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This article presents information for new landlords or landladies and which mistakes to avoid so that you can preserve your real estate investment and avoid some major headaches that can lead to some major losses of money! In a previous article, part one of our two-part series on Using Real Estate as an Investment, we discussed what steps to take and mistakes to avoid when dealing with tenants. In this article, part 2 of our two-part series, titles, “How to Maintain Your Property Before and After It is Rented,” we will explore the steps you must take to maintain your property to ensure it remains attractive to prospective tenants and provides you with a profitable return on your investment.
As we mentioned in a previous article, the first and foremost rule is that you should always treat your property as a business. What that means is that you should devote the time, effort, and resources required to ensure that your business provides you with reliable and profitable income. There are five important points to consider in How to Maintain Your Property Before and After It is Rented.
STEP ONE: assuming you don’t already have tenants, you should prepare your property to make it more attractive to prospective renters, which takes a little extra time and effort but worth it in the long run. This is especially important if you need to compete with other well-maintained and appealing properties in the area. Start by conducting a thorough inspection of your property. Start from the outside and work your way in. The inside of your property may look amazing, but if the outside looks worn, cluttered or even damaged, the odds are that prospective tenants will look elsewhere and never get to look at the inside.
Assess the condition of the exterior. Does it need a new coat of paint? Perhaps a repair of a roof or gutters? Or perhaps it just needs some additional maintenance — mowing the lawn, removing the trash, cleaning the windows and doors, or perhaps some additional landscaping. All these can make a huge difference in what potential renters will see as their first impression. And first impressions count! The point is: make sure the condition and appearance of the outside of your rental property are inviting and isn’t the reason why prospective renters look the other way.
Then your inspection should focus on the inside. Start with the kitchen. Check your appliances. Are they in good working condition? Are there leaks from the faucets or worse yet, to the appliances, and can they be fixed? Are countertops and cabinets damaged? Do they need to be replaced or repaired? Now check the bathroom. Again, are there any leaks? Are there rust or lime stains visible that can be removed? Are the tub, sink or vanity worn? Is the toilet working properly?
Now do a walk-through the remainder of your rental unit. Do the walls, doors, fixtures, and ceilings need a new coat of paint? Has the carpeting been cleaned or does it show stains and discoloration? Is there damage on hardwood or tile floors that can be repaired? Check for potential safety hazards like missing guardrails outside windows, unsafe venting on dryers or gas ovens, loose electrical switches, and socket covers, or the presence of mold. Examine the hardware in your rental property like doorknobs, hinges, drawer and cabinet pulls, light bulbs and switches, and pull chains. At the very least, make sure that your rental property is clean! Nothing will turn off a prospective tenant more than layers of dust, cobwebs or bugs in corners, or just musty or undesirable odors, especially from any leftover furniture, rugs, or curtains from previous tenants.
The point in all this is to pay attention to the condition of your rental unit before you invite potential renters. Create a check-list of repairs and replacements that need to be done before you bring in potential tenants. Make necessary but sensible improvements. Don’t invest in renovations that won’t command a higher rent and provide you with a higher return on your investment.
To attract higher-paying tenants, consider add-ons like extra storage space or lighting, built-in closets, stainless steel appliances, air-conditioning, heating, and dishwashers.
In the end, ask yourself this question? Would you and your family find your rental property appealing to live in?
STEP TWO: once you have rented your property, you need to handle any repairs and renovations to it while it is occupied. As we have mentioned previously, you need to treat your rental property as a business. You may need to be “on call 24/7” if there is ever an emergency, and it’s a good idea to have a separate phone number available for such a purpose. However, most situations that do develop are minor and don’t require an urgent response. In these cases, you can respond to the issue by email and handle it at a mutually convenient time.
It’s important to address tenant concerns and potential problems with your property swiftly and effectively. Failure to do so and you’ll quickly turn good tenants into adversaries. They may be legally entitled to withhold rent from you until the problem is resolved, especially if it impacts safety or health, or they may feel forced to handle the problem on their own and deduct the cost from the rent. Worse yet, they may be legally entitled to sue you for any injuries caused by unresolved, defective conditions, plus they can move out without giving you notice regardless of the language in your rental agreement.
The point is: don’t ignore or delay a concern raised by your tenants. But make sure you distinguish between normal wear-and-tear and intentional damage by tenants. Some renters simply don’t care about how they live and will generally treat and respect the property they don’t own less carefully. Treating a broken window caused by a tenant is a lot different than one caused by a defective or worn part. Stick to the rental agreement, especially language regarding property condition. If the damage is due to renter negligence, you can deduct the cost of the repair from their security deposit. If the security deposit is fully used up, you can legally charge them a repair fee or sue them for the extra cost.
But assuming the damage is due to normal wear-and-tear or a defective part and you are handy, first try to do the repair yourself. But here’s one warning to consider: NEVER ask tenants to do the repairs for you and then reimburse them. Technically, this would constitute a labor agreement, and you might find yourself unknowingly violating labor laws. Instead, if you can’t handle the repair or renovation yourself, hire a reliable contractor or handyman, especially if they are available during off-hours or when you’re not around. Nothing else can ease a tenant’s mind more than having that plumber available to fix a boiler not working properly in the middle of a cold winter evening.
Make sure you give enough notice to your tenants on when you plan to schedule repairs or renovations. Notify them of any temporary loss of power, water, or heat during the time when the repairs are taking place.
STEP THREE: handle any ongoing and preemptive maintenance to your property to keep it in “good working condition.” It’s a good idea to take a more proactive approach and not wait for tenants to alert you of their concerns. Schedule a quarterly or semi-annual inspection of the premises. Compare the condition of the property with that when you first rented it. You may need to repair or replace faulty lighting, doors or window locks, or handle roof or plumbing leaks, warped window screens, or cracks to steps or walkways.
Create a checklist of items that need to be addressed and then handle them!
For example, you may need to periodically maintain the exterior of the property, including visits by a landscaper, exterminator, or a snow removal service.
Keep track of those repairs, renovations, and services that you complete, not only for tax purposes as business deductions but also to spot any trends. If you find yourself repeatedly repairing your leaking roof, you may need to consider replacing it altogether. But again, be sensible with the cost of repairs and maintenance. Prioritize what’s important. Balance the need to address any safety or health concerns with your property with the need to spruce up your property to create a more appealing environment.
There may be times when your property is subject to inspections by the local municipality, who checks to make sure that you’re following relevant health and safety codes, or by your lender or insurance company, who checks to make sure that the property is well maintained for updated appraisal purposes. Failure to properly maintain the property can lead to a hike in your insurance premiums or a devaluation of your property by the lender.
Which leads us to STEP FOUR: make sure that your property investment is well-protected. Lenders will require that you have a homeowners insurance policy, which will typically cost more if you’re renting a property that is not your primary residence. Consider a good umbrella policy to protect yourself and your family from any liability issues with your tenants and visitors to your property. The umbrella coverage should also extend to handle damages to your property whether by tenants, visitors, or “acts of God.”
Also, consider how your property is secured. Although you can invest in a full-blown 24/7 security system, you can also consider less costly steps to prevent your property and tenants from becoming victims of crime. Improved exterior lighting, deadbolt door locks, and well-designed landscaping can be worthwhile measures to protect your real estate investment.
Finally, STEP FIVE: make sure that you have budgeted sufficient funds to handle issues with your rental property. Again, treat it like a business! Make sure you have enough time and money set aside to deal with routine maintenance and unforeseen damage.
Depending on the rate of vacancy of your rental property, you might have to set aside up to a quarter of the rent you collect to handle the cost of maintaining that property. Keep in mind that over time, your rental property will either begin to show a profitable return or not. Consider using a trusted and experienced realtor from the Diamond Listing Team of the Guardian Realty Center to help you determine when the return on your property, based on your operating costs, will begin to diminish, so you will know when it’s the right time to sell.
So let’s review the five tips that landlords should follow on How to Maintain Your Property Before and After It is Rented:
Step 1: Prepare your property to make it more attractive to potential tenants, but don’t invest in renovations that won’t command a higher rent
Step 2: Handle any tenant concerns with repairs and renovations to your rental property swiftly and effectively while it is occupied to avoid legal issues down the road
Step 3: Handle any ongoing and preemptive maintenance to your property to keep it in “good working condition
Step 4: Protect your real estate investment with a good umbrella insurance policy
Step 5: Set aside the appropriate funds and time needed to address the previous four steps!
Although there are many more issues that landlords can face when dealing with their investment property, we feel that these five steps are the core to ensuring that your real estate investment remains a sound, profitable business venture.