In the last post we talked about the security deposit, what it is, when to collect it etc. The next step would be the tenant’s move-in.
In these blogs we discuss how to buy foreclosures in the Dallas, Fort Worth, Denton area; how to fix them up; how to market it as a rental and how to operate your rental property. At times we discuss the broader aspects of investing in real estate like overall gains, tax advantages, myths about tenants etc. Our main focus is single family rent houses in the DFW metroplex, however some general ideas here could apply elsewhere. Please read Getting a Mentor and Getting started if you are new here.
After the property is ready either after completion of rehab or after the old tenants have moved-out, re-key the locks for the new tenants. In the post on rehabbing we talked about buying locks that have “smart keys“. These are the ones that can be re-keyed easily without having to call a locksmith. These locks tend to be more expensive than the normal ones but more than pay for themselves, sometimes in just one rotation. Install a lock box with your new keys and give your tenants the code. Google Master Lock 5400D. It’s a 4 digit combo lock and I have found this to be quite reliable. Home Depot carries them as well. The three letter dial locks are harder for people to use and seem to jam with rust. You don’t want to drive to the property just because your contractor’s crew can’t work the lock box. As a landlord you will use this lock box long term, so get a good one.
Give your tenants the code and let them move in on their own. Give them two days to fill out the property condition addendum. This is a form that lists any flaws, stains or other issues with the house. If you have rehabbed the house as we have discussed before, then the items on this list will be few and minor. Meet with your tenants after they have had their two days. Walk the house and let them point the items to you. Take pictures of all items on the list. You need a camera that can date and time stamp pictures as you take them. Address the small items if you can right away and get the others repaired or cleaned as the case may be. Even though the move in condition form is simply a documentation of condition and not an automatic repair request, it’s best to fix these items. Reasons being:
- Your actions communicate that you care about the property and even the small items you do not ignore. That’s the maintenance quality you expect.
- If these are damages caused by the previous tenant, you are within the 30 day window to get it professionally fixed and itemize the cost as a deduction to their security deposit.
- It establishes a clean slate for the new tenants, so there is no question of unaddressed items worsening over time.
- New tenants are sometimes shy in asking for fixes, especially if there are a few. It’s best to not have them live with stains or faults as it’s just not good customer service.
Some landlords insist on meeting the tenants as they arrive and walking them through the house before they move in to demonstrate that the house is in perfect condition. I do not recommend this approach as your tenants have a lot to deal with on move in day without having to be under the landlord’s microscope. Furthermore, no matter how great a shape your property is in, unless they live there for a couple of days, they are not going to know that the one of the blinds does not close well or one of the tubs drains slowly or there was a stain in the pantry shelf. So give them their space and time. You do not want them to have a reasonable claim of not having sufficient time later. That said, do not put off meeting with them for an extended period of time after their move in. It is important to establish property condition as soon as possible. Two to three days is sufficient time. Your lease should specify how many days they have to turn in their property condition addendum. It’s good to remind them when you give them the code to your lock box.
After you have walked the house, you may have taken pictures for some items on the list, fixed some items and discussed setting up repair calls or cleaning calls for some others. Make notes in the property condition form and get them to initial changes, resign and date. When you get back home you can email them a copy.
In addition to the property condition form, there are two other forms that you should use in your move in documentation. They are:
- Inventory Form: This lists with serial numbers, model numbers or other identifying information some significant items in the house, like the stainless dishwasher, stove, garage door opener etc. It also lists how many keys, gate cards, pool cards, garage door remotes etc. that you have provided. Your tenants should initial the items, sign and date this form.
- Smoke Detector, CO Detector and Fire Extinguisher Form: This states that you have provided operational smoke detectors and a Carbon-monoxide detector. A CO detector is useful only if the property has gas supply, for heat, stove, dryer etc. If the house is all electric, the CO detector may not be useful. Also provide a fire extinguisher even if it’s not required by law. The form will state that maintenance of these items including testing and changing batteries is the tenant’s responsibility.
When you meet your tenants for the first time it is important to address key items of your lease. Answer any questions they may have about the lease. You should be prepared to show them how to use the thermostat or the sprinkler system. Show them the water shut off at the curb and tell them where they can get the correct key for the shut off. Show them where the breaker box is. Leave a copy of all user manuals at the house or give them links to the manuals online. Finally, remind them the process for sending you the rent including when and where it is due.
Now that you have your tenants, you can start work on refinancing your loan into a long term mortgage, which will be topic of our next post.