How to manage rental properties
To Manage or Not To Manage
People always ask if they should manage their investment properties themselves or hire a property manager. I always recommend managing the property yourself (at least for the first year). This way you can get a hands on experience for how things work.
Finding a Tenant
When you have a property that is available for rent, then you can choose to rent it out yourself or use a real estate agent. If you choose to rent it out yourself – then you will need to take photos of the property, create ads online, market it, respond to inquiries, show the property, take rental applications, and evaluate the applicants yourself. You’ll want to conduct background checks and credit checks.
If you decide to let a real estate agent market it, then they will do most of the above work. But, you will have to pay a negotiated commission, which is usually the first month’s rent.
Once you have a viable applicant, then you will have them a sign a lease. If you are using a realtor or an attorney, then they can draw up the contract for you. This is also when you will collect the security deposit.
Before the tenant moves in, have them do a final walk-thru of the property and fill out a move-in checklist. This is where the tenant checks off any items that are in need of repair prior to moving in. This way if the tenant moves out and there is a hole in the wall (that was not marked on the move-in list), then you know that the tenant was responsible for the damage. Then, you can deduct the cost from the security deposit.
Get a system in place for collecting rent. Your lease will specify on which date that the rent is due. You will need to decide if you prefer the tenant mails you a check each month for rent. There are online services that make it easy to collect rent. The tenant can pay online using a credit card or have the rent debited from their bank account.
The online services are great because they can automatically send out late notices. Also, some online rent collection websites will allow the tenant to purchase renter’s insurance directly from the website.
Reliable Contractors are Key
Have some reliable handymen available. Give the tenant the phone numbers to the contractors. If there are any emergency repairs that are needed, then the tenant can call the contractor directly without having to bother you. This makes it easier to schedule repairs too. The tenant and the contractor can work out a time that is convenient for both of them.
For example, there’s a great plumber in Pittsburgh called Restano. They are available 24 hours a day and 7 days a week. So I can rest assured knowing that if the tenant clogs a toilet and it overflows on a Friday night at midnight, then they can call up Restano to get it fixed ASAP. They also do HVAC and I can’t even tell you how many times that a tenant’s furnace has stopped working (in the dead cold of winter) and an emergency repair has to be made.
If you’re not sure where to find reliable contractors, then start online with Angie’s List or Homeadvisor. You can check out the reviews there to find quality contractors.
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Hiring a Property Manager
Managing a property yourself does not have to be that difficult. However, some people choose to use a property manager instead. This is recommended for out-of-state landlords or if you just don’t have the time or resources to manage the property yourself. Just remember that no one is going to manage your property as good as you do.
If you decide to use a property manager, then they can take care of renting the property for you. Also, they will manage the property and schedule contractors to make repairs, as necessary. The downside to using a property manager is that the management fees will cut into your monthly cash flow. Most property managers will charge between 7 to 10% of the monthly rent.
So if you have a duplex (2 unit) and the tenants pay $2000 per month. The property manager might take $200 each month as their fee. Now say that your mortgage payment is $1600 per month (with taxes and insurance included). Instead of making $400 per month, now you are only making $200 per month.
Managing an investment property yourself or hiring a property manager is just a personal preference. It really comes down to the cost and convenience to you. If maximizing your cash flow is important to you, then manage it yourself. If the thought of managing a property makes you sick to your stomach, then hire a property manager to do it for you.
Welcome to Hey Rich Girl!
Hey girl! I'm Cynthia Cuccuini, a self taught real estate entrepreneur. I've been flipping houses, landlording (Is that even a word)? and designing homes for over 10 years. Come along the journey as I educate entrepreneurs how to invest in real estate.