Being a self-managed property manager is more often than not a very profitable and rewarding experience. However, for someone who is new to the rental industry, managing a rental property can be quite difficult. If you find yourself in this situation, take the time to learn the ropes.
An inexperienced property manager might start by gaining sufficient understanding of the following:
- A landlord’s responsibilities,
- The law
- Understanding marketing strategies
If, however, you feel that you are not ready to self-manage you can always hire a property management company to manage your rental portfolio for you.
To get you started, we created the ultimate guide to help new landlords manage their rental properties more efficiently.
Step 1. Landlord Basics
First, its time to establish whether or not you are ready to manage your rental properties. If you are reading our guide, then the answer is yes. A good landlord doesn’t have to be a real estate expert, a property management pro, or a professional contractor. In order to succeed in this business, you must be eager to invest time and effort in learning to understand the business.
Formulate a work schedule
Whether you manage a single rental property or several, formulate a schedule and to stick to it as much as possible. Predicting problems is not always possible, but as a landlord, you will have to deal with a wide range of expected and unexpected issues regardless of the time of day or day of the week.
Keep in mind that you will have to allocate time to do certain property management tasks like tracking the expenses, taking care of the general maintenance, etc. Without a schedule, staying on top of tasks can be difficult.
Being a self-managed landlord is a business in its own right, so it’s important to treat it accordingly. It is a good idea to set up a Limited Liability Company (LLC) for the properties’ ownership. The LLC can protect you from all sorts of legal problems.
Use the skills that you already have
Landlords need to have strong professional relationships with their tenants. Therefore, there are certain skills that people acquire from other professions such as sales or customer service that are extremely helpful in landlording.
If you have some experience in accounting, marketing, maintenance, or time management, you will also find that you can use some of your skills to manage your rental properties more efficiently. However, keep in mind that regardless of how skilled you are sometimes you simply have to hire a licenced and insured professional.
Step 2 - Learn Everything About Your Property
Perhaps you have inherited a property or you decide to rent your property because you are forced to move from the residence. In both cases it’s safe to say that you have become a landlord by accident. Maybe you simply decided to become a rental real estate investor. Either way, a rental property is generally viewed as a long-term investment, and to maximise your profits, you must know everything there is to know about it.
Find the right rental property
The area features, access to transportation, shopping options, and the neighbourhood in are all features to consider before you invest in a rental property.
The price of a property is also important, but choosing a property that is conveniently located should be higher on the checklist. A cheap property is not always the best investment, and neither is a very expensive one. Before you buy, you should ask yourself if you would like to live there. If the answer is yes, then chances are your future tenants will feel the same way.
Calculate your cash flow
Before you invest in a property, you might want to learn if it has positive cash flow potential given the current and future real estate market conditions. If the amount of money produced by the property through rent is higher than the expenses going out of the property (taxes, maintenance costs, mortgage payments, etc.), then you have a positive cash flow.
For instance, if you collect a monthly rent of $2,000 and pay out $1,000 in monthly expenses, you are left with $1,000 in your pocket each month.
If you want an investment property worthy of your effort and time, you will need to calculate what the limits of your budget are and how much you wish to earn. Always be prepared for unexpected expenses, late rental payments, and manage your expectations. Even if your tenants don’t pay rent you will still need to pay the mortgage.
Set the rent
Now that you have a rental property, the next step is to learn about the dynamics of your local rental and real estate market and set a fair rent price. Look at other similar rental properties in your neighborhood to get a feel for the local market.
You should also pay attention to the potential tenants, are there many students in the area? Is the area family friendly? Are there many people who are employed or unemployed in the neighbourhood?
When you are setting the rent you must also take into consideration the property features, amenities, and parking conditions. Each property andneighbourhood is different, but by looking at other properties you can get a sense of what people are paying for similar units. As a landlord, you must always be prepared for any market changes so you might want to start paying attention to the local real estate news and make some connections in the industry.
There are also many online softwares that can be extremely helpful to a landlord or to a property manager. All professional property managers are using CRMs for accounting and property management. The cloud-based property management platform Bricks + Agent is a great example as it can make your job as landlord or manager much easier.
Step 3 - Rental Property Management
You’ve done your research, you found the perfect property, and now you are eager to find tenants and to start earning some steady income. As you probably know, throughout your activity as a self-mansged landlord you will have to find tenants many many times. This process can sometimes seem quite intimidating, especially to someone who may not have a lot of experience. However, you shouldn’t let yourself be intimidated by it. Follow the steps below, as they will help you find high quality tenants.
Finding a good tenant
Most people who are looking for a place to rent will search the Internet, so ensure your property is listed on sites such as rent.com.au. Additionally, after your property has been listed on a website, sharing it on social media platforms can only provide more exposure.
A property listing should be written clearly and include all the basic information such as the square footage, the number of rooms (bedrooms and bathrooms), and all the deposits and fees that the potential tenants need to pay before they move in. Always highlight the benefits that your property has to offer such as proximity to local stores, shopping centers, entertainment venues, schools, transportation, etc.
An often overlooked component of listing your rental online is investing in high-quality photographs. Avoid posting low-quality photos taken with your phone. By enlisting the services of a photographer you ensure that the photos capture the best angles and highlight of the property and its features successfully.
Fair housing and discrimination laws
Before you list your rental property online on and start advertising, it is important to know and understand the laws of fair housing and discrimination. The laws of fair housing ensure that everyone has equal access to housing. Therefore, the discrimination based on nationality, familial status, religion, race, sex, or disability is illegal.
These laws and regulations might differ depending on the country or state in which your property is located, so it would be wise to do some research and to become familiar with them.
Show your rental property
To show your rental property to potential tenants, you can either host an open house or set up individual appointments. We recommend organising open house events as they can save you a lot of time. In either case, if the rental property is currently vacant, you must ensure that it is clean. If the rental property happens to be occupied, make sure that your tenants know exactly when you are going to come by. If you suspect that they might not clean the place, offer to hire a professional cleaner.
Each person who is interested in renting your property should be given a flyer that contains all the necessary information about the unit as well as photos. By having a well-designed and well-written flyer, you show them that you value the rental property and that you respect your tenants.
Review the tenants’ applications
Once you find people who are interested in renting your property, you will have to give them rental applications that they need to fill out. Their applications will help you choose the tenants that you find most appropriate for your rental unit. Verify the information on the application forms and check whether it matches the details via phone or email. It’s always a good idea to document all your interactions with prospective tenants by writing down the time of the discussion, the topics, and what questions were asked and answered.
Once the application has been verified, you should run a background check, a credit check, and verify the tenants’ income sources. Most property owners/managers will also follow up with one or several references from the tenants’ previous landlords.
The easiest way to run a background check or a credit check is by using online services such as Smart Move or Tenant Background Check. In order to verify the income, you can discuss with the tenants’ employer or request a pay stub. It’s usually recommended that the tenants only spend around 30% of their income on rent.
Accepting and rejecting applicants
Once you decide that one of your applicants is the right tenant for your property, congratulations! Make sure that you update your online listings right after the status of the property has changed.
In the case that you decide someone isn’t a good choice (based on their background check, credit card check, other landlord’s references, or other reasons), then you should let them know as soon as possible. You should send them a written notification via postal mail or email, in which you clearly state why their application was rejected.
Collecting the security deposit
After you sign the lease, you must collect a security deposit from the tenant. This deposit will generally be anywhere between half a month’s rent and a month’s rent and is a sort of insurance in case something goes wrong while the tenant is living on your rental property. The security deposit should cover for property damage that is quite severe and should not be used for the regular wear and tear.
Signing the lease
The lease is a document or a legal agreement that should address the policies and rules, as well as the conflict procedures that you and your tenants must be aware of. The lease should also clearly define the responsibilities that you have as a landlord and the ones that your tenants have while living on your property.
You can find a wide range of generic leases online, but it’s important to include the local requirements and other important details. We recommend hiring a legal professional to check and reviewing your lease.
Many property owners today offer their tenants the option of signing their leases online, as it’s much easier and less time consuming for both parties.
The final walk-through
Before you hand over the keys to your tenants, you should do a final walk-through during which you assess the general condition of the rental unit. It’s generally recommended to take photos and to write down things such as small issues with the furniture, whether something is broken or damaged, whether something is new, etc. It might be helpful to go through this process with the tenants so that you both see the condition of the rental unit. A well-documented walk-through with the tenants present will prevent future conflicts.
Step 4 - Rental Property Maintenance
The paperwork has been signed and your tenants have settled in, its time to focus on property maintenance rather than on the property management. As a property owner or manager, you have certain responsibilities like performing periodical maintenance checks in order to ensure that the rental property is safe and that everything is in order. It is also your responsibility to respond to the tenants’ requests in a timely manner. Paying attention to the tenants’ needs and requests will help you have a good relationship with them.
If you are a DIY enthusiast, you will probably be able to handle the minor maintenance tasks by yourself. However, keep in mind that you are required by law to hire professional contractors for the electrical and the plumbing work. Before attempting to tackle complex jobs, make sure you check the local laws and regulations.
Collecting the rent
There are many different ways a landlord can collect rent, but today its more common to pay via online transfer or direct debit. It is a good idea to make online payment available for your tenants, as this is a very convenient method.
If your tenants didn’t pay the rent on time, you should remind them of the terms of the lease and encourage them to try to pay on time in the future. You may feel bad about asking them to pay, but remember that although you have a friendly relationship with them, you are running a business.
Renewing the lease
If everything is going well for you and for your tenants, then they may want to renew their lease. Make sure that you remind them a few months in advance and that you ask them whether they are planning to renew the lease or not. This will give you both enough time to plan your next move.
The lease renewal is a good time for you as a landlord to reanalyse the real estate rental market and to determine whether or not you should increase the rent. If you decide to increase the rent, be considerate and give your tenants sufficient notice so they can decide whether they want to stay or not.
Whether you only want to earn some extra income or you are thinking about becoming a landlord full-time, this job done correctly can increase your income significantly. Owning and managing rental properties can be a very profitable business but it’s important to educate yourself about the real estate market, the laws, and the procedures, and to have an efficient schedule.
If you want to manage your properties more efficiently and rent like a pro, check out Bricks + Agent property maintenance app.