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Starting out as a Landlord

Updated on February 13, 2014

So you want to be a Landlord…


You've read books, attended seminars, talked to your brother in law and now you want to be a landlord. I've been a landlord for 15 years and in this Hub I will share with you the steps I took in becoming a landlord and the initial rental process. I’ll talk about the initial purchase and all the paperwork I use.

It was 1995 when I got the itch and wanted to rent houses for passive income. I read books, attended seminars and talked to friends that had dabbled in real estate investing. I didn’t have the luxury of the internet back then so I did it the old fashioned way. I got out the classified ads and started looking for low priced properties. I then called a real estate office and was fortunate to meet Steven, a young motivated agent that was willing to work with me. I had an area in mind where I wanted to buy in so together we sat at his computer and began looking for properties that met my description. At the time my budget allowed for a two bedroom home no basement. If I was lucky the property also had a garage.

The search was on


I’d pick out about ten to fifteen properties that were in my price range and I would drive by the property on my time. If the house was acceptable on the outside I would make note of it on the print out. If not I would rip the page in half and throw it in the back seat of my car. After that process I would usually have five to seven houses left. I would call Steven with the addresses and he would schedule the appointments. We would then drive to each property and begin the screening process.

I would carry a note pad, pen, and flash light with me to the initial viewing. This was new to me but I had already owned two different houses of my own so I had a general idea of what to look for. I would generally look under sinks and toilets and check for water damage. In cupboards for any insect or other infestation and if the house was vacant I would turn all the faucets on at the same time, including the bath tub and flush the toilet a few times to make sure the water drained smoothly. I would make notes of any defects or issues that I felt were important so If I decided to write an offer I would know how high I was willing to go should the seller counter.

How Many Offers Does it Take before One Sticks?


In my case it took about fifty. I made fifty offers before one stuck. In the beginning of my offering process people were not willing to budge much from their asking price. Then I found one that was a vacant rental property and I think the previous landlord wanted out. I made a low offer, he countered. I was getting tired and wanted a house already so I accepted the counter offer and 30 days later I was a proud owner of a two bedroom fixer upper. I still own this property and to this day has been one of my most profitable investments.

The house needed cleaning, paint, carpet and a handful of minor repairs. I did all the work myself except the carpet. Three weeks later it was ready to rent. I ran an ad in a local classified paper and the calls began rolling in. There is also a company called Rental Pros in my area that lets landlords advertise for free. I now use craigslist, it’s much more effective.

A side Note on Phone Calls


I never answer my phone when I have a house for rent. I WANT any prospect to leave their name and number so if we get disconnected I can call them back. If I can’t understand them I don’t call them back. A number also gives me a general idea where they live now by what area code they are calling from. Not always because of cell phones but true 87% of the time.

Screening and Showing Process


I have a Rental Application that I make all the people interested in the property fill out. I also ask for a $300.00 NON REFUNDABLE deposit if approved and they change their mind. If they are not approved I refund the full amount. This eliminates the “tire kickers”. I also ask them if they are 100% sure they want the property before I take their deposit. I recently had a lady that was interested in the property and had the $300 deposit. When I told her it was NON REFUNDABLE should she change he mind she said “Let me walk around again”. When she came back to the kitchen she had this look on her face like she wasn’t sure. I gave her the deposit back and told her to sleep on it. I told her that if I didn’t hear from her I would know she changed her mind. She told me she would call me either way and let me know. I never heard from her again.

When looking over the application I make sure their income can cover the rent, utilities, auto expenses and food. If that all checks out I call their employer to verify their income. I also call previous landlord if they have one listed.

A side note on showing the property.


When I show a property I turn on all the lights and open all the blinds. I want the tenant to see everything. If there is a flaw I want them to be aware of it before moving in. Leave nothing to chance.

I also call them 1 hour ahead of time to confirm our appointment. If they are not there at the exact time of the appointment I call them again and make sure they are still coming. If there is no answer I leave a message. If they are not there 15 minutes after the scheduled appointment I leave. They are not coming. Don't wait around for them. If they can't make it on time for the first appointment what makes you think they will be on time with the rent?

It's not really that bad...

I have all my forms on the computer to help ease the pain.
I have all my forms on the computer to help ease the pain.

A Note on Paperwork

I keep all my paperwork on my computer. This makes it easier to fill out all the forms and make sure all the spelling is correct.

Lease Agreement


When I find a suitable tenant there are several forms I use. First is the Lease Agreement. This form lists in detail the term of the lease. How much the rent is and the due date. The discount if paid on time. What their responsibilities are as a tenant and my role as landlord. At the bottom of the second page I list how many people will be occupying the premises, how many keys received and that a fire extinguisher was provided. We both sign and date two copies.

A side note regarding the Lease Agreement. I only list the main income earner on the lease agreement and everyone else on the addendum. This makes it easier and less expensive if I have to evict them.

Addendum


On this form I list the names of the occupants. I state that the smoke detectors have been tested and are in working order. (I do a walk through with the tenant and show them that they all work). I state if or if not there is a pet. I state that a “Protect Your Family from Lead in Your Home” brochure has been given to them. (I then hand them one). I also list what bank their indemnification (Security) deposit will be held at.

Amount to Begin Lease


This form lists the property address, the amount of the indemnification deposit, First month’s rent, Total amount due to begin lease. The amount of deposit they gave me and the balance due to begin the lease. I also state method of payment whether it is cash, check, or money order.

Sample Water Due Letter


I pay the water monthly via Electronic Fund Transfer then I mail them a letter telling them the amount due for water and ask them to add it to their next month’s rent. This way I know the water is current and I don’t get a surprise when they move out. I also remind them to change the furnace filter at the bottom of the letter.

In the summer months I delete the furnace filter reminder.

Move in/Move Out Form


This form simply lists all the rooms in the house and whether there is a ceiling fan, certain appliances or window treatments. It lists the condition of the exterior of the house such as lawn or landscaping. It also lists the condition of the walls and flooring in each room. Whether there are defects of if it’s in tip top condition. I use this form when they move in and I review it when they move out. The outcome will determine the amount of indemnification deposit they get back.

Collecting Rent


The rent is due on the 1st of the month. If they move in on the 15th of the month and the rent is $1000. The $1000 is due upon signing , in addition to the indemnification deposit which is usually a month and a half rent. On the 1st of the following month they pay me for 15 days. On the 3rd month and every month thereafter, they pay $1000 on the 1st of the month. I have 7 rental properties and I don’t want to be going to the post office every other day. I also use a PO Box to collect rent checks and any bills related to my rental business.

Local Phone Numbers


I also give them a list of local phone numbers which includes the following:

  • Me
  • Fire
  • Police
  • Electric company
  • Gas company
  • Cable company

I tell them to transfer the utilities in their names as within three days and ask them to call me and leave me a message after it has been done. I then call the utility company to verify that they have transferred to their name. If I don’t hear from them within three days I call the utility company myself to see if perhaps they transferred and forgot to call me.

If they have not transferred I tell the utility company to turn off the power. Then I call the tenant to remind them to transfer and by the way, the power will be out of my name by the end of the day.

Free Rental Forms

Insurance

When all the the paperwork is signed, keys are exchanged for money and everyone is happy I briefly explain renters insurance to them. I explain that I have landlord insurance which covers the structure should anything happen such as a fire or a tree fall on it. However, my insurance does NOT cover any of their possessions and it is up to them if they want to get renters insurance.

Renters insurance is much less expensive than landlord insurance and I recommend they look into it. The rest is up to them.


I hope this Hub has been informative as well as entertaining. Any comments and suggestions are greatly appreciated.

Thanks for reading!

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    • Doodlehead profile image

      Doodlehead 4 years ago from Northern California

      Dude --you are so brutal! Good for you.

      I can't be tough so I got a manager. $300 deposit. That's business. Yup. Electricty off by the end of the day.

      That's a really cute little house and I bet it does roll in for you on that one!

    • tammyswallow profile image

      Tammy 4 years ago from North Carolina

      If you don't mind, I am going to link this hub with my hub about rent to own. You may sound tough, but experience has taught me that you can't be "nice" as a landlord. I am trying to sell my own home rent to own and I have had to be pretty tough just to get people to do what they are supposed to do. Your process covers everything!

    • Doodlehead profile image

      Doodlehead 4 years ago from Northern California

      I agree. I was being a 'nice" landlord when a tenant asked if they could have their "dog". They showed me "the dog". I said ok and got a deposit.

      Voila....the neighbors reported the tenants had gone on extended vacation, and left their FIVE DOGS in the living room in CAGES. The peed everywhere.

    • Gypsy Rose Lee profile image

      Gypsy Rose Lee 4 years ago from Riga, Latvia

      Sounds like a profitable but rough business. Never knew what it took to be a landlord. Thanks for sharing this informative hub. Passing this on.

    • profile image

      ElleBee 4 years ago

      Lots of interesting info. My goal is to buy a 3 family within the next 3-5 years (live in part, rent the other 2 apts) and I will definitely need to keep these tips in mind.

    • TycoonSam profile image
      Author

      TycoonSam 4 years ago from Washington, MI

      @Tammy...it would be an honor to be linked to your hub!

      @Doodlehead. I charge a $100 pet deposit and $50 per month extra per dog or cat.

      @GypsyRose. You have to have a thick skin to be a landlord. I may write a new Hub telling all my horrar stories.

      @ElleBee. Excellent idea to live in one of the units. You'll be able to keep a close eye on things.

    • Doodlehead profile image

      Doodlehead 4 years ago from Northern California

      "Starting out as a Landlord" has such a nice "ring" to it. Now that I have been doing it a while I think of it more as "ending up" as a landlord.

    • TycoonSam profile image
      Author

      TycoonSam 4 years ago from Washington, MI

      ..."ending up" as a landlord...just one of the many things we do.

    • First Colony profile image

      First Colony 4 years ago

      An excellent Hub. I have been going back and forth on whether to become a landlord. I have been thinking that if I did, I would hire a Property Management Company. Is this a good idea, or is it a waste of money?

      I have enjoyed this Hub as well as your Good, Bad and Ugly Hub.

      Voted up and Interesting.

    • TycoonSam profile image
      Author

      TycoonSam 4 years ago from Washington, MI

      First Colony...Thanks for stopping by can commenting. As far as a Property Management Company goes, there are pros and cons. The fees are pretty expensive but they do a great job of screening prospective tenants. If you don't want to do the work yourself or hire your own contractors then a property management company would be a good way to go. I hope that helps.

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