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If you cannot manage property you will not be around investment property for long.  

Property Management

You must:

Learn the rules and laws covering land-lording, discrimination, and develop a written policy to guide your decision making. Educate your self,  learn from others, you cannot live long enough to make all of the mistakes yourself,  learning from others it is much less painful and expensive.

Plan develop a managerial philosophy, don't manage by crisis.  Develop a team of support, and repair contacts i.e. carpenters, plumbers, air condition repairmen, electrical, housekeeping, landscaping & trash haulers carpet installers and most important a good general handyman. Consider who will cover your proprieties when you are out of town.

• Stay away from poor people, income should be between thirty-five percent of their take home pay or half of their gross income with adjustments made for large fixed debt obligations.
• Use a good lease and explain the lease and responsibilities with the tenants.
• Screen your applicants:
  • Do not let any flakes into your rentals
  • Use a good rental application and keep all applications on file especially the ones that you reject in case charges of discrimination are charged against you.
  • If the applicants are not married, have each one complete an application and inform them that they each will need to qualify independently or you can not rent to them.  I know by experience that the room mate that moves out will be the one who can afford to move and will leave you with someone who cannot afford to pay the rent.  Do what you can to avoid these situations by establishing this policy in advance.
  • Join a credit reporting agency to check on the credit and legal history of your applicant.  A good predictor of how people will act in the future is how they acted in the past.  Credit history is a good indicator of character and ones honoring their commitments in the past.  Consider that you are turning over control of a valuable asset for very little relative security.
  • Obtain at least three years credit history, then check references.  Check to see if the references are real and not their friends posing as their landlord.  Check with the prior landlord, they will tell you the truth, the current landlord may say anything just to get rid of a problem tenant.
  • Questions to ask former landlords:
    • Do they pay their rent on time?
    • How many people lived in the unit?
    • Was the rental unit left in a clean well maintained condition?  If they rented a home, was the landscaping healthy and trimmed?
    • Where their maintenance requests reasonable?
    • Did they honor their lease?
    • Did they give notice that they were moving?
    • Were there complaints about their behavior?
    • Knowing what you know about the tenants, WOULD YOU RENT TO THEM AGAIN?

Warning signs on the application:

• Applicants are living with friends or relatives, why?  have they learned how to take care of a home?
• Applicants need the home immediately, the arrive with a trailer full of their belongings, are they being evicted?
• Applicants are personally or physically disagreeable, they do not want to fill out application they indicate that their income is none of your business, or they try to bargain about rent or deposits, run down home etc.  It only gets worse if they become your tenant.  Avoid negative people.
• Applicants have a group living situation.  Extended families, often lead to bad situations.  If unmarried adults are living together it is important to have a policy of obtaining and approving each person's rental history and credit status.  Remember that if anyone moves out you will be stuck with someone who cannot afford the home.  Review federal and state Fair Housing Regulations to avoid any discrimination complaints.  Memorize and strictly abide by the protected classes regulations.
• Observe the applicants cars i.e. junkie cars are often a good indicator of their maintenance and cleanliness standards
• Avoid applicants who move around a lot.  You want good stable tenants who hate to move, and will stay with you many years.  Turnovers cost money, i.e. cleaning, repairs, painting, vacancy and leasing expense.
• Be careful with applicants who work at home, or can not show you a paycheck.  If they do not have a checking account investigate why.  What do they do at home, do they need a zoning variance?  Do they make bombs?  Ask to see last years  tax return - at a minimum. Carefully look at their employment definition, any W-2s or 1099's attached and the dates.  
• Do not accept co-signers, the applicants must qualify on their own
• Pets - have you ever known of a dog or a cat that increased the value of anyone's real-estate?  At the least get an additional deposit, an additional monthly pet rent of ten to twenty dollars per month. You will need it, and get a written statement from the tenant that the animal has not been attacked trained or have a history of biting.  Insist and get an agreement that the dog will be outside when no one is at home.  Instruct the tenants to post beware of the dog signs on all gates to the back yard for their protection their invitees and yours. Also insist that the pet be vaccinated and licensed with the proper authorities, and that it will not be a nuisance to the neighborhood.

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