What I Wish I Knew Before Investing In Rental Properties

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Most often than not, a lot of people seeking investments in rental properties are being discouraged due to the hassles involved in collecting rent from tenants. Some tenants are also known to have a poor maintenance culture and as such, leave the house in a deplorable state after moving out. Such tenants have failed to recognize that a lot of work, time and money went into getting the property to the enticing finished state that attracted them to rent the property in the first place. It should be noted that not all tenants are like this, but the disturbing truth is that many are.

 Despite this disturbing reality of rent collection hassles and misuse of rental properties by some tenants, there are a lot of ways to minimize this:

     1. Never be in too much hurry to rent out your property

Some property owners are in a hurry to rent out their apartments or commercial spaces, so do not carry out proper investigation on the prospective tenant. It is a possibility that people can lie about their salaries, where they work and the reasons why they are trying to rent another apartment or commercial space. Investigations will help to reveal the true nature of the prospective tenants and his/her attitude.

2.Property owner should get involved in renting/leasing out the apartment / property

Some property owners are not in any way involved with letting out their properties and are only interested in knowing that someone has paid for the apartment and they have received the bank alert or cash. The agent might not be carrying out good investigations to ensure that payment continuity and proper property usage/maintenance can be ascertained.  Therefore, property owners should be interested in knowing if the tenant will be of good/responsible behavior and will be able to pay rent as at when due. It’s also important to ascertain that the prospective tenant has the right attitude to maintain the house/property in good condition during the tenancy period.

3.Get the right tenant

This is achieved by simply making sure the prospective tenants are well scrutinized to know that they have a good personality/attitude, the kind of job they do and if he/she is capable of paying for the apartment/property. A general guide is that the apartment/property monthly/yearly rental cost should not be more than one-quarter (1/4) the monthly/yearly earnings / salary of a tenant, otherwise, such tenants might be overstretched to pay the rent. Insist on talking to the former landlord to ascertain if your prospective tenant pays rent promptly and to evaluate the tenant’s general behavior .It is good to get a documented guarantor for a tenant. The tenants’ guarantor also needs to be a responsible person with reasonable source of income. Make sure the guarantor understands the implication of vouching for your prospective tenant.

 4.Routine inspections

Inspect the property on quarterly or bi-annual basis; this encourages proper and prompt maintenance of the apartment. Care should be taken to ensure that this is mentioned on the lease/rental agreement and that proper and adequate notices are given to the tenant before routine inspection, the idea is to make sure that routine inspections do not unduly inconvenience the tenant.

     5.Use a trusted proxy/affiliate or agent for rent drives

There seems to be a common tendency for some tenants to be reluctant to pay landlords in the belief that a landlord is rich and is not in dire need of the rent. Due to this erroneous belief, some tenants tend to delay payment of rent as they do not consider payments to their “rich” landlord their high priority. Rent drive should be carried out by a trusted agent or affiliate who will be dedicated to doing the job because of his/her commissions. Agents will generally give gentle reminders 3-6 months before yearly rent is due to ensure the tenants plans ahead and promptly pay rent. When dealing with an agent who is relatively new to you, it is advisable for a landlord to insist that all payments be made by cheques written in favor of landlord or money paid directly into landlord’s account. Some landlords allow their agents to collect the rent and later remit if they have already established a trusting long-term relationship with the agent.

      6.The neighborhood where the property is sited

Some neighborhoods tend to attract more of tenants that are problematic, under-employed/jobless and do not like to pay rent. Therefore, it’s better to look at the demographics of the neighborhood before sitting a rental property there.

7.The finishing on the property

The kind of finishing on the house/property sometimes attracts responsible individual with well to do jobs/source of income who are willing to pay for it. Rental properties should be well finished with durable materials/fixtures. If the tenants feel the house is overpriced or the materials/fixtures used on the house//property does not possess the quality as initially thought, they may be reluctant to pay subsequent rents.  

8.Renovate apartment before letting it out

In many cases, rent void (not getting new tenants on time) may be attributed to the state of the apartment. When a tenant packs out, endeavor to put everything right before letting the property/apartment out. This has proven overtime to encourage shorter rent void as tenants are happier/quicker to pay for apartments/properties that do not require too much extra money to get it to good usage/living conditions. This is the same reason some tenants insist on looking for and renting new houses/properties.

     9.Tenancy agreement

Be sure to specify the dos and don’ts in the tenancy agreement. Also ensure to clarify the responsibilities of the landlord and the responsibilities of the tenant with regards the apartment or property.

     10.Be a good landlord

From a general perspective, good will attract good in most cases. Being a good landlord i.e fair rents, reasonable property conditions, being civil in dealing with tenants will generally encourage fewer hassles with tenant. As in most real life situations, sometimes a good landlord might still end up with a band tenant in some cases, but, being a good landlord will generally attract more of good tenants.

The points highlighted above helps to reduce the severity of some common problems associated with rental real estate properties. 

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