Recently, our CEO and Founder, Kevin Kiene, did a live stream with a leading real estate investor and mentor, Dr. Joe Asamoah. In the hour-long interview, Kevin and Joe talked through the Landlord lifecycle, offering tips for each phase of the process, and at the end of the hour, Kevin responded to questions from both Dr. Joe and his viewers, in a Landlording Q & A.
A wealth of knowledge was shared in this segment titled, “Top Secrets of a Landlord That’s Killing It.” As you know, we want to always share the expertise or “secrets” we have learned over the years so every Landlord in our community can get the most out of their investment properties. With that in mind, here are some helpful tips from Kevin.
Question: What’s Your Process for Acquiring New Properties?
One thing I like to focus on is the “1% Rule.” Basically, I want to see that the monthly rent will be at least 1% of the purchase price. For example, if a property costs $200,000, I’d want to make sure I could get at least $2,000/month in rent.
That said, there are a couple of things to keep in mind when calculating this. If you’re going to need to make significant repairs before renting, you should add the cost of repairs to the purchase price before coming up with the 1% that you want to get. In addition, it’s important to realize that this 1% isn’t all profit – you’ll still have to subtract expenses like insurance, taxes, and mortgage payments.
When considering a new property, I try to focus on both appreciation and cash flow. In my experience, real wealth building comes from appreciation. Even so, I like to see some steady cash flow, which is why I use the 1% rule. It’s not a hard and fast requirement, but something I like to use to help me in the acquisition process.
Question: What’s Your Top Tip for Getting a House Ready for a New Tenant?
I like to build my rental units like a tank. Rentals get lots of wear and tear and need to be ready to withstand it all. As a result, when I’m making repairs or prepping a property for new Tenants, I focus on durable materials that will hold up well.
I don’t buy the cheapest supplies or appliances. Instead, I focus on what will last. I’ve found that this saves me time and money in the long run. Plus, better quality materials attract and retain better Tenants.
For example, I use satin paint that has a little shine but is easy to clean, I focus on hard floor surfaces – for example, tile or luxury vinyl plank, and I install quality appliances that will hold up well.
Question: Any Secrets to Tenant Screening?
Yes, I have a lot to say about Tenant Screening, but I’ll focus on two things: 1) you have to set up a process for Tenant Screening and stick to it; 2) make sure you do plenty of listening when screening Applicants.
I’ll talk through each of those points a little more. You can’t just go with your gut when screening Tenants. You need a clear process that you follow with every Tenant. This will ensure your screening is fair and legal AND it will lead to better results.
I always do a credit report, pull a ResidentScore or credit score, get a criminal background report, review an eviction history report, and verify income. That might sound like a lot, but we’ve found a way to make it really easy with our updated Tenant Screening Services that get Landlords all of these reports in one step.
Before getting the results, you need to have parameters that you’ll stick to for each Applicant – some minimal requirements that every Tenant must meet. It can be tempting to take any Applicant that is ready to sign a Lease and pay rent. Avoid that temptation! Be patient, stick to your process, and take the time to find the best Applicant possible.
The second point is as simple as it sounds: listen when meeting with potential Applicants. You’ll be surprised how much you can learn if you do less talking and more listening. For example, you might learn something about their job, previous moves, roommates, pets, or other factors that indicate whether or not they’ll be a good Tenant. Good listening and thorough Tenant Screening have helped me avoid Tenant nightmares!
Question: How Do You Build and Maintain Good Relationships With Tenants?
Communication! This is the key for me. I communicate thoroughly with Tenants before moving in – going over the detailed Lease and ensuring they understand all roles and responsibilities. Next, I check in regularly to make sure everything is going well. And of course, I respond to their calls about repairs or concerns about the property.
Strong Landlord-Tenant relationships are essential. When your Tenants are happy, they take better care of your property and stay longer. This is so important! You want to avoid Tenant turnover as much as possible – this is where the real work and expense come as a Landlord. This is why I really focus on first, finding great Tenants, and second, making sure they’re happy and want to stay in my property for as long as possible!
Question: What Do You Do When Tenants Can’t Pay Rent?
This is a tough situation. It’s hard for Tenants and it’s hard for Landlords, who have bills to pay too. My best advice here is to keep up good communication with your Tenant. Everyone faces some hard times, and you want to work with your Tenant to keep them in the property if at all possible.
I like to talk with Tenants to set up a timeline for getting current with rent – maybe even just a couple of hundred dollars at a time. As long as the Tenant is willing to talk with you and work with you, you can probably come up with a repayment plan that will work for both of you.
When I get concerned is when a Tenant stops answering the phone, stops returning texts, and isn’t making an effort to get current on rent. If the Tenant isn’t paying rent or communicating, then it’s time to consider taking the next steps toward eviction. I try to avoid that whenever possible, but sometimes it’s necessary. When it is, I always have a local attorney handle the eviction – in part to ensure things are done correctly and in part, because this is my least favorite task as a Landlord.
Have More Questions for this Landlording Q & A?
If you have more questions, we’d love to hear them! You can email us, join our online forum, or follow us on social media. Also, visit ezLandlordforms.com to start a Tenant Screening, create a state-specific Lease, or find any property management forms you need.
