You Bought a Tenant-Occupied Property But Know Nothing About Property Management

Uh oh. But not uncommon.

Let me start out by saying that managing your own properties starting out is the way to go.

Why?

Because you must know the laws and what you can and can’t do as a landlord. Perhaps you have no interest in managing the properties yourself and plan to immediately hire a management company. *Warning* – if you don’t understand property management, you won’t know how to hire a property management company or if they’re doing a good job. I’m quite confident when I say that most property management companies are not good.

Now, to the problem at hand – There’s a Tenant in Your Property!

1. When you bought the property, you should have received the tenant deposits and contracts from the previous owner. If you didn’t, you started out wrong. If the owner says they did not have contracts or deposits with the tenant but the tenant says they had a contract with the previous owner, ask the tenant for copies of the contract they have. If they also can’t produce a contract, there is nothing binding you to any previous terms.

2. Hopefully you received the tenant deposits because, when they move out, you want something to cover the repairs you will need to do, plus, you’ll be responsible to refund any deposit they paid that is not used for unpaid rent or damages (even if they paid it to the previous owner who did not pass it on to you).

3. You are legally bound to uphold any prior contract and terms that the tenants have (again, providing you have a copy of these agreements). Consumer protection laws protect the tenant and bind you to their previous agreements until those agreements expire.

4. If there is no contract, send all tenants your own new contracts immediately. They are allowed to sign or move. You will then be managing your property according to your terms.

5. Owning a property and managing tenants are two very different businesses. You must learn property management if you’re going to have tenants. I wrote a book – The Essential Handbook for Landlords – available on Amazon, which is a great starting point.

You own the property – you’re the one in charge. You need good contracts and it’s essential that you know your local laws and how to manage tenants.

6. When you do decide to hire a property management (PM) company, know that they manage based on your paperwork and your rules. I owned a PM company for years and most owners came in with their own previously-signed contracts and rules. Some allowed pets – some didn’t; some allowed smoking – some didn’t, etc., etc. We enforced the owners’ rules. What you do with your property is up to you – the PM company enforces your rules (if the company is any good… ).

Managing properties and/or tenants all goes back to the contracts. And your local laws. Every state is different. Know your laws.

Additionally, owning rental properties is a business. When any tenant is “bad” including behind in payments, start eviction IMMEDIATELY. I listen compassionately to their reasons, but the rules are the rules and don’t bend them for any because, if you give in to one, you must give in to all (consumer protection laws, again).

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Landlords: How to Determine the Rental Amount for Your Property

I want to introduce several resources where a real estate investor or property owner can determine what rent you can charge for your investment property. The three most popular websites available for this purpose are Zillow.com, Rentometer.com, and Craig’s List.

Zillow is the most popular and respected so we will start there. Go to Zillow.com and put in the address of your property and then click “search”. Click on the word “rent” or “Zestimate”, both will give you rent estimates. The word Zestimate (rent estimate by Zillow) should pop up with the rental amount and the range Zillow thinks the property may rent for.

We know Zillow is not perfect. Zillow uses computer models and they are basing their rent Zestimate upon averages in the area that have similar characteristics of your property, i.e. square footage, similar number of beds, bathrooms, etc. Again, no computer model will be perfect but generally Zillow is accurate. You will need to be realistic about the property and observe its characteristics. If your house is a multi-unit building or if your house is somehow different than every other property in the neighborhood, the Zestimate may not be accurate.

The second site is rentometer.com. Once on the site you enter the property address. In this site they ask for how many bedrooms are in the property. You can also provide other information that could make the rent estimate more accurate. Once you have entered all information click “submit”. The site will give you a similar analysis to Zillow and a range they think the rent may fall in.

Another good way to get rent comparable is Craig’s List. Craig’s List has had issues in the past involving scammers and fraud. But as far as determining rental amounts it is fairly accurate. On this site, you would perform a slightly different search. You would go on Craig’s List for your area and go to “Apt/Houses” section and type in your town. Or, if it’s a development, you might type in the development name. You then enter the number of bedrooms and/or bathrooms. At that point many house or apartments will appear in your search for rent. You then need to review them and see if any of them are similar and look like your property so that you are comparing apples to apples.

Keep in mind these are estimates and you will have to test the market to really know what your property can rent for per month. We do not recommend that you try to “go high” and figure you can negotiate down. This rarely works to in today environment. Generally, if you over price your property hoping to get more rent it will just get ignored and you will not get any traffic or potential renters.

I better strategy is to use the above resources to get a close estimate of your property will rent for and then price your property slightly lower. This should attract a lot more tariff and may be result in a quick move in versus over pricing and the property sitting vacant for weeks or months.

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