So you want to be a landlord

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Rental property can be a great investment. As an investor you provide a much needed commodity for a person or family while they pay the mortgage on the house and provide you with a little extra money each month. Over the years I have helped several people start and/or add to their rental portfolio. Most of my clients tend to manage their own properties, while others find a property manager to screen tenants, and hire maintenance people.
Banking rules regarding investment property have changed greatly over the past several years, so it is advisable that you speak with a banker prior to starting your search. You should also obtain a copy of the landlord/tenant act and read it, study it, and read it again. It is important that you understand what the law says regarding your rights and responsibilities.
As you begin your search for your first rental, you will need to decide where you would like to buy. You might consider looking close to you where you work or live so you can check on it, especially if you are planning on managing it yourself.
Once you have found the property and purchased it you will want to get it rented as soon as possible. Investors don’t like their properties to be vacant. It costs money to have a vacant rental and there is always the risk of vandalism. However, I think it is worse to put an unqualified person into the unit who tears up the property and doesn’t pay you.
The most important and complex part of renting is screening the tenant. Have an application that you have everyone interested in renting fill out. You can use one from the office supply store or make one up yourself. Some landlords charge a nominal fee to run an application. This often deters people who know they don’t qualify from applying. I personally do not charge a fee. You will need to verify the information on the application to make sure it is true. I suggest verifying the address on the applicants driver’s license to the application. Check to see who actually owns the property where they live, verify that is the same name that is listed on the application. If not, it could be a property manager. The law in Oklahoma says that a property manager who is not the owner of the property managed must possess a Oklahoma real estate license. Verify all phone numbers to see who they actually belong to before calling them. They could be the applicants friends. I had an applicant that listed a cell number for his employer and said that was the only number he had. So I asked to see pay stubs. He had none and said he got paid in cash. I can’t verify that and didn’t rent to him.
Determine what your criteria you are going to use to qualify a tenant. My qualifications are 3x the rent in income (meaning if rent is $1000 a month, tenant must earn $3000 a month or more), no evictions, or felony convictions. You need to use these same requirements for each and every tenant. You will want to decide if you are willing to rent to people who smoke or not (although I think this is crazy to monitor) and also if you are willing to accept pets. If you do accept pets, I would suggest a pet deposit. A pet deposit is very common.
Once you have approved a tenant, have everyone sign a lease. The lease should be comprehensive. In real estate everything needs to be in writing so put it in writing so everyone has the same expectations.
This is just the beginning. This is not meant to be inclusive and if you have legal questions, please contact a lawyer. I will blog some more later about what should be in a lease as well as other landlord issues.