrea Collatz writes.
"Using a fast and easy tenant screening service can help you screen applicants quickly while also helping you to reduce future headaches."
If it takes a few extra days to find the right tenant, so be it. It's better than the alternative of choosing the wrong tenant and then dealing with months of headaches before ultimately having to find a replacement.
3. Hire a Local Property Manager
Don't feel equipped to do your own tenant screening? A property manager can step in and handle this important task on your behalf.
One of the keys to hiring a property manager is to go local. You don't want to work with some national brand with little or no presence in your area. You need someone you can speak with face-to-face.
4. Focus on Tenant Retention
The most successful landlords in our industry are the ones who develop long-term relationships with reliable tenants. In other words, they've mastered the art of tenant retention and minimized the negative impact of turnover and vacancy.
It's often better to keep a good tenant locked in place with a rental agreement that's below the market rate than it is to increase your rent and force a good tenant out. Do everything you can to prioritize retention. You won't regret it.
5. Know Your Number
You can't afford to be slack with your accounting. In fact, a lack of familiarity with your numbers is one of the major driving forces behind failed real estate investments.
Even if you have a property manager or accountant handling your investment for you, it's important that you're aware of property taxes, insurance, HOA dues, maintenance and repairs, vacancy rates, rental rates, cash flow, mortgage rates, interest, and other key numbers. This will help you make more educated decisions.
Taxes are especially important and should be given a great deal of attention. Every state has its own real estate tax laws, so make sure you know what you can and can't deduct in your area.
You don't have to reinvent the wheel to be a successful landlord. Sometimes the best approach is to study what's already working and model your system after those core principles. In that vein, the hope is that this article will serve as a strong foundation to help you do just that. Start with the low hanging fruit and gradually implement the more challenging ones over time. Your long-term dedication to getting the details right will take you a long way.
Since the likes of the traditional Inauguration Day in the national Capitol are likely never to be witnessed again, take this opportunity from one who has been there to relate some truth about the experience