When it comes to real estate investing, there isn’t much that is passive about it. However, there are things that you can do to make the income from your income properties more “passive” and less “work,” which include finding the right tenants and maintaining your property.
How to Find the Right Tenants
When it comes to finding tenants, you have your work cut out for you. Advertising is not the difficult part, despite popular belief. You can simply post a “For Rent” ad on Craigslist, in the local newspaper, or even place a sign in the front yard. You will get calls. The difficult part comes in finding the right tenants.
Remember, this is your income, so you need to be diligent in choosing who you allow to partake in it. Think of finding tenants as hiring employees: you need to conduct a background check, hold an interview, check references and gauge each candidate’s character. Don’t rush into anything with the first person who shows interest in your property, and don’t just “go with your gut.” Even if you get a good feeling about a person, check their references before making the final decision. Taking the few extra minutes to call references and run a background check could end up saving you thousands of dollars in repair and eviction costs.
Additionally, when you have a good tenant, your income will be much more passive than if you had a bad tenant. A good tenant will take care of your property for you simply because they want a clean and functional place to live. A bad tenant won’t care if something breaks, if mold grows in the bathroom or if pests take over. A good tenant will deposit rent into the bank on the first of every month without you having to ask. A bad tenant will make you hound them until you get some of the money owed to you, which can take a lot of your precious time and even require legal intervention.
Some tips for finding the best tenants and avoiding the bad ones include:
- Require renter’s insurance. Bad tenants won’t have this.
- Conduct a background and credit check.
- Verify employment information.
- Use a strong lease agreement with strict terms and conditions.
- Wait for the check to clear before handing out the keys.
Maintaining Your Income Property
When it comes to maintaining your rental property, try to do as much work yourself as possible, as this will ensure that, you know, you have an income at the end of the month. However, there are some things that may require maintenance that you cannot (and should not) do yourself, such as plumbing and electricity (unless, of course, you’re a plumber or electrician). If you’re not a plumber or electrician though, try to enlist of friends and family members who are. If you don’t know anyone in either trade, do your research to find contractors with the best price. However, best price doesn’t necessarily mean cheapest. Again, this property is your income, so do your research before hiring out any maintenance work, and only hire people or companies with a good track record.
When it comes to all other maintenance issues, repairs and upgrades, be smart. Do everything right and don’t just do a “Band-Aid fix,” as that will only result in bigger and more expensive problems down the road. Invest in yearly or even seasonal maintenance chores, including cleaning the gutters, inspecting the property for dead trees or overhanging limbs and monitoring the roof for any damage. If the home has a chimney that is used, hire a chimney sweep to come out once a year. Have the HVAC system inspected annually, as well as any crawl spaces, attics or basements.
Finally, make sure that your home’s exterior paint is in good condition, as any exposed wood is susceptible to rot, and keep an eye out for any holes around the foundation. If you notice any, have them filled right away.
Make the Most of Your Passive Income Property
After reading this series, you may decide that a passive income property isn’t so passive after all. However, if you do everything right—invest wisely, find the right tenants and maintain your property—you may be pleasantly surprised by how little work you will have to put in for such a great return. Sure, you will have to put forth the effort to make your rental property work for you, but once you’ve purchased the property, made the necessary renovations and found the right tenants, everything else will be smooth sailing.
Passive income property investing is not for everyone, but if after reading about what it takes to be successful with your rental property you are still interested in giving it a go, it may be right for you.