You’ve purchased your rental property. You’ve had it inspected and addressed any deficiencies. It’s up to code. You’ve painted, cleaned, spruced up the exterior and it’s finally ready for its first tenant. Now what?
Now that the curb appeal has been addressed and any interior problems have been fixed, it’s time to make the interior’s first impression the best possible. How do you do that? Staging. Whenever you stage a property, it’s always best to use neutral colors and fixtures to accommodate a wide array of styles and tastes. Never make paint, accessory, artwork or furniture decisions based on what your personal taste is. You aren’t going to live there.
Please understand that neutral doesn’t mean beige, white and tan. Do a little research on the internet to discover what the “new” neutral’s are. One year sage and other light greens were the neutrals of the year. One year it was all manner of light blues. This year, it’s lighter versions of grays. If you are still unsure, paint the walls, ceilings, and trim work white. While white can be sterile and it can put a lot of folks off, it also bounces light around which tends to make a room appear cleaner and brighter than it really is and if you are the type of landlord who allows their tenants to paint the walls, it gives them a clean surface on which to put their personal paint color choice.
If you need help or you simply don’t have the time or inclination to stage your rental yourself, there are professionals that will come in and do it for you. Of course, they don’t do it for free, but a properly staged property will heighten the “feel” and desirability of the space. As a result, you will get better-qualified tenants. It will also lessen the time your property sits vacant.
Below are a couple of pictures of lightly staged properties. Remember, you don’t have to make the property look as if someone is currently living in the unit. Just give the rooms a sense of what they could look like if the prospective tenant lived there along with a general idea as to where they might place the bed or sofa. This is especially true if the room is an odd shape or has a lot of doorways to obstruct furniture placement. If a prospective tenant can’t figure out where to put the bed, sofa, TV, dining room table….they might walk away. At one time, people thought that empty rooms appeared larger. This is no longer the case. It has been proven by independent studies that empty rooms not only appear smaller than they actually are but that empty rooms can oftentimes overwhelm prospective tenants as to where they will place their furniture and if their bed or sofa will actually fit comfortably in the space as most tenants don’t measure these things prior to looking at available units.
Kitchens and bathrooms don’t need a lot of staging. You want the countertops to appear spacious and clean so just a couple of things to give it some interest, color, and texture and you’re done.
Marketing your rental property starts with taking quality photographs of each room in the space as well as at least 4 pictures of the exterior when possible. If your property is in an apartment complex, it may not be possible to get 4 exterior shots. In this situation, give them a front and rear view. If there are any amenities that come with the property such as a community pool, golf course, park, covered parking….include pictures of those as well.
Note: Never ever use pictures that were taken before the unit is 100% ready for occupancy. Never. Also, never use pictures that include people (or reflections of them in mirrors, windows or glass doors), animals, trash or supplies (cleaning or construction). See photo’s below for examples.
With today’s internet access and the plethora of websites that offer rentals, people are quick to skip any property that doesn’t grab them with the first couple of pictures and they are more prone to skip rentals with no photo’s even quicker. It’s better to delay your advertising for a couple of days than to post photo’s that aren’t as pretty as the unit you’ve just spent time and money on.
This might sound like common sense to many, but you’d be surprised how many ads I’ve seen that fall into each and every one of the items on the above “don’t” list.
Once you’ve taken your pictures and you’re satisfied with them, you can begin writing your rental ad. In order to do this effectively you will need to determine:
- Your rental price and if it includes utilities (water, trash pickup, sewer, etc.)
- The square footage of your property
- What you are going to charge as a security deposit (usually equal to one month’s rent.) On the topic of deposits, you need to do a little bit of research because some states will allow you to charge more than one month’s rent while others do not. If you live in a state that allows it, you can compensate for marginal credit by increasing the deposit. However, if you live in one of the states that don’t allow increased deposit amounts, and you do it anyway, you could be open to trouble.
- Availability and length of the lease. Do you want to only rent it for the summer months? Maybe only during a school year (for those rentals that are geared mainly for students and/or faculty). Maybe you don’t want to rent it for the next 3 or 4 months (this is usually the case when a current tenant has just given you notice that they intend to vacate or if the owner lives out of state and won’t be available to show the unit until the next time they are in town.)
- Whether you will allow smoking or pets
- If there are any additional incentives, such as parking or a rent special. When you have a rental in a highly competitive area sometimes offering a rent special will bump you to the top of a potential tenant’s list. Example: If they sign a 13 month lease, the 13th month is free. Maybe you could offer a free month on a 24 month lease and break the month’s rent down into 4 separate months? For instance, if the rent is $400 a month and they sign a 24 month lease their first 4 months rent would only be $300 a month. There are endless specials you can offer. If you need inspiration, call the managers of large upscale apartment communities and ask them what their specials are and which ones seem to work best for them. Then just tailor it to suit your unit.
- Gather information about the neighborhood and surrounding areas. Including information such as proximity to the interstate or other major thoroughfares can be extremely helpful to prospective tenants that perhaps are familiar with the area.
- How you wish to be contacted. Do you want prospective tenants to call your cell? Email you?
Write a clear rental advertisement that describes the rental property and covers price, location, length of the lease and any incentives. Picture your ideal renter and target them in your ad. Your goal is to make your property stand out from the others while still communicating everything a potential tenant needs to know to inform their choice.
There are many places you can advertise either free or paid. Some of your options include:
- Online classified ads
- University housing boards
- Word of mouth through family, friends and/or co-workers
- Social media
- Renting bulletins or apartment listings
- Newspaper ads
- A rental sign on your property
- Community bulletins, such as at a grocery store or recreation center
- Listing the property with a real estate agent or Property Management Company.
If you use quality photos, and an engaging headline and rental description, you might start getting calls immediately from potential tenants. How you proceed with the process can depend on the volume of people expressing interest.
Many landlords will schedule appointments and show the property to anyone who is interested. Another option is to hold an open house at a set date and time, where you allow people to come by to view the property and hand out applications to all who express an interest right there on the spot.
Screening Applicants Using a Rental Application
Before narrowing down your choice of tenant, it’s important to do your due diligence and collect information about who will be living in your rental property. A Rental Application allows you to collect a prospective tenant’s contact information as well as:
- Their employment history and income
- Their rental history
- Credit Information
Once you’ve received the completed rental application along with copies of supporting documentation (i.e. Driver’s License, paycheck stub(s), etc.) you can then review the information that has provided to determine whether they would make suitable renters. Typically, you would assess if they have a stable income and a good credit score to see if they are responsible and earn enough money to pay rent.
Speaking to previous landlords can offer insight into a tenant’s rental history, specifically if they made rental payments on time and if they were a respectful renter. Researching a tenant prior to leasing is a very important step that can save you from issues down the road.
When screening tenants for your property, you are held to the Fair Housing Act, which prohibits you from discriminating against tenants based on age, sex, race, religion, etc. The Americans with Disability Act serves a similar purpose by ensuring that landlords make reasonable accommodations for any tenants with a disability.
Note: Both Fair Housing Act and the Americans with Disability Act have other requirements and exceptions that you, as a landlord, should be familiar with. It’s best to head to their websites and familiarize yourself with these requirements and/or exceptions. The government hires “mystery” shoppers to randomly visit available properties in order to determine if the property and the landlord are obeying the laws. Failure to obey can be very costly.
After checking the candidate’s background and deciding they are a good fit, you can put the wheels in motion to begin your paperwork.
Pre-Move in Checklist
You’ve prepped your property, advertised your rental, screened potential tenants, and settled on a renter. What’s next?
The next steps involve nailing down the details of the tenancy and communicating with the tenant to arrange a move-in date and inspection. Before moving day, you have to get a Lease Agreement in place. Use this checklist to make sure you don’t miss anything important.
- Clean the property and make any repairs
- Create a Lease Agreement, go through the terms, and sign the agreement
- Change the locks and cut an extra set of keys
- Provide your tenant with your contact information both for emergencies/repair calls and for mailing the rent.
- Collect the first month’s rent, security deposit, and pet deposit or fee, if required.
- Conduct a rental inspection with the tenant and sign the report. Provide them with a copy and make sure to put a signed/dated copy in their rental file.
- Test lights, appliances (stove, fridge, dishwasher, disposal, all sinks, toilets and tubs/showers, etc.), fans, locks and smoke detectors with the tenant present.
- Provide the tenant with a copy of any bylaws or condo rules if applicable.
- Transfer any utilities to the tenant’s name, if applicable.
- Determine the best method of communication for both parties.
Note: It is equally important to have a Move Out Checklist. Go through the property with the tenant once all of their belongings have been removed and they have notified you that they have cleaned the property. Just as in the Pre-Move in inspection, check everything and notate on the Move Out Checklist anything that appears to be damaged or non-functioning. Take loads of pictures of every room and the exterior. Once the tenant has signed and you have given them a copy, you can decide what is normal wear and tear and what is actual damage to the property. As long as you are very clear with the tenant that they will not get their deposit returned to them unless and until this step has been done, they usually comply with this step. You should know that all states have a mandated length of time in which a landlord has to return a tenant’s deposit or give them a detailed letter explaining why they won’t be getting their deposit back. Should you not comply with these laws, you might be out more money than you’d like. If your tenant isn’t getting their entire deposit back, you must give them a breakdown as to why.
Landlord Tenant Laws
Renting a property creates a business relationship between a tenant and a landlord, which is governed by landlord-tenant laws and the Lease Agreement. Each state has its own laws regarding rental property, so it’s important that you review the laws in the state where your property is located or contact a local attorney for advice on your specific renting situation. By learning about tenant rights and state landlord-tenant laws, you can ensure you are following the best practices to avoid any future legal battles with your tenant(s).
Your Lease Agreement
A Residential Lease Agreement is a roadmap that will not only guide the relationship between you and your tenant but also set the rules for your residential tenancy.
A Lease Agreement also:
- Protects you from liability
- Prevents confusion over terms, rules or situations
- Prevents conflicts or issues that arise from misunderstandings
- Provides a written outline of the tenancy for recordkeeping purposes.
- Offers a demonstrated understanding and agreement to the rental terms
- Sets out the procedures for notices and eviction
- Keeps expectations clear
- Protects a tenant’s rights.
Types of Lease Terms:
The lease term is the length of time that the tenant is expected to rent the property under the terms of the Lease Agreement. There are two types of terms:
- A fixed term tenancy is one where there is a set end date for the tenancy. Generally, these types of tenancies last 6 months or 1 year from the time the tenant moves in.
- An automatic renewal (or periodic) lease term is one that continues to renew each month or year until one of the parties chooses to terminate the agreement.
Permissions in a Lease Agreement:
As a landlord, you get to make decisions about what will and will not be allowed in your rental property. These are called permissions. They commonly address matters such as pets and home improvements.
Consider what you are comfortable allowing in your rental property and ensure you address these in your Lease Agreement.
Some of the different types of permissions include:
- Will you allow all kinds of pets or only certain pets? Will you charge a pet deposit or monthly fee…or both?
- Will you allow the tenant to make improvements to the rental property, such as painting the walls or planting flowers outside?
- Will you allow smoking in the rental property?
- Are home businesses permitted in the rental property? Often, home businesses are a zoning issue and depending on the size and income of the business, it may or may not be permitted.
- Will other occupants be allowed to stay in the rental property?
- Will the tenant be allowed to sublet or assign the Lease Agreement?
Determining Your Rental Price
To set a rent price, you will need to figure out your monthly costs to run the rental property. Think about your mortgage payment plus any additional expenses you are covering, as well as a condo or HOA fees. Once you have your monthly figure, look at nearby rentals of comparable value to set your price.
Once you advertise your rental property, the price will be the main factor in drawing tenants and getting a leg up on your competition. If you wish, you can also leave room to negotiate your price. Beyond rental price, ask yourself if you will be charging a few for late rent payments. Some states have restrictions on how much you can charge and how late the tenant must be in order to be charging a late fee at all, but in general, it shouldn’t be an unreasonable amount.
Another element of price is utilities, such as electricity, sewer, garbage pickup, and water. Should you include them in the rent price or make them the tenant’s responsibility? Some municipalities include trash pickup in the real estate taxes so charging the tenant for that service might appear greedy since you are, in essence, already charging them for your yearly tax bill.
Now that you’ve covered all your bases, drafted the perfect Lease Agreement, found the perfect tenant and collected all the deposits and first month’s rent….it’s time to enjoy the fruits of your labors.