Investors in apartment buildings, single-family homes, duplexes, and other residential properties are landlords. The aim of most landlords is simple: to have tenants who will treat their units like homes they cherish, pay their rent on time, and not be a nuisance to others. That simple goal eludes many novice landlords because they fail to establish their authority over their properties.
Selecting Tenants: Avoid Cash-Flow Erosion, Landlord Burnout
The proper selection of tenants is one of the most important responsibilities of a landlord. To carry out this duty, a landlord must have clear selection criteria and a legal and effective screening process. Shortcuts in this process can result in future problems and misunderstandings with the tenant. This may include expensive and time-consuming court proceedings, which in turn can erode cash flow and contribute to landlord burnout.
Informing Tenants: Strong Lease, Clear Rules
Landlords should use well-drafted leases and rules (the rules may separate or included in the lease) that put the tenants on notice of the course of conduct that is expected of them. For example, the lease should state when the rent is due and how it is to be paid. The rules may specify that the use of illegal narcotics on the premises by anyone or that loud music or noises after a specific hour can lead to eviction procedures.
Notifying Tenants: Following Landlord/Tenant Laws
Landlord/tenant statutes in the United States are written with the view that landlords enjoy a stronger bargaining position than their tenants and, therefore, that leases favor the landlord over the tenants. To level the playing field, the laws of each state specify, among other things, the types and timing of written notices that landlords must give their tenants about lease infractions and eviction proceedings. Landlords who fail to follow these specifications needlessly surrender their legal standing and risk seeing their cases thrown out of court.
In many states, after buying a rental property, a landlord is obliged to advise existing tenants in writing that the ownership has changed. This type of letter also should inform the tenants how to contact the landlord (or property manager), where to send or make the monthly rental payment, where the security deposits are being held, and how to request repairs.
Sometimes, a tenant may test a new owner by not paying rent, paying it late, or making unreasonable demands for upgrades. Perhaps the previous owner had been too timid to confront the tenant about such conduct. To avoid becoming the tenant’s “doormat,” the new landlord must swiftly and unequivocally show that he or she does not tolerate unreasonable demands and the lease being breached.
By applying the lease terms and rules to all of the tenants and by using a system of written notices, landlords demonstrate that they are in control and that no one receives special treatment. This is an effective business practice because it encourages good tenants to stay and bad ones to move.
Landlords Lead by Managing Tenants
Smart investors manage their investments; they do not allow investments to manage them. This is equally true for investors who are landlords: smart landlords do not allow their tenants to dictate how to run their properties.
Demonstrating control of a rental property does not mean being authoritarian, offensive, or uncompromising. It does mean acting like a leader, setting the tone of a tenancy, and enforcing lease terms and property rules in a consistent, even-handed manner.