The Qualities of a Successful Landlord
To keep your expenses low and increase your income, you'll want to do most of a landlord's tasks yourself. This is especially important if you are thinking of landlording because you want to supplement retirement income or build equity in a starter home. If you were going to have others do all the work, you'd have to hire a lawyer, a bookkeeper, an accountant, a secretary, a plumber, an electrician, a handyman, a painter, a designer, a marketing agency, a mediator, yard-care and cleaning services, and, in some cases, a collection agency.
How motivated and committed do you feel about going into landlording? Have you always dreamed of owning your own business? If you are excited about becoming a landlord and absolutely certain you'll be good at it, you'll be able to sustain interest in your work. Read the following sections carefully and be honest with yourself about whether you have the qualities necessary to be a successful landlord.
Then if you still think landlording is for you, go ahead. A good way to start out is by converting your home into an owner-occupied, two-unit dwelling or buying a duplex.
Personal Qualities
It's very important for a landlord to be committed and motivated. It also helps if you like people and treat them with fairness, honesty, and respect — you want to be friendly with your tenants. A good landlord is flexible and can stay calm, even though you might be angry or upset. A sense of humor helps, too. Do you laugh when you make a mistake and then learn from it? If you tend to lose your temper when things go wrong, you might be better off in another job.
A good landlord has good communication skills and a great deal of patience. Are you assertive? Can you make a point without becoming aggressive or belligerent? Are you able to stay optimistic and enthusiastic even when you're overtired or having to deal with a tenant's problem late at night?
Natural Management Skills
It helps to have management skills. Landlords need to organize and prioritize all sorts of tasks and set goals. Are you good at keeping things straight and solving problems under pressure? Do you get flustered if someone interrupts your work, or can you set it aside and come back to finish the job later?
Before you leap into landlording, try to honestly assess your limitations and strengths. Be realistic. If you don't like doing paperwork or don't want to tinker with a lock or a leaky faucet, how long will it take before you're putting more of your own cash into hiring help than you're getting out of your apartment?
As a rule, are you patient or impatient? For instance when you're looking for a duplex to buy or a new tenant to live in it, can you take time to find the one that's exactly right? If you rush into purchasing property, you may end up with something in a neighborhood that's decaying. If you aren't careful about checking a prospect's background, you may find that you've given a one-year lease to a problem tenant. Both rash decisions will have a negative impact on your income.
Business Skills
Landlords need to be assertive when a tenant is late on a rent payment or breaks a provision in the lease or rental agreement. They have to make decisions based on common sense and good business practices. If you aren't getting rent because a tenant lost a job, you have to start eviction proceedings. Can you do that and can you do it diplomatically?
In evictions or any other tenant disputes, you have to stay calm and not lose your temper. A landlord should act professionally at all times and never argue or verbally attack the tenant. It takes focus and a sense of purpose. After all, you're pursuing what's rightfully yours — the rent.
If you are willing to learn, you'll be able to pick up all the skills necessary for running your business: advertising, marketing, maintenance, accounting, bookkeeping, and the legal skills that pertain to landlording. That also means learning about the federal, state, and local regulations governing landlord-tenant relationships.
The bottom line is that if you aren't getting the rent, you lose two ways: the rental income and the money you're shelling out to pay your property bills. A landlord needs to be able to collect the past-due rent or find a new tenant who will pay on time, every month.
Handyman Skills
Landlords take on simple plumbing and electrical work, carpentry, and furnace and water heater maintenance. They know how to do small repairs and make the unit attractive to tenants. They handle all their own painting and cleaning to keep expenses low.
If you have to hire someone every time a toilet needs to be unplugged or a lock doesn't work properly, you'll be spending your rental income on repair services. If you don't know how to use a hammer and other tools, or get frustrated when you have to spend hours repainting and cleaning every time a tenant moves, you probably shouldn't become a landlord. If you don't have the time or really dislike these chores, can you afford to hire someone to do them, and for how long?
It's not necessary to have handyman experience before going into land-lording, but it's essential that you're willing to learn how to become proficient in many different tasks. You can get simple instructions off the Internet or in how-to-fix flyers, brochures, and books. You can always learn from experienced friends and relatives. If they do all their own work around the house, ask them if you can watch (or help) while they work so that you can learn how to do it, too.
Bookkeeping Skills
Ask yourself how much you enjoy paperwork. Some people handle numbers with the ease of an accountant; others hate balancing their checkbooks. Do you understand financing, interest rates, credit reports, bookkeeping, filling out and filing your business reports, and preparing income tax returns? Are you good at budgeting and putting money aside for taxes or do you tend to spend more than you should? In general, do you make good decisions about spending money?
Tenants move around a lot — one landlord says turnover occurs every year to 18 months. The national average for length of stay is less than a year. With a parade of tenants moving in and out — which is hard on an apartment — you might find yourself thoroughly cleaning and painting it twice or more in a period of a few years.
Financial Stability
Look at your own finances and credit history. Do you have money set aside that can be used for emergencies? Are you able to get a short-term loan if you need one? Will you be able to cover expenses if the apartment stays vacant for a couple of months? Can you afford to hire someone to do the jobs that you don't have enough experience to do or don't want to do?
Why Landlords Fail
The most common reasons landlords fail are:
They don't know how to run and manage a business.
They didn't learn about it beforehand.
They didn't stop to analyze whether income from their property would cover expenses.
They purchased property in the wrong neighborhood and can only attract low-income tenants.
They bought an overpriced property, took out a balloon-interest mortgage, and now their monthly costs — including higher mortgage payments, utilities, and maintenance and repairs — exceed their monthly income.
Their tenants have to be evicted for nonpayment of rent and/or breaking terms of the lease.
They won't take time to improve and maintain their property.
They go overboard and spend too much on appliances, fixtures, cabinets, etc.
