After closing on a home, it is important to switch from a purchase mentality to a management mentality if you want to excel as a new landlord!: here are some of the best tips and tricks I can give you to nail home ownership!
1. Upgrade Hacking to Excel as a New Landlord
Upgrade hacking is a great way to improve the value of your home over time, and one of my favorite strategies overall. The basic premise is that anytime something in your home breaks, and you need to replace it, upgrade it!
For example, if your toilet breaks and it will cost $300 to replace, why not spend $400 to get a top-of-the-line unit. You need to spend the money to replace it anyway, so by putting that little bit more to it, in this case $100 on top of the replacement cost, you’re adding value and upgrading your property during a routine fix.
You can use this logic with a lot of items in the house, from lights to carpet, paint quality to your garden. This simple trick can help you slowly increase the value of your home, reduce utility cost and refresh your fixtures and fittings.
…and No. You don’t need to spend $9,ooo+ on a Kohler Numi toilet that self-cleans, self-deodorizes, has built-in mood lighting, heated seats, and even has internal Bluetooth capabilities in order to excel as a new landlord!
That wouldn’t be upgrade hacking…that would be…well, awesome!
It would also be a colossal waste of money in 99.99% of investment properties!
2. Landlording 101
If you have purchased a property for rent, or if you’re thinking of bringing lodgers into your home, don’t rush to fill vacancies.
Make sure that you are screening tenants, and only renting to the most qualified of applicants.
From a financial point of view, an easy tenant income guarantee is making sure they earn at least two (preferably three) times what you are charging in rent, per month.
From a general cleanliness and character point of view, get references from their last 2-3 landlords and ask questions about their approach to home care and maintenance. Look at how they approach your property – do they dress well, maintain their car well, are they eager to provide references? All of these points give you an indication on their character and how they will look after your property.
Checkout the BiggerPockets guide to tenant screening basics and ensure you are screening tenants thoroughly! Another great resource is this article my friend Dave wrote about how he self-manages all of his rental properties!
3. Hiring a Property Manager helped me Excel as a Landlord!
I love my property manager!
Maybe you are like me, and will hire a property manager immediately if for no other reason than you don’t want your tenants to know you own the place and it offers discretion and efficiency.
Maybe you will hold out, and manage your rental property on your own. Both are achievable and you have to find your own way!
If you’re fortunate enough to scale your real estate business you will most likely hire a property manager. Here is an article I wrote about how to hire a property manager. Check it out, and make sure you hire the right team!
4. Transferring title into an LLC – and avoiding the due-on-sale clause
You may have heard about the dreaded due-on-sale clause that most lenders put in their mortgages. It is ultimately there to ensure you pay them off before collecting any profits from the sale of a property.
Some investors have stated that a bank could call the note due, even if you just transfer the title into an LLC.
While there might be a possibility that this could technically happen, I have never heard of it actually happening.
Nonetheless, if you want to ensure you’re in the clear, there is a very simple solution.
- Before you transfer the title of the property into an LLC, email your lender and get them to confirm it is acceptable, since you will still retain complete ownership and control of the property.
- That’s it!
Boom! I told you it was simple.
As to whether or not you should transfer the title of your property into an LLC at some point, check out this article we wrote that explains when you may need an LLC.
If you’d be interested in joining a community of like-minded service members and veterans, focused on building wealth through real estate, then check out the War Room REI mastermind community today! We are the top mastermind group for service members and veterans!
If you ever have any questions about refinancing your mortgage, selling your home, land lording, or anything else, don’t hesitate to reach out!