1. Set the Right Rental Price
- Your main income from rental properties is the rental fee, so ensure you estimate and set a fair and attractive market price to rent the property immediately.
- Consider recent market comparables to determine the real rental value of your property.
- Give more weight to properties that have been rented out rather than those still available. If you don’t have access to this information, seek advice from an expert broker.
- Attempting to rent $100 above market value can result in the unit sitting vacant for months, leading to greater financial losses over time.
2. The Rental Market Does Not Directly Correlate to the Purchase Market
- It’s common to hear clients suggest raising rents because of increased condo fees, repairs, or rising property sale values. However, rental prices do not directly correlate with the owner’s expenses; they correspond to a specific rental market in a city, community, sub-community, or building.
3. Consider Renewing Contracts
Several factors must be considered when renewing a tenant’s contract. From a financial perspective, renewing is usually the best decision. Renewing helps avoid costs such as:
- Improvements to the property to put it back on the market (painting, carpet cleaning, etc.)
- Time spent finding a tenant, pre-qualifying them, negotiating the contract, and association application phases, often translating into weeks or months without income.
- Commissions can be higher for a first contract than for renewals.
4. If the Tenant is Good, Try to Keep Them
- The relationship with the tenant is one of the most delicate aspects of rental properties. If the tenant pays on time, maintains the property well, does not frequently bother with minor repairs, and you don’t receive complaints from neighbors or the association, they are an excellent candidate for renewal.
- Owners often insist on increasing rent and are willing to lose “good tenants” over a disagreement on the increase. However, before letting go of a good tenant, consider that it’s a gamble who your next tenant will be.
5. Evaluate the Tenant
Consider the following aspects:
- Proof of Income:
- Request documentation showing they can cover the rental payments, such as:
- Recent pay stubs or income statements (W2 or 1099)
- Recent tax returns
- Bank account statements
- Request documentation showing they can cover the rental payments, such as:
- Credit Report:
- Request a credit report to see their payment history. In the U.S., you can use the following as a reference:
- Below 579 (poor): bottom 20% of the nation
- 580 to 669 (fair): below the national average
- 670 to 739 (good): national average
- 740 to 799 (very good): top 40% of the nation
- 800 or more (exceptional): top 20% of the nation
- Eviction History: Determine if the tenant has any history of eviction.
- Request a credit report to see their payment history. In the U.S., you can use the following as a reference:
- Police Report: It’s reassuring to know the tenant has no criminal background. This check is easy and quick to obtain.
- References from Previous Landlords: Request references from previous landlords where the tenant has lived. This can be in the form of a letter or contact information in the application form, allowing you to call and ask for references. Even if they are phone references, they provide valuable feedback.
- Remember, if your property is in a condo requiring approval before the tenant moves in, the tenant will also go through this filter, giving you double protection. However, this does not replace the need to request all the above for your security and the safety of your investment.
Enrique Vicente Urdaneta
Real Estate Advisor | eXp Realty | EVU Luxury Homes
305.209.6418
www.instagram.com/evuluxuryhomes
Disclaimer: The information presented in this article is intended to provide a general understanding of the topic. However, please note that I am a real estate agent, not a lawyer, accountant, tax, or financial advisor. This content should not be taken as legal, tax, accounting, or financial advice. The laws and regulations related to this topic can be complex and may change or expand in the future. Therefore, it is crucial to consult with a qualified professional, such as a specialized financial or tax advisor, before making any decision based on this information. As a real estate agent, I can provide various options and professional guidance related to the real estate aspects of your investment strategy, and for matters related to tax implications, legal issues, and financial planning, please consult with the appropriate professionals, which whom I have allies I can refer.
