The Essentials for Success as a Landlord

So, you've decided to do it. The mortgage on your house is about $800 and it could potentially rent for $1000. Lucky you! I wish I were in your position! And you've made the decision to rent out the place. Kudos on the decision. Here are some things to be aware of when you decide to become a first-time landlord. And, by the way, these are tried and true, both by myself and by friends that actually are millionaires because of their real estate investments:

1. Beware of the easy tenants: In other words, run a credit check. Get them to pay for it, but do run a credit check. There will be many tenants that will promise to pay but you should not - in any case - let them rent your $350,000 home because they will give you $50 more in rent a month unless you can see beyond a doubt that they pay most of their bills on time. (Okay, almost on time. You can't expect perfection. Pitfall #2)

2. Don't expect a FICO score of 800: The reason many people are tenants is because they cannot afford to buy. If they can afford to make your rental payments and have a good credit history, thank your lucky stars. You, my friend, are in the enviable position of being a landlord with a long-term tenant. The very words make the likes of us drool.

3. Always, always, always, always get a security deposit: One of my friends suggests this should be a different number by at least $50 from the rent. There will be a few tenants that will want to use this as a last month's rent. You cannot allow that. If you suspect that in the beginning, collect first month's rent plus last month's rent plus security deposit. If they say they don't have money for the SD but do have money for rent, tell them you will take the SD and hold the property for them until they can come up with the rent or let them have the property with a late charge.

4. Always have a penalty for late payments and checks returned for insufficient funds: Now, don't get me wrong. All tenants are not bad. Heck, more than 50% always pay on time. But their financial situation will be inextricably tied to yours as long as they live in your house. Therefore, it is imperative that you do impose fines on them, the same way your bank will impose a returned check fee on you. The same way your mortgage company will on you if your payment is late. You're a landlord, not a charitable organization.

5. In the same breath, be nice: Do make human concessions. Do fix things when they break. Do remember to thank your tenants when they do pay on time. Heck, send them a Christmas gift. The one thing that makes being a landlord rewarding (and frustrating) is that you are in a personal relationship and a financial one at the same time. And as always, if you lived in the home before, remember to change your insurance to landlord's insurance.

Good luck in building your real estate empire. It's a goal worth working hard for.