Becoming a residential rental property investor means you must go through a learning curve. While you may have experience as a renter in the past, that doesn't qualify you as a rental property owner! As Seattle apartment managers, we understand that this is a business and not a way to make friends. However, many property owners don't realize that when they acquire an investment property with the intent to rent, they are essentially launching a business—and a career.
Yes, mistakes are going to happen. Still, with the following tips from seasoned property management in Seattle, you're sure to make less of them!
Note: This article is not legal counsel. If you need real-time assistance, reach out to Real Property Associates!
Don't Be Your Renter's Friend
There's a significant difference between rental property owners and their residents being "friendly" and becoming friends. There's nothing wrong with being cordial with your renters! That's one of the best ways of retaining them and getting referrals for additional renters. However, Seattle apartment managers know that it's important to draw a professional line in the sand.
Tips for how to create this buffer include:
- Setting specific business hours: Avoid answering calls, emails, or text messages during off-hours. The only time you should hear from a renter during off-hours is if there's an emergency.
- Avoid social interactions with renters: Social interactions means going out, spending time in their rental units, or other events where it's more appropriate for friends to attend. Hosting an event for all residents is one thing, but going out to dinner with renters is another.
- Don't share too much: Your renters don't need to know details about your life, including family drama or other difficulties. Keep conversations directed to local events or news if you decide to make 'small talk.'
Don't Use One-Size-Fits-All Leasing Forms
Property owners who aren't working with professional Seattle apartment managers should avoid using prefabricated leases.
- This documentation is typically available as a free download online. However, they're not comprehensive and miss several critical details.
- Instead, hire an attorney to draft your lease. That way, they're covering every legal point and not leaving any critical details.
This step is one of the most important you can take! Using a prefabricated lease could lead to the following issues:
- Some of these leases have the renter's best interest at heart, which leaves investors dangerously exposed.
- The language in the lease might not reflect the investor's wishes for their property or requirements.
- The lease might include clauses that take control away from the investor and give it to the renter.
Price Your Rental Rate Correctly
Here is another area where Seattle rental property owners tend to make mistakes. For example, if they aren't charging high enough rental rates, that could lead to lost revenue. However, if you set rental rates that are too high, that could also lead to lost revenue. The main reason is that renters are going to avoid an overpriced listing—and it could remain vacant for too long.
Here are some tips for how to set rental rates:
- Investigate rent-control laws: Rent control means there's a limit for how high you can set your rental rates. There isn't any rent control in the state of Washington.
- Research rental rates in your area: Look at other rentals in your area with similar amenities and use those competitor listings to help set your rental rates.
- Budget for maintenance, repairs, and utilities: Plan for the cost of maintenance, repairs, and utilities using a spreadsheet or accounting software. Annual repairs and maintenance could account for up to 50% of your annual rental income.
Thoroughly Screen Any Applicants
Screening involves looking at the renter's background, which includes previous rentals, credit, and employment histories. While no background screening process is perfect, it's a good idea to perform them for every renter. Taking this step can save you a significant amount of money and stress down the road!
Here are some examples of background screening Seattle apartment managers can perform for you, so you get an idea of what to look for:
- Criminal record check: You can conduct these on a county or state level. If a renter has a criminal record and you decided to deny their application for that reason, you must provide a copy of the report with a written explanation for the denial.
- Sex offender registry: California may prevent anyone from 'discriminating' against those who are on a sex offender registry. However, in the state of Washington, having this information is critical if other renters have children or your property is near a school or playground.
- Credit report: This background screening helps you identify which renters are financially responsible and who is not. Even though credit scores aren't available in this screening, you can see an applicant's bankruptcies, accounts in collection, judgments from previous property owners, and open loan accounts.
- Proof of income: Investors can request copies of paycheck stubs or other income verification to prove that the applicant can pay the rental rates they set.
- Employment history: This information proves that the applicant is currently employed, as well as if they experienced extensive periods of unemployment or gaps in their employment.
If you use a consumer reporting agency, then this screening falls under the Fair Credit Reporting Act (FCRA). If you choose not to work with a professional Seattle apartment manager, then you should absolutely conduct your screening with a third-party screening service to shelter you from liability.
Turn to Real Property Associates for More Insight!
The last thing any rental property owner wants to experience is making mistakes when launching a career—and a business! We have tools and resources, including our Seasonal Maintenance Checklist, to help Seattle rental property owners get started the right way—profitably.