We get a lot of business from agents who do a terrific job finding deals for investors in getting rental properties. The sad news is that many of these agents are creating problems for their client that will cost them a lot of money down the road. Here are some tips to make you look like a rock star the next time you help someone purchase a rental property:
Dodge Hostile Tenants – The last thing you want to do is have your investors purchase property in their name with their personal address on tax records. Nothing will get a spouse’s attention faster than when a hostile tenant shows up at dinner time demanding their deposit back. The very minimum protection should be a UPS box recorded with the county. Maximum protection would be to hold a property in an LLC owned by a trust. BEFORE they close escrow, square that away or it will cost them much more money later.
Avoid Pools & Vegetation – The average tenant will simply destroy everything that requires attention. The modest increase in pool revenue is quickly eaten by pool pumps that blow up or mosquito infested neglected pools. A property with grass is the last thing you want your investor to purchase. Grass attracts tenant who have dogs. The grass will eventually turn to dust by about the 3rd tenant.
Don’t Dilly Dally During Escrow – WHILE the property is in escrow, get those contractors over there to get estimates so they can rehab the property the day after it closes escrow. Owners who spend 2 months getting a property ready are just losing money.
Advertise While In Escrow – If you are assisting the owner find a tenant, start advertising WHILE the property is in escrow. Put it on Craigslist and other advertising areas. Post the property as available to show about 4 days after your close of escrow. Your investor will grin ear to ear when it’s occupied right out of the gate.
Don’t Put Earrings On A Pig – New appliances, granite countertops, gorgeous landscaping, etc. are wasted on most rental properties. Some tenants will likely chew that stuff up and spit it out. Clean and simple is all an owner needs. An owner should tile everything possible unless it’s the second story. They don’t need to bother landscaping the backyard either.
Just Say No to Friends and Family – Owners who do this will put an end to joyful Thanksgiving dinners. Every month, we toss a daughter, cousin or a friend. Every single one of them said to us “This is different” before they moved in. No. Tenants are not different. Renters don’t behave like owners and the expectations between an owner and a tenant are huge. Owners can’t wrap their mind around the way a renter lives or doesn’t understand why a tenant doesn’t pay rent on time.
Interview Managers During Escrow – If your investor isn’t going to manage the property, have them start interviewing property management companies while the property is in escrow. A really good property manager will get everything squared away before the closing so that the property is ready to rent ASAP