Get into the rental property business and become a landlord

A water line serving the very first rental property Jeanne Albert and her husband, Howard, bought 31 years ago broke just three months after they took over the Sherwood Street home on Buffalo’s West Side. The unexpected setback was a lesson well learned.

They now have 55 units on the West Side and in North Buffalo — and they’ve learned many other valuable lessons along the way.

“Believe you me, to this day I check every water line before buying a property,” said Albert, a Hamburg resident who is the hands-on partner of the two.

For anyone thinking about getting into the rental property business, the Alberts are examples of how hard work and strategic, long-term investment can lead to success.

Becoming a landlord in Minnesota can be a good, reliable source of income over time. Landlords may not make a lot of money, but they we are making a profit. Landlords not to expect that after buying and filling their apartments they can simply wait for the rent checks.

Landlords, who bring in good tenants, invest in their properties and stay on top of building code and maintenance issues can develop a steady cash flow business.

The rental market is still healthy in Minnesota. But buying properties and renting them out is a business, and like any other business it’s going to require effort. And it shouldn’t be regarded as an easy way to make money. Given how low interest rates are right now, just over 4 percent for a 30-year fixed rate mortgage and it can be a good time to buy property.

Know your neighbors and your responsibilities

The first step for anyone thinking about getting into the rental business is finding the right property to buy.

Be sure that you’ve inspected the property before you’ve purchased it! Most Minnesota investors nowadays are looking for foreclosed properties which are selling below market value. It is important to know the location and neighborhood you are buying into. When you rent the properties out, you can tell your tenants that you know your neighbors are good neighbors.

Many investment properties require fixing up before a tenant can move in. Experts recommend starting on the outside to make repairs before moving inside – do the neighborhood a favor.

Landlords need to know their responsibilities well enough to be property owners under local and Minnesota building codes. For example, while the state for years has required working smoke detectors, a recent change to the law now also requires carbon monoxide detectors. Being ignorant of the law is no excuse for a violation. There are a number of municipal and nonprofit agencies provide resources for landlords. If you’re going to be good stewards of your property, then the community is going to benefit.

Find the good tenant for your rental

Once the property is in rentable condition, the next step perhaps the most important step for a landlord is finding a good tenant. You want somebody who’s going to pay the rent on time, take care to not damage the apartment, be a good neighbor.

How to find tenants for your MN rental?

You can find tenants by advertising in the News and other papers, online and simply by putting up a sign. Make sure to avoid discriminatory language in your ads and describe the apartment instead of who is going to live there.

Experts say it’s essential to have an application that asks detailed questions about the tenant’s finances and ability to handle the required rent and utility payments. You can request references from several past landlords and call them to discuss the prospective tenant. If you can’t reach a previous landlord, you may want to visit tenants at their current addresses to see how well they keep up their property. You also should obtain credit reports on prospective tenants. If the tenants were not approved, you need to give applicants a valid reason for why they weren’t approved.

Consistency in the process protects the landlord, and landlords should offer the apartment to the first applicant who meets the rental criteria. Every landlord and housing expert recommended having a lease that spells out the expectations and responsibilities for both parties. It also helps to have a lawyer review the language in the lease.

How long your lease should run?

Most landlords in Minnesota ask for the first month’s rent and a security deposit, typically equal to one month’s rent, before a tenant moves into a unit. Some also require the last month of rent. Whether you should have the duration of the lease run for 12 months, nine months or month to month, as long as there is a lease the duration of the lease is less important.

How much you should charge for rent?

You can look at ads for other, similar rental units in Minnesota to help decide how much to charge for rent. It is market driven, though sometimes you rather keep good tenants for the long term than give them reason to leave with annual rent increases. For example if you keep your rents as consistent as possible, so that your tenants can plan and stay on a budget, and they can think of the apartment as a home.

Stay on top and be your own property manager

Once the tenants are in the building, you do have to stay on top of calls for maintenance work or emergency repairs. your visiting rental properties frequently is necessary to make sure smoke detectors are working, garbage is being taken out and sidewalks are cleared of snow. Most property owners try to do as much work as they can themselves, or with their families. But specialized tasks, such as plumbing, should be done by a professional to avoid problems later.

Landlords do have to put money back into their houses and apartment complexes, which are long-term investments. You’ve got to be budgeting a portion of that rent to put back into the property. It is looking after that investment, first, and worrying about the income, second.

Source: By Stephen T. Watson, The Buffalo News, N.Y.