Buying a rental property does not make you a
landlord. A landlord does not merely own, but also manages and controls his
building. The process of becoming the landlord of your new acquisition commences
before title even passes.
Information is the key. The subjects on which
information must be gathered are: the tenants and their rental agreements and
deposits, the condition of the building, and compliance with applicable statutes
and codes. What was given on the multiple listing is too sketchy and what comes
through the seller’s Realtor may not be entirely reliable. There are things
you can do to ensure you are fully equipped, or equipped as possible, to assume
your position as landlord when the escrow closes.
Estoppel certificates will ensure that the rental
agreements you receive through escrow are still in effect and not modified by
oral agreements with the seller that will bind you when you assume ownership.
Security deposits can be verified in the same way.
Engage a private property inspector who can
inspect the property and report on its true condition. Since a property
inspector neither does contracting work nor refers contractors, his advice will
be much more objective than the report you will receive from the typical
"termite inspector" who is not working for you anyway.
Before escrow closes, make sure all outstanding
bills owed to vendors have been paid, or at least accounted for if you are
willing to shoulder the responsibility of paying them off. Also, take the time
to check with local code enforcement to ensure the property complies with zoning
and housing ordinances.
After close of escrow, you must approach your
tenants on a personal basis to confirm the information you gathered while the
deal was pending, and to fill in any gaps. Personal meetings, carried on in a
non-threatening way at mutually convenient times, will give great insights into
tenant concerns and permit you to assess the degree of cooperation, or lack of
it, you can expect from your tenants.
Having done this and made your assessment of the
property and your tenants, it is time to begin to shape things as you wish them.
Submit a standard rental agreement in which you have confidence to your tenants.
Set the rents at a level you deem fair and raise the rents which need to be
raised. Set up a rational method for tenants to request maintenance which
results in an audit trail. Just remember, do not do it all at once. Present the
changes in stages or steps which are digestible to the people who, after all,
are essential to making your rental property a viable business enterprise.
By understanding what you are getting into before
you get into it, you will avoid nasty surprises. By showing your tenants that
you are aware of their concerns, but not a push over, you will gain their
respect. By acting fairly you will make them want to comply with your reasonable
policies and procedures. Having accomplished this you will be in control, you
will be the landlord.
For a more in depth discussion, see our:
How Would You Like To Be The Landlord
If you are a
new landlord, thinking about becoming a landlord or even a seasoned landlord,
here’s a careful review of the elements you want to consider before buying a
rental property. Such as maintenance history, inspection relevance to overall
condition, tenant profiles, zoning compliance, security deposit status, use of
an estoppel certificate, letter of attornment, do’s and don’ts of contacting
the tenants, and much more. A “must” for the new landlord.
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