Real estate investors advance their careers by continuously learning new skills and gaining the confidence to branch out into new areas of investment. For example, an investor who primarily deals with single-family homes might want to try investing in commercial real estate or multi-family housing, but the unfamiliar nature can cause hesitation.
Hesitation to engage in new investment opportunities fades when you know what to expect on a basic level. The following tips will help you establish some familiarity.
1. Learn federal, state, and local landlord-tenant laws
Most investors become landlords at some point, only to discover that being a landlord isn’t easy. It might be more lucrative than other career options, but it’s still a full-time job and the stakes for making bad decisions are high.
Knowing the nitty-gritty details about landlord-tenant law will help you make sound decisions. For instance, there are some types of properties you may want to avoid in certain cities due to strict rent control or laws. Knowing landlord-tenant laws will also guide your interactions with tenants and protect your investments.
Landlord-tenant laws are complex
Although there are shared basics, each state has its own set of complexities. In many states, some laws only apply to certain types of units or rental arrangements. For example, in Texas, a tenant with a housemate is responsible for 100% of the rent and all damages unless the housemate signed an individual lease with the landlord. If the housemate is a legal sublessee of the tenant, the tenant is responsible to the landlord if the housemate fails to pay rent. The tenant can sue the housemate, but the housemate doesn’t have to answer to the landlord.
Another important fact to know is that sometimes part of the fair housing laws don’t apply when a landlord lives with a tenant. For example, normally it’s illegal to specify a preference for renting to a specific gender. However, in California, when your tenant will be your housemate and you’ll share common areas like the kitchen, the bathroom, and the dining room, it’s perfectly legal to specify a preferred gender.
Investment mistakes are painful enough. You don’t want to make mistakes as a landlord. Learning the details of landlord-tenant law is a smart way to protect your investments.
2. Learn commercial real estate analysis
Most real estate investors don’t jump in with commercial real estate. However, if you haven’t branched out from residential investments, it’s worth considering making your next investment commercial.
Unlike single-family homes you can buy, fix, and flip, commercial real estate is a different game. To make informed investment decisions with commercial real estate deals, you need to understand micro and macroeconomic theories and frameworks. You also need access to financial analysis tools and the knowledge of how to read and interpret that data.
If you’re just starting to branch out from residential investments, take an online course to learn about commercial real estate. Once you learn how to assess the viability of a commercial development project and understand asset markets, your residential investment game will improve as well.
3. Take communication courses
If you’re a landlord, your communication skills need to be solid. Tenants have respect for landlords who make an obvious effort to understand their needs, requests, and complaints and resolve issues peacefully.
Your communication skills will be put to the test whenever a tenant becomes upset, angry, or otherwise reactive to a situation. For example, a tenant might yell at you for giving them a late fee after they failed to pay rent on time. You could point out the fact that they agreed to pay the late fee according to their lease, but that approach will likely create further upset.
With smooth communication skills, you can diffuse the situation by empathizing with the tenant and offering to let them pay the late fee in installments without any additional penalty. If the late fee is only $40 and the tenant insists on paying you $10/month for four months because they can’t afford more, give them that break.
It might seem ridiculous to accept $10 payments, but the point of late fees isn’t to get rich – it’s to deter people from paying rent late. By accepting $10/month, you’re not letting your tenant get out of their agreement, but your flexibility will maintain the peace.
You can find great tenants with a good marketing strategy, but great communication will help you retain those good tenants.
