BRRRR Investing Basics; Step 3: Rent
BRRRR basics, the third R- rent!
New investors fret for years on the “B” in BRRRR- buying. That first step is always so scary, the deal has to be PERFECT. Once they have that deal, the agonize over the rehab- nickel and dime their contrators, do as much work themselves as they possibly can in an effort to get the property perfect as they prep to advertise it “for rent.”
After all of this work, effort and expense- they take the first smiling prospective tenants to show up with a check.
Friends- let me tell you about the MOST expensive mistake most new investors make; not thoroughly and properly screening their tenants. You think your rehab was expensive and stressful? Wait until you have a tenant smoking in your kitchen, dumping trash down your vents and laughing in your face when you politely ask them to pay rent. Wait until you are forced to move forward with a formal eviction and you’re stuck with seemingly never ending bills from your attorney. For months on end. For reals. Your rehab bill could be a walk in the park in comparison.
It’s awful. But there is good news- it’s actually pretty easy to find yourself reliable and responsible tenants. Screen them. Screen them properly, thoroughly and in accordance with all fair housing laws. It’s really that simple. Sure, there are plenty of details, and there will be much more detailed blogs about landlord/tenant relations, but it all begins with proper screening.
You’ll need to develop screening criteria that have nothing to do with the protected classes. You can screen based on income, credit scores, whether they have pets, if they have good references and any other criteria you feel strongly about, as long as they aren’t related to those protected classes. You need to publish your criteria- either on your website, your ads for the property or on your application.
Insider tip- just because you are proud, and you should be, of your new investment, it may not be in your best interest to let everyone and their dog know that you are the owner and the landlord. If you own the property and your tenant knows this, every interaction now becomes a negotiation. Need a rent increase? Why? Be prepared to make the argument, and it’s not likely to go well.
There is a foolproof way to avoid all of that mess- let Boise TurnKey guide you through the process. Our sister property management company, CohesionProperties.com, has never had a formal eviction. Of course anything is possible, but having an experienced team behind you goes a long way.
