A coworker expects to inherit a two-bedroom house in the next few years and asked for some advice on getting started as a landlord.
Getting started as a landlord is all about learning and following a simple formula. Learn the formula and follow it, and it’s extremely difficult to go wrong.
Getting started as a landlord starts with some homework
Look to see what comparable houses in the same school district rent for. Check Craigslist or Hotpads.com to get an idea. Keep an eye on how long the ads run too–if an ad runs more than a few weeks, you probably don’t have a prime comparable. I decided to get into rentals when I saw houses in my school district stay on the market for days before the signs went down, and I saw that the dollars were realistic.
If the prices are too low, don’t get into it. You have to decide what’s too low, but if you can’t rent the house for 1% of what you put into it, dollar wise, you won’t make your money back. If you put $100,000 into a house, you’ll need to be able to rent it out for $1,000 a month.
The formula of a successful landlord
Successful landlording is very formulaic. And that’s OK. You’re not out to win awards, you’re trying to appeal to the masses while controlling costs and keeping time between tenants at an absolute minimum. There’s a simple formula that successful landlords have been using for decades. Learning and following it will make you successful too. That’s the most important part of getting started as a landlord.
Paint the walls a dark beige
Dark beige is inviting and feels secure, and it’s easy to take care of. Use eggshell or semigloss paint to ease cleanup. While it won’t win any awards, it’s a color that’s been in use for centuries and never goes out of style. And it matches everything.
It covers fairly well, and I have a trick with tinted primer to make covering easier. I frequently paint between tenants, and can cover the old paint in one coat.
Few people will object to a dark beige. I’ve even had people ask me what color it is, and ask if I have a color sample. Every once in a great while someone will not like it and want to paint it. That’s a great way to find someone who’s going to be high maintenance.
Replace outdated flooring
No shag carpet. Put down a good quality laminate floor in anything that isn’t a kitchen or bathroom. It’s inexpensive, durable, and easy to replace again when the time comes. Be honest when people ask, but many people can’t tell the difference between laminate and hardwood. In kitchens and bathrooms, vinyl planks aren’t a bad option. They’re easier to put down than squares, though squares are very cost effective.
Appliances don’t have to be brand new, but tenants expect them to be clean and to work. And measure all of your doorways and the height from floor to cabinet on both sides before wrangling a side-by-side fridge into the house. I once dealt with a kitchen that was designed for one, but the rest of the house wasn’t, and the floor wasn’t level. Also, if you want top dollar, install a dishwasher and a garbage disposal. And while basic white appliances won’t win any design awards, you can keep touching up the dings and they’ll still look good enough in 10 years. You’re not trying to win awards; you’re trying to keep renters happy while keeping your profit margin workable.
Replace broken-up trim, or paint it white
Good woodwork adds tons of character to a home. But the cheapest, easiest fix for beat-up woodwork is putty and white paint. The nice thing about beige is that it looks good with either white trim or stained wood.
Getting started as a landlord: In conclusion
Everything about this is formulaic, but it’s a time-tested formula that’s been working for decades. You’re not trying to win awards. The secret to landlording successfully is to have a cost-effective formula that you can repeat over and over for years. Some people won’t like it and will speak up, but that’s fine. You don’t want a high maintenance tenant.
In addition to appliances, have the mechanical systems thoroughly checked — the plumbing, wiring, furnace, and hot water. If the wiring or plumbing isn’t up to code, fix it before you rent the place out. Better to have that kind of work done when the house is empty and you can make holes in the walls without making anyone upset. Far better to fix such problems before the pipes start leaking and you’re facing thousands of dollars in repairs on top of the cost of new plumbing. Ditto for wiring, where the cost of not fixing substandard work can be a burnt down house and dead tenants.
Likewise, if the furnace is old, replace it up front rather than wait for it to die and have to pay extra to get emergency service on a weekend in the dead of winter with a pissed off tenant thinking that you’re a horrible cheap slumlord.
Good point on all of that. When I’m in the market for a house, I probably won’t buy it if it has those problems. I have an inspector who is…. very thorough. That’s the polite way to put it. I can spot a few problems myself, but that’s what I pay him for. He’s more expensive than some inspectors, but worth it.
“When I’m in the market for a house, I probably won’t buy it if it has those problems.”
But in the case of your friend, it’s a house that’s going to be inherited, so the potential for such problems is there. Even if the relative who’s leaving the place to him is a lovely honest person, there’s a strong likelihood that even if they never did any work, the owner before them did. And more often than not, homeowners try to save money by going DIY on plumbing or wiring or alterations… or they hired someone cheap to do it for them, and there’s a reason that person was cheap.
On the plus side, an inherited house means he won’t be facing much, if any, mortgage, so if necessary he can borrow, say, $20,000 and have the whole place re-wired/replumbed/restructured as need be.
What I learned from looking at over 100 houses while trying to find one that would be suitable for my disabled partner is, and then having major renovations done to make the house accessible, is that the good expensive tradesmen are licensed, bonded and insured for a reason… and that it’s very foolish to try to save money by not hiring someone who knows what they’re doing.