It was a cold and rainy day when I walked into the apartment. The door was unlocked and ajar. And while I shouted “hellloooo” through the crack, I already knew no one was at home. My tenant had left in the middle of the night without paying his rent. Lucky for me I had a security deposit; I’d need it to clean up the mess.

I’m a compassionate person, always trying to believe the best about people, and while I continue that philosophy, there have been times (this being one) where I was taken advantage of. There are two schools of thought; one being the tough and tenacious one, always keeping a certain distance between you and your tenant. The flip side is the compassion one, where you get to know the renter and their family (that’s the one I’d practiced in this scenario). While one will rarely allow a social interaction, the other can cause its own set of headaches.

What I’ll aim for in the future is a blend between the two. I refuse to change my philosophy about life (its keep me sane and happy) still I realize there are those who would take advantage of anyone’s kindness. In other words (as heard in political circles) “trust but verify”.

No matter whom the person is; family, friend or stranger, always get references and a security deposit. In my case, if I hadn’t had the deposit, I’d have been out the money to get the carpets cleaned, not the end of the world, but not good business either.

Here’s the policy I’ve adapted and while sometimes difficult, it’s kept me out of financial trouble and it’s really pretty simply. Be upfront with the renter and tell them what you expect. Is the rent due on the 1st? Then make certain they know you expect payment on or before that date. Do you give grace periods? If you do, then expect them to be used. Do you charge late fees; again make that fact known in the beginning. If you’ll do this, then it will be you who sets the rules and there will be no misunderstandings later.

Now this next one is very important and probably (depending on your personality) the most difficult. Stand behind what you say; if you charge late fees, then charge them, don’t let it slide. No one likes to pay extra. For example, when you get your bill from the electric or gas company, have you noticed if you pay you bill on time it’s one number, and if you pay after a certain date, the figure is higher. They are letting you know, emphatically, exactly what you owe and what you’ll save by paying timely.

Over a recent holiday I was fortunate to attend an Amy Grant concert, beautiful music, efficient staff and VERY good security. On the back of their t-shirts were written the words… “Polite but firm”. What a great slogan and perfect advice for every landlord. Everyone has difficulties in life, I certainly have had my share, and during those times, compassion is appreciated. Still, to keep their problems from becoming yours, you must be firm, not mean, but firm.

Doing so won’t hurt their feelings; instead you’ll find they treat you with respect, knowing their limits. This is your property, your investment, and your cash flow, and the FIRST person you must respect in these transactions is yourself.

June is a professional writer and Internet marketer. Her background is comedy and she always tries to include that in her articles. June’s site Wealth, Health and Success was created to help you achieve COMPLETE success in life. “I believe life should be balanced in order to achieve true happiness. Money is important, but so too are relationships and our health, which is often taken for granted till it is gone”. June recently created… Custom Written Articles which provides unique content to webmasters worldwide. Not busy enough with these tasks, she also contributes to Find-Read-Discover.com

Choose your property.

Not every house is going to bring in the money you need each month. Some considerations:

Will you be financing? How much you finance is going to have to be factored in to how much you need to cover the monthly expenses. Up to four units is considered a residential loan by most banks; beyond that is commercial, which means that the lender may factor in the rent more easily as income, but other, more stringent requirements must be fulfilled to secure a loan. The more equity you have now, the more able you are to weather periods of vacancy.

How many units? Not only is the number of units a factor in lending, it’s also very important for income. More units means less drain when you have a vacancy (a two-family house loses half the income when one tenant leaves!), it’s also just plain easier to get enough rent to at least cover your expenses.

What rents can you charge? Find out how much the rents for the current tenants are, if any. If you don’t know the rental market well enough, consult with your real estate broker or a professional property manager to determine what fair market rent for each apartment is. The monthly rent should be at least one percent of the value of the building for it to be a profitable investment.

Will major work be needed? If you’re getting a place cheap, you probably are expecting to do some renovations. This has to be budgeted in, because you’re spending money and not getting rent for that period of time. Contractors often break both deadlines and budgets, because hidden problems become apparent as you dig in to the project. Make sure you have a cushion to cover your mortgage, insurance, taxes and other expenses.

Choose your management approach.

Once you’ve found a winner of a property, it’s possible to just sit back and let the money roll in . . . or you could make a part- or full-time job out of being a landlord.

If you’re handy, enjoy paperwork, like working with people, and don’t mind being available pretty much all the time, you should be a landlord. Many people have left their old jobs behind to manage their own rental properties full-time.

If you envisioned real estate as a more passive investment, consider professional management. Many real estate brokers manage properties as a side business, or you could contact a professional association such as the National Association of Residential Property Managers to find a dedicated property manager in your area.

Property managers handle all the tasks of being a landlord on your behalf for a portion of rents, usually around ten percent; this does not include costs of advertising and maintaining the building. They often also charge a placement fee of a month’s rent when the sign a tenant, although whether this fee is the responsibility of the tenant or owner is negotiable. Their job is to keep the property occupied by reliable tenants and in good repair. Minor maintenance is done automatically, while bigger items (like a new roof) are addressed in consultation with the owner.

Choose your tenants.

If you are using a manager, once you pick a reputable one, you don’t need to worry about this. If you’re going it alone, here are some tips: Advertise. Put your place in papers, on bulletin boards, and online. The more visibility you get the more calls you’ll get.

Background. Take an application from any prospective tenant which includes their current address, phone, social security number, landlord, employer, and personal references. You want to check references, and run credit and criminal checks; this will cost money so don’t be shy charging an application fee.

Personal. Take a look at the condition of the prospective’s car, inside and out. Make it a point to visit them where they live now, to see how they keep it. Meet every person (and animal, if you choose to allow pets) that will be living in your building.

Income. You cannot discriminate against someone because of the source of their income. With any applicant you turn down, it’s a good idea to send a letter stating the reason for not renting, even if it’s as simple as the background check came back faster on someone else.

Don’t rush. The best way to pick a bad tenant is to rush into it because you’re scared of a vacancy. If you choose poorly, you will likely have far worse than a vacancy on your hands.

If you don’t have the iron constitution for buying properties and flipping them, but agree that real estate is the best investment around, rental properties are likely the way to go.

Terence P Ward is a freelance writer specializing in business and web writing. His website at http://theplanwriter.googlepages.com provides links to writing samples and information on hiring him to provide articles, blog posts, business plans, and copy of all types.

When or if you have a large sum of money to invest in your real estate, you need to think about upgrading your tenant’s apartment, as well as your vacancies. The condition of your tenant’s unit is part of the market value of your house or building. If it’s in bad shape, it could lower the potential sale price. If it is good condition, it adds to the stability of your financial investment.

You also do not want to be in the position of having to do a complete renovation of the tenant’s apartment after a move-out. When you have the money, consider upgrading key areas of the apartment building.

When was the last time you saw the inside of your tenant’s apartment? Do you know what condition it is in? How long has the tenant lived there? The answers could impact how much money you will need to request to the bank.

Homeowners have an obligation to review and maintain the upkeep of their occupied and vacant units. Doing an annual apartment inspection helps you stay abreast of the condition of your investment. Once you give advance written notice to your tenant, go in with a pen and notebook, and write down what repairs need to be made. Also write down large replacement work needed. For example:

Are there illegal bars on your tenant’s windows that need to be removed or replaced?

Do you have an elderly or disabled tenant who could benefit from hold bars in the bathroom by the toilet and tub?

Are the ceilings and walls cracked from building settling? Does the apartment need any patch and paintwork?

Are there a lot of extension cords, indicating a need for additional electrical plugs? Is there a GFI electrical (safety) switch in the bathroom and kitchen, which may be a part of your state’s housing or building code?

Did the tenant have a roof leak and the water damage from it never got repaired?

If a needed repair has been caused by damage to the apartment, rather than wear and tear, you can charge the tenant for the repair cost. The point of the apartment inspection is to review the overall condition of the apartment at least once a year. You want to know if your tenant unit is in as good a shape as the exterior of your property. The inspection can and should be used to determine your needs as part of your re-financing request.

Once you evaluate your needs, talk to contractors for proposals, and calculate the overall costs. That will tell you how much money you require to re-finance, in addition to any other fiscal needs you are looking to resolve. As stated before, if you complete substantial renovations at your property, you can recoup the expenses through your decrease in mortgage interest costs, or a rent increase on the units impacted by the renovations.

In Summary, do not forget that the condition, as a whole, of your tenant’s apartment is what makes your property valuable to you as the owner, real estate investor, and to potential buyers. A good research of what it would cost to upgrade or repair your residential units, as part of your total re-financing needs, is never a waste of time. It could also save you money in the long-term stability of your investment.

Carolyn Gibson of Boston, Massachusetts, is a property management consultant, speaker, and a Certified Property Manager (CPM®) experienced in marketing, leasing, and eviction prevention techniques. She has a considerable senior executive residential management history. Carolyn has been featured in the Boston Herald, the Boston Globe, and the national magazine Journal of Property Management (JPM) as well as several radio talk shows.

Ms. Gibson is the author of the tenant selection screening book, “How to Pick the Best Tenant”, which can be found at Amazon.com

More of Carolyn’s articles can be found at her web site at http://www.synergyprofessionals.com, and as a contributing author at http://www.helium.com