Being a landlord can be a wonderful way to make some extra money and to help you acquire an investment property (check out our free tool kit for your property potential). But being a landlord is not as easy as simply depositing a rent check every month.

Here are some useful tips to help ensure your success as a landlord:

Tip#1: Treat being a landlord as a business | Become a Successful Landlord

It’s tempting to either rent to friends or to become friends with your tenants, particularly if you live near the rental property. While it’s ideal for both parties to be friendly toward each other and to treat each other with respect, it can be problematic if you are or become friends with your tenants.

Here’s why:

If your tenant/friend is late with rent, for example, you might let it slide for a couple of weeks. Before you know it, you’re losing money on the arrangement.

You probably won’t remain friends much longer, especially if you need to evict and possibly sue for back rent. So the best solution is to keep the arrangement with your tenants friendly but businesslike.

Tip #2: Screen tenants | Become a Successful Landlord

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Renting to people you don’t know can be risky.

So it’s important to run a background and credit check on every tenant who applies. The background check tells you whether the applicant has a criminal record and any evictions.

The credit check provides you with a credit score and a credit report so you can see why the score is high or low. These reports can help you make an informed decision on whether to rent to an applicant.

Also, find out where potential tenants work and how much they make. Call employers to verify applicants really work where they say they do.

Also, ask applicants for the contact information of past landlords, and call those landlords to find out whether there were any problems.

Tip #3 Keep your tenants happy | Become a Successful Landlord

become a successful landlord

Once you have your place rented to good tenants—people who pay rent on time and keep the property in good condition—you want them to stay.

Having vacancies is the top reason landlords don’t make a profit. Help ensure your tenants are happy by being a responsible landlord. That includes the following:

  • Keeping the property clean and secure
  • Responding and following through promptly to maintenance and repair requests
  • Practicing good communication by answering your tenants’ questions in a timely manner and keeping them informed of any need-to-know information, such as when the gardener will be coming or when lease renewal time is approaching

Tip #4: Have a lawyer make or review your lease | Become a Successful Landlord

Knowing landlord/tenant law is important to make sure all involved parties comply with state laws. You can download a copy of “California Tenants: A Guide to Residential Tenants’ and Landlords’ Rights and Responsibilities” here to familiarize yourself with basic California landlord/tenant law.

Beyond that, you need a solid lease.

The lease is a legal and binding contract.

To ensure you include the right clauses that protect you and your tenants and that are legal, you should have an attorney draft your lease or review a lease you draft yourself.

Tip #5: Have adequate insurance | Become a Successful Landlord

become a successful landlord

Once you become a landlord, you need to get a separate landlord insurance policy.

Your homeowner’s insurance usually doesn’t apply to non-owner-occupied property, even if the home is on the property of your residence. You’ll need coverage to protect you from a devastating loss that could put you out of business.

Landlord insurance typically covers the rental property if it becomes damaged by fire, other natural disasters, or other covered losses, such as vandalism.

It also helps pay for medical bills if your tenants or their guests are injured on the rental property. Some policies also temporarily pay for lost rental income due to a problem that makes your rental unit uninhabitable.

Tip #6: Abide by the 1% rule (if possible) | Become a Successful Landlord

The 1% rule is an easy way to determine whether it makes sense to buy (or build) an investment property. Using the 1% rule, a property that costs $600,000 (the median home price in California) should rent for $6,000 a month to help ensure you’ll make money.

But how likely are you to get $6,000 a month for a rental property? Not likely, given the median rent price in California is about $2,750.

So you’ll want to keep the purchase price of a rental property closer to $300,000 or less to have a positive cash flow. This is nearly impossible unless you’re looking at constructing an accessory dwelling unit.

  • In Southern California, stand-alone accessory dwelling units typically range from 150,000-300,000.
  • In Northern California, stand-alone accessory dwelling units typically range from 250,000-400,000 (but can also command much higher rents).
  • Garage conversions can cost between 75,000-110,000.

How To Hire A Great Contractor

Tip #7: Screen Out Bad Applicants | Become a Successful Landlord

Make sure when evaluating an application you look at:

  • Current employer (call to verify)
  • Payment stub for the past 2 months
  • Credit check
  • No recent evictions
  • No recent felonies
  • Good previous landlord references

A tenants salary should be 3X the cost of monthly rent. So if your rent is $2,000 a month their gross monthly salary should be $6,000.

Tip #8: Set Up a Google Voice Number | Become a Successful Landlord

When I set up my Maxable Space business one of the first things I did was set up a Google Voice number.

It’s a free service provided by Google that allows you to direct calls through Google Voice to your cell phone without having to give people your actual cell number. It’s a nice layer of protection and I highly recommend setting it up regardless of whether you’re renting out an accessory dwelling unit or founding a startup.

You can even set up a professional business voicemail.

Accessory Dwelling Units

become a successful landlord

If you’re considering becoming a landlord in California, building an ADU might be the perfect solution. You can make the numbers work to help ensure you’ll make a profit, the rental property will be nearby, you’re helping provide much-needed housing in California, and you’ll be making a wise investment choice.

Plan, hire, and manage your ADU project with Maxable.

At Maxable, we believe that building an ADU should be fun and exciting. You shouldn’t have to be the one to deal with confusing obstacles like permitting snafus or ever-changing regulations. We’ll be by your side every step of the way and connect you to experienced designers and general contractors in your area to make sure your project goes as smoothly as possible.

Leave the headaches to us! Check your address and see what Maxable can do for your home during a free ADU Planning Call.