Juggling maintenance schedules, late rent payments, and even signing lease agreements can be a bit overwhelming. But paying a property management company to oversee your rental property on your behalf can be expensive. Despite the work involved, it may be worth your while to learn some property management basics so you can do it yourself.
From setting the right price for rent to finding and screening tenants, we have some strategies for how you can manage your rental property, regardless of your experience level.
There are several facets that you’ll need to focus your attention on when you begin managing rental properties; they can be broken down into three categories:
This is the primary focus of managing rental property. Successful landlords know that this goes further than just making sure your property is appealing to potential renters. Effective tenant management also includes:
Rent Collection: You’ll want to establish a due date for rent payments. You can also decide whether you’ll allow a payment grace period (and if so, how long that period will be) and what you’ll charge as a late fee. It may be a good idea to talk with your tenants and set a payment date for them depending on their pay schedule.
Rental Agreement: You need to review the rental agreement template to ensure that it includes all required rental provisions and that the language is legally sound. Also, ensure that it addresses the start and end dates of the lease agreement.
Background Check: Once you receive a prospective tenant’s rental application, run a background check to verify the accuracy of the information listed on the application and ensure there aren’t any potential issues with renting to the tenant.
Signing Agreement: Before you allow a tenant to move in, collect a security deposit along with the first month’s rent. Have a walk-through with the tenant to identify and document any pre-existing issues with the property prior to them moving in.
Move Out: When the time comes for a tenant to vacate the property, review the agreed-upon lease terms and complete a property inspection.
Complaints: Promptly acknowledge and address tenant complaints.
Eviction: Send prior notice to a tenant who is being evicted before initiating the eviction process.
Property management is another significant responsibility of property management. The property needs to be maintained and protected for the safety and health of the tenant. Tenants should have access to running water and heat or air conditioning. There are other aspects included in property maintenance such as shoveling snow, picking up leaves, cutting grass, and garbage pickup. Scheduling repairs when needed is also part of property maintenance.
It may be necessary to deal with inspections from the local authorities and insurance companies. City inspectors routinely conduct property inspections to ensure that residential buildings meet all the safety requirements. Insurance companies conduct routine inspections to make sure the coverage amount is appropriate given the property value.
The third part of basic property management is managing the income and expenses associated with the property. You’ll need to track how much money you are collecting in rent payments each month and how much you are spending on things like mortgages, insurance premiums, and property taxes.
Now that you know the basic responsibilities associated with managing rental property, you can determine how you want to manage these areas. You may have three approaches:
It’s necessary to manage how you will collect rent, respond to maintenance calls, and pay taxes. The main advantage of managing by yourself is that you will have sole control over all aspects of the property. So you’ll know what is going on in all parts of your business. Also, since you will be attending to all maintenance calls. You will know right away when there’s a problem with a property’s facilities.
The downside of managing by yourself is the workload. No one is an expert in everything, nor do you have time to effectively manage everything. You might end up making mistakes and incurring losses unnecessarily. You might miss deductions that would have been identified by an accountant. Similarly, you may neglect to include certain provisions in your rental agreement that a property management professional would have known to include.
Property management can be manageable for those with a small number of units or those who have prior property management experience. If this is not your strong suit, it may be worth it to recruit a professional.
In this scenario, you would manage the aspect of property operations in which you are most comfortable managing and outsource the areas you do not have the desire to manage or do not feel as comfortable with.
For example, you may decide to outsource rental management issues that involve legal matters and, since you are comfortable managing financial aspects, you maintain those operations on your own. Or, you might not have time to deal with property repairs. In that case, you may outsource maintenance responsibilities to professionals so that you would have time to do the things that you love to do, be it spending time with your family or investing in continuing education opportunities.
The only drawback is that you will be relying on others and spending money, which will be reducing your income. This arrangement works best for those who have several rental units in their investment portfolio.
You can hire a property management company or property manager who will handle everything, including collecting rent, running background checks, attending to tenant calls, addressing maintenance issues, and handling the eviction process.
With a property manager, your property management responsibilities would be significantly reduced. But it may be costly as you will have to pay a percentage of the rent payment to the property manager. This option is best for those who don’t live close to their rental properties, or those who have several rental units.
Now that you know the responsibilities associated with managing properties and different strategies of how to manage them, you can choose the one that best suits you.
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