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Oct 06

Positively cash flow your rental properties….

Keep tenants from moving on the fly!Positive cash flow is the key to successful buy and hold investment properties.

As a buy and hold investor you want to maximize your cash flow by keeping tenant turnover at a minimum. Finding good tenants is a process that starts with how you advertise your rental property. I find that most of my rental prospects come from craigslist, therefore I write my qualifications in the ad:

  • Must make a monthly rent equal to 3 times the rental amount
  • Must not have any prior evictions
  • Must pass criminal background check.
  • Only neat, clean, responsible people who pay their rent on time need apply.
  • Must have first month’s rent and security deposit to move in.
  • Pets considered on a case by case basis. Application Fee of $25 per person.

This keeps my phone calls of non-qualifying tenants to a minimum.

Keeping your properties well maintained plays a key factor in keeping tenant turnover low, not too many people want to rent from a slumlord. Patch holes in walls, make sure doors open and close properly.  Respond to maintenance calls in a timely fashion.

Keeping your rents in line with the rest of the market will keep your phones ringing. Setting boundaries with new tenants giving them a sheet on the life expectancy of household items, such as light fixtures, doors, paint on walls, and carpet. Set an expectation of how the property is to be turned back over to you.   My units are clean when we do the lease signing and I set the expectation then and tell my new tenant, “this is how my last tenant left the house when they moved, all I had to do was show it, this is how I expect you to leave it when you move.”   Put a move out “to do” list in your lease under the security deposit section.  My list contains 25 things the tenant needs to have done before they get their security deposit refunded. For example, they must have carpets professionally cleaned and provide a receipt, supply me with a forwarding address and must provide a 30 day written notice of planned move out date, to name a few. If the consequences are spelled out your chances of keeping turnover costs low are extremely good.

Tenant turnover can suck up all of your cash flow if not handled properly and nobody wants to get stuck with a $3,000 turnover bill.  Getting tenants to give proper notice is key to keeping turnover costs low, and getting the vacancy filled as soon as possible. Often times I have had a unit rented before the old tenant has left and don’t miss out on a month’s rent.

Buy and hold properties can be very lucrative and produce positive cash flow on a monthly basis, however it is very important to run them as a business and not just a part time hobby. Every successful business has a good employee manual as every successful landlord should have a tenant manual,  starting with rental advertisements to rental agreements. Set rules in the beginning and keep your rental properties in the black.

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