The tenant (customer) is what drives your real estate investment. For the buy and hold investor, they are your lifeblood to success. With that in mind, it is very important to find someone who can help you achieve long term success. On March 6, 2013, we gave some pointers on how to proceed on this very important subject. As a follow up to that post, we are would like to mention these as well:
1) Have the security deposit (which may equal the first month’s rent) in your bank account before the tenants move in. This is non- negotiable and is designed to protect you the investor.
2) Ensure the tenant(s) have a bank account. If they insist on paying in cash, this could be a signal that the banking system does not trust them and neither should you! You cannot be sure that the source of funds is even legal especially if they want to prepay an entire year of rent in cash.
3) Do not rent out a property to someone you have never met. There is absolutely no substitute to meeting someone face to face and getting a first impression of who they are. If you get a funny feeling that something is not right, there is probably a reason for it and it is best to say “I have decided to rent out the property to someone else”. Even if you have not found this “someone else”, it is a way to avoid any potential legal issues down the road.
4) Do not rent out your property to a friend or a relative. This will only blur the line between your investment and your emotions. If they do not pay the rent, it could be more difficult to remove them from your property and may involve consequences for your personal relationships.
5) If the rent is not paid on the first of the month, start the eviction procedure the next day. Your property taxes, insurance and mortgage are all due at the same time of month without any extensions. Your tenant must follow the same policy.