Renting out your real estate investment property can be a profitable endeavor, but it is not without its share of challenges. Whether you plan to rent out your property for long-term or short-term tenants, there’s a lot at at stake for landlords. It doesn’t matter if you’re a seasoned investor or a first-time landlord; you’ll need to have a clear understanding of the key strategies that contribute to successful property management.
In this article, let’s go through some tips on how you can manage your rental property like a pro even without prior experience so you can maximize your investment returns. We have divided this article into three sections: property management, tenant management, and handling finances.
Part 1: Managing the rental property
Effective property management is crucial because keeping the property in tip-top shape will draw in tenants, increase the value of your property, and help you maintain a stable income from the property. Here are some basics in managing rental properties. Leaving your property in disrepair would not only hurt your cash flow, it can also cause you bigger problems in the long run.
Regular Inspection and Repairs
As a landlord, it is your duty to ensure a healthy living environment for your tenants. Proactive maintenance is key to preserving your rental property’s value and attracting quality tenants. Regularly inspect the property for any repairs or maintenance needs and address them promptly. Additionally, consider scheduling routine maintenance tasks, such as HVAC servicing or gutter cleaning, to prevent major issues and ensure tenant satisfaction.
Include Some Aspects of Maintenance in Tenant Negotiation
You might want to consider adding extra charges to maintenance like lawn care or snow shoveling. This is especially necessary for long-term tenants. While some may treat your property well and take good care of the house, some will not be so diligent, and this could cost you in maintenance later on or even city and HOA fines for unkempt lawn.
Decide whether you will incorporate the extra services into the rent or if you would let the tenant handle it themselves. Either way, it should be clear to both parties and in writing who will handle what.
Create a Safe and Healthy Living Space
To attract and retain high quality tenants that feel safe and secure in your property, make sure that there are proper safety measures in place. The property should be free from rodents, bugs, mold, and other health hazards. Safety equipment like smoke and CO2 detectors should be working, as are water heaters, and fire extinguishers should be readily available.
Get a Proper Insurance Coverage
Protecting your investment is of utmost importance in rental property management. Adequate insurance coverage, including landlord insurance, can protect you from potential risks such as property damage, liability claims, or loss of rental income. Consult with an insurance professional to determine the best coverage options for your specific needs.
Have a Handyman or Local Contractors on Call
If you don’t have handyman skills or have limited skills with repairs, make sure to have local contractors available to help. Handling maintenance requests from tenants in a timely and efficient manner is key to tenant satisfaction. Usual concerns could include toilet or bathroom issues, water leaks, electrical malfunctions, problems with heater or furnace, and so on.
Communicate with the tenant prior to the visit the time, handyman’s name, and other important details for safety purposes.
Part 2: Managing Tenants
Tenant management includes the complete lifecycle of working with tenants: from finding them, screening them, and taking care of your tenants. Some of the landlord duties have been covered above such as repairs and maintenance. In this section, we will focus on dealing with tenants.
Find and attract quality tenants
Not all tenants are created equal. Do not be in a rush to just take in the first one who answers to your listing or advertisement. So many problems can arise from not choosing the right tenants and these can cause you so much headache later on. That being said, try to cast a wider net to draw in your ideal tenants. List on websites like Redfin, Zillow, and other platforms. Take extra care to provide complete details and photos of the property.
You can also opt to advertise on social media, popular local websites, or rental property platforms. Having a lot of eyes see your listing will give you better options to choose from so you can properly screen your potential tenants.
Screen prospect tenants
Prepare a checklist beforehand on what you would like to see in a prospective tenant. There’s no perfect tenant but an idea of your ideal tenant would narrow down the process. Screen them for their financial capabilities to pay rent and this can include running background, credit, and eviction checks to be absolutely certain. You can also verify employment and income and contact previous landlords to get a complete picture of potential tenants.
Remember your property will be in the care of these people–you need to make sure they can handle the payments, won’t destroy your property or neglect it, and be reliable and reasonable to deal with.
Some states place limitations on how much landlords can screen potential tenants so do some research beforehand on your state’s laws on landlord-tenant screening process. You can visit Zillow’s resources on Fair Housing Law and Landlord-Tenant laws here.
Compete the lease agreement
As soon as you have selected a tenant for your rental property, it’s time to complete the paperwork and have your lease signed. Have a legal expert check your lease agreement prior to ensure all bases are covered and you are not just protecting your rights as the landlord, but also the tenant’s rights under fair housing laws.
A well-drafted lease agreement is essential for maintaining a healthy landlord-tenant relationship. Ensure that your lease agreement clearly outlines rent payment terms, maintenance responsibilities, occupancy limits, and any other important clauses. By setting expectations from the beginning, you can avoid potential disputes down the line.
Review the lease agreement with the tenant, sign the documents, and ensure that both parties have a copy of the rental lease agreement.
Good communication with tenants
Good communication is a must in a harmonious landlord-tenant relationship and maintaining open lines of communication with your tenants is necessary for successful property management. Respond promptly to their inquiries or concerns, whether it’s via email, phone, or through actual conversation.
It’s easy to forget concerns if not properly listed, so always document tenant requests either through an online tool, a log book, or a prepared form or slip for them to fill out. This ensures requests will be properly recorded and processed on time. Systematizing the communication process will make your tenants feel well taken cared of and your handling more professional. Same goes with tenant notices, write it all down and document everything.
Use a walkthrough checklist before and after move-in
Have a checklist ready to document the condition of the rental property before the client moves in, then repeat the same process before the client moves out. This will help you take note of any damages when it’s time to return their security deposit. Document each item in the walkthrough inspection and have your tenant sign the tenant move-in checklist.
While it’s never an ideal situation, understanding the eviction process is essential for managing rental properties effectively. Familiarize yourself with local laws and regulations regarding evictions and follow the proper legal procedures when necessary. Seek legal advice if you encounter any challenges during this process.
Part 3: Managing the finances
Renting out your property is a business and accounting plays a major role in ensuring this business remains afloat.
First of all, you must set a competitive rent price. Next, an efficient rent collection should be established. Most renters prefer online payment, but you may provide various means for them to pay rent so there will be no delays if possible. You may also impose late fees, send late rent payment reminders and notices, and include late payment terms in your lease to address the issue beforehand.
Regularly review your rental rates to ensure they align with market trends and maximize your return on investment.
Always keep a record of rent receipts. This will help simplify your bookkeeping, avoid disputes, and track proof of payment from renters.
Managing the financial aspect of your rental property requires a proper tracking of your income and expenses. It means being on top of rent collection and security deposits, and knowing how much money is spent on maintenance and repairs, mortgage, taxes, utilities, and other expenses. This also includes thorough record-keeping and creating an organized system for your files.
You might consider hiring an accountant who can assist you with the tax rules for your rental property, help you maximize deductions, and report your expenses. You can also opt to use an accounting software.
Managing a rental property is not easy. It requires good people skills, keen judgment, a sharp business sense, and some knowledge of maintenance and repairs. You can choose to do it by yourself and DIY the whole process especially if you have a few rental properties listed, or you can opt to outsource some of the tasks or even the entire property management. But regardless of which path you choose, a strong understanding of how to manage a rental property is required so you can make sure your cash flow is properly maximized.
Remember, staying informed and adapting to new trends and technologies will help you stay ahead in the ever-evolving rental market.
At Longleaf Lending, we offer loan programs for real estate investors including long-term rental loan and multi-family bridge loan for landlords looking to pursue value-add opportunities in multi-family properties. Check out our products here.