You’ve probably read everyone’s horror stories about being first time landlords, but it’s not nearly as disastrous as they make it seem.
They just did it well…. wrong.
If you’re looking to dive into the world of real estate investing, you’re not alone.
Investing in the real estate market is on the rise, but it’s not as far-fetched and scary as most people make it seem.
My husband and I aren’t real estate agents. We didn’t pay for someone to coach us. And we definitely didn’t buy someone’s investment course online.
We turned our first home into a rental and found great tenants who consistently paid on time for two years, with minimal issues.
So, how did we do it?
This post is all about our experience as first time landlords.
Initially, my husband [when he bought the house] was just looking to buy a house to move out of his roommate’s home.
I just wanted to get something fast and I didn’t care about the numbers. I wanted to fit my budget, but I was looking at the wrong things. I wasn’t necessarily like “oh this could turn into a rental” or “oh I could possibly flip this house.” It turned out to be a good house. It was in a good neighborhood. I got lucky in a sense.
my dear husband
About the House
As an 1100 square foot, two-bedroom one-bath house, it was the perfect size home for a single bachelor like my husband, at the time.
But, when we got married and had our first daughter, it was also perfect for us as a small family.
It was recently renovated, but the best aspect of the home was the huge fenced-in backyard.
When Toné bought the home back in 2013, it was only on the market for a week.
When we listed our home for rent, we actually had to hold two weekends of open houses because we had so much interest.
I have a degree in English, so I signed up for a Zillow account, and listed our property myself with updated pictures.
Why Background Checks Are Non-Negotiable
We had applications that were there at the open house so anybody who was immediately interested could apply, and we had an application fee.
We only used the application fee for the background check.
And yes, we ran background checks on EVERYONE who applied.
This is arguably the number one reason why first time landlords have such horrific experiences!
They don’t do their due diligence of vetting a complete stranger moving into their property.
I mean, when phrased that way, it doesn’t make much sense to avoid screening someone you’re giving keys to right?
Other landlords who chose to neglect this aspect of safety and security measures regretted it, so we do suggest you run background checks on every single applicant.
Applicants are trusting you with their private information and you’re running it for a specific reason: to see if they’re qualified to rent your property.
Now, you can have stipulations of who is able to rent your property (I.e. if you’re listing as Section 8, Active 55+ community, etc), but be careful to avoid discrimination.
Make sure to check your state laws to be up to date.
You Can’t Judge A Book By The Applicant Pool
The first person to arrive at our open house was also the first person to respond to our listing on Zillow.
At first, she seemed the most “qualified” and passed both credit and employment checks.
She provided a glowing recommendation letter from her current landlord, so I phoned him to chat.
As it turns out, the letter was forged and the current landlord was struggling to evict her.
Apparently, she had never paid rent, had no intentions of paying, and destroyed the property.
He actually urged me to drive by his property to see the damage firsthand.
He was forced to take her to court and had to list his property for sale in order to evict her.
So — even with a decent background check, call ALL references!
At the second open house, we chose the perfect tenants the next day (after another round of checks).
They were a married couple with a dual income which was comforting for us.
Allowing Pets As First Time Landlords
Honestly, what set our rental apart from others was that we allowed pets.
The yard was fully fenced in, but we did charge a pet deposit fee for the dogs (with a maximum of three) which also allowed us to generate a more money per month.
Our first rental was one of the smaller homes in the neighborhood, and there were several larger homes also for rent.
But, none of them allowed pets and they all sat a lot longer than ours (remember we listed and rented our property in just two weeks!).
Legal Paperwork Necessary As Landlords
So you get your tenant in – what’s the process on making it legal, right?
I am a HUGE fan of RocketLawyer is a website that I love because it walks you through everything.
When you are generating a legal document, RocketLawyer asks questions throughout the lease agreement as you’re filling it out.
What is amazing is that it also has state-specific laws that you may not realize even exist, but are extremely important to include and/or know.
Then, when you’ve completed the document, you could print the lease agreement as many times you want.
Bear in mind, that this is not a free service.
However, if you’re not in the legal field, RocketLawyer is an expense worth investing in, especially to avoid legal ramifications down the road should they arise.
You’re creating a legal document that’s from actual lawyers.
You’re not making it up yourself and you’re protecting yourself.
Plus, you don’t have to worry about forgetting something in your lease agreement.
For example, if you want to offer a month-to-month lease option after a contract ends.
From one first time landlord to another: print everything out and get wet signatures.
RocketLawyer would send it to your tenant, so we would sign it first so it sent it to them which is nice because it also keeps its record.
How to Collect the Rent
We used an application called Cozy (now owned by Apartments.com) which acts as a third party between you and your tenants.
Cozy makes the tenants feel more comfortable that you’re not directly connected to their bank account.
Your tenants pay Cozy and Cozy pay us.
It’s nice because you can add security deposits, utility bills, or added fees with pay by dates due or just group them in one lump sum.
There is also an auto draft or auto payment option which is common nowadays.
You don’t have to worry about having a check get lost in the mail to you, or having to deposit it.
I had to do this in my apartment, and it could take up to five days because it’s subject to postal times and holiday schedules.
In this case, that helps eliminate the option of receiving the rent late because it’s paid all through an electronic service.
Rent Needs A Special Account
We charged a monthly rent in addition to a pet deposit.
However, we assumed it would just go into a regular bank account (not our own, but a separate savings account).
WRONG.
Make sure you ask the bank and let them know that it’s being used as a rental property.
First time landlord pro tip: I would highly recommend getting security deposits.
You never know what can happen if something breaks, even accidentally.
Many first time landlords make this mistake forgetting that security deposits are supposed to help with the vacancies and obvious repairs.
This post was all about being first time landlords.
While this house initially wasn’t meant to be an investment property, we had a great experience as first time landlords.
It is vital to know something about real estate, at least the neighborhood and city, so you know what kind of tenants you would potentially be attracting in that area.
Do your research on the area and the city if you are unfamiliar or recently moved.
We did end up selling our first rental property simply because we moved 17.5 hours away.
You can do property management which we probably will do eventually, but we just didn’t want to deal with managing something that far (unless we had more properties also in that area).
Especially as a married couple, we wanted to share our experience and what it is really as first time landlords.
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