As a savvy real estate investor, you’ve likely spent time crunching the numbers and looking for the best way to maximize ROI. While many landlords hire professional property managers, managing rental properties on your own is an easy way to improve your profits.
Rental property management companies typically take 8–12% of your income. When cash flow is already limited, that cost can reduce your earnings considerably. Many investors wonder what does a property manager do to justify the cost? Instead, these investors choose to pursue the path of a DIY landlord.
If you plan to manage a rental property yourself, it’s essential to keep tenants happy, the rental property in good condition, and your finances organized. The most common issue among DIY landlords is being unaware of every responsibility and letting important tasks fall to the wayside.
In this article, receive the insight you need to smoothly manage a rental property as a landlord. Learn how to manage property rentals, so you don’t lose money on your real estate investment.
- A thorough screening process should include an employment check, credit check, background check, and references from previous landlords.
- Your lease should clearly state all the parameters and rules of living on your property. A well-written lease is one of a landlord’s most powerful property management tools.
- Always perform repairs promptly and keep up-to-date with proactive maintenance of your property.
- Use property management software to run your rental business and track finances effectively.
What Are the Top Responsibilities of a Landlord?
A lot goes into being a good landlord. Buying an investment property does not automatically mean you’ll have passive income. Landlords who self-manage their properties stay busy. Here are the top responsibilities you’ll have as a landlord:
- Keeping the building in good condition
- Performing regular maintenance and repairs
- Maintaining the yard
- Finding and screening potential tenants
- Providing and signing the lease
- Communicating reliably with tenants
- Collecting rent
- Paying necessary bills (mortgage, insurance, taxes, etc.)
- Understanding and following all tenant-landlord laws
5 Steps for Managing Rental Properties Successfully
1. Advertise Vacancies
As of May 2022, the vacancy rate of rentals in the U.S. is 5.8%, which means more than 1 in 20 rentals are currently vacant. To keep cash flow high, filling vacancies as quickly as possible is critical. A good marketing strategy will help you avoid taking a hit on your profits when a tenant moves out.
Investor, real estate educator, and YouTube host known as “It’s Mandy” self-manages 16 rental units. From her experience, Mandy says good pictures are a crucial part of an excellent rental property advertisement. She explains, “No matter how nice your property is, if the inside of the house is dark and you have your bright yellow lights on, it just does not look good. So make sure you have good lighting when you take pictures.”
Once you have pictures of your rental property, post your listing on the most popular rental property platforms in your area. Check out:
Look at rental platforms to see the competition for rentals in your area. If one of the platforms doesn’t have any listings, it might not be popular in your region. But if another platform has tons of listings, be sure your property is listed there, as this is likely the most common place tenants in your area look for rentals.
2. Screen Applicants Thoroughly
President of MC Residential Lesley Brice believes property management is easier when you have a good screening process for tenants. “You have to start by bringing in the right residents. So, I think one of the most important things if you’re gonna manage for yourself, is having a system for approving people with strict criteria,” she says.
A good screening process should include:
- Employment history and credit check: These two things will help you determine if a potential tenant has the financial stability they need to make rent every month.
- Background checks: A background check will help you determine if your tenants are trustworthy.
- References from previous landlords: Speaking with previous landlords can tell you more about a potential tenant than any aspect of the screening process. Ask previous landlords if the tenant was always on time paying rent, if they caused any damage to the property, and if there were any other concerns you should be aware of.
VP of Realtor.com Laurence Jankelow believes consistency is the key to a good screening process. “You can’t treat different tenants in different ways. You don’t want to violate laws. So creating a process for how you find and screen those tenants and sticking to it every part of the way is super important,” Jankelow advises.
3. Cover Your Bases With a Well-Written Lease
A lease is one of a landlord’s most powerful property management tools. It outlines your responsibilities and your tenant’s responsibilities and protects you from liabilities. Every lease should answer each of these basic questions:
- Who: List the names of ALL adults renting the home. If a tenant plans to have roommates or a partner living on the rental property, make sure these people sign the lease as well, so they are aware of the rules of the property.
- When: Include the lease’s start and end dates and requirements for renewal.
- What: List all property rules, including HOA rules, city ordinances, pet rules, and anything else you require of tenants. Make sure you clearly list the consequences of violating these rules. Also, include which responsibilities you’ll take care of as the landlord (like sewage bills and maintenance) and which responsibilities the tenant must manage. If there are any things the tenant must legally be aware of, such as the presence of lead or asbestos, be sure to include that information in the lease, as well.
- Where: Include the address of the property.
- How much: State the cost of monthly rent, how much will be charged for late fees, and the tenant’s obligation for court fees in the event of a default.
Landlord attorney Ernie Garcia has over ten years of litigation experience and understands the importance of a thorough lease when self-managing rental properties. “If you have rules, don’t just assume your tenant knows how to behave. You want to make sure your rules are explicit and clearly explained,” he recommends.
The first time you write a lease, it’s a good idea to pay an attorney to review it to make sure it covers all the most important pieces of information, explains your expectations for tenants, and fully protects you from liability.
4. Perform Regular Property Maintenance and Repairs
As a landlord, you’ll occasionally receive messages from your tenants regarding broken appliances or issues they’ve seen show up in the home. It’s important to take care of these issues promptly to protect your home from further damage and ensure your tenants’ quality of life isn’t significantly impacted.
Ken McElroy’s 26 years of property management experience led him to believe it’s important to respond quickly to repair requests. Tenants can get frustrated quickly if they have to deal with broken appliances, plumbing problems, or temperature fluctuations from a broken furnace or AC. “People move out when they’re not being attended to,” McElroy says.
Keeping a list of contractors on hand to reach out to when your tenant notifies you of a problem will make it easier to respond to repair requests quickly. When you’ve built good relationships, you can count on contractors for after-hours emergency requests.
Brandon Turner of Bigger Pockets explains that prompt payment is key to building good relationships with contractors and getting repairs done quickly. “Let’s say I call a contractor and say, ‘Hey buddy, I got this leak.’ If he remembers last time he worked for me, I took a month or two or three to pay him, do you think he’s going to be jumping out of bed to go help me out?” Turner says. “Be so organized you can pay them promptly, like same day, next day, so that next time you call that vendor, whether it’s a contractor or somebody else, they’re like, ‘Oh yeah, I like that person because they paid me quickly.’”
Tips for Proactively Keeping Up With Home Maintenance
Caring for your property also involves proactive maintenance. Owner of JDS Home Inspection Services John Schultz says, “Every spring, it’s a good idea to take a slow walk around your property just to see how it stood up to the winter wind and cold. This is part of regular home maintenance and should be considered preventative. It’s not just for curb appeal. It’s really the best way to catch minor issues before they become major problems or health hazards.”
In addition to walking your property to look for damage, each year, perform these important tasks to keep your home in good condition.
- Clean rain gutters: Rain gutters can become blocked with leaves and debris, causing water to overflow. Excess water can damage the roof, foundation, and siding of your home.
- Schedule HVAC maintenance: Your HVAC system needs a tune-up each year to lengthen its lifespan and ensure it’s operating efficiently.
- Trim trees: Large branches from nearby trees can break off and damage your home. Trim tree branches yearly to avoid this problem.
When a tenant moves out, take time to spruce up the home’s interior to make sure the space will appeal to future tenants. This includes:
- Painting the walls
- Recaulking bathtubs and showers
- Replacing any appliances, carpet, or cabinetry that is near the end of its life
5. Keep Finances in Order
Remember that as a landlord, you’re running a business. A well-run business always tracks income and expenses and looks for ways to improve its bottom line.
Landlord attorney Ernie Garcia, who is mentioned above, recommends landlords track finances with property management software. “If you’re using tenant management software, particularly if you have more than one tenancy, you’re gonna be much more organized. You’re going to have a better delivery of your services, as well as give your clients better access to you online,” he says.
The following platforms help landlords collect rent, track expenses, and stay organized with their finances:
- Stessa: As a free accounting software for landlords, Stessa makes it easy to collect rent online and create income statements, cash flow charts, and balance sheets.
- Avail: This software is a full-service property management platform that helps find and screen tenants while making it easy for landlords to collect rent and do all their accounting. With a free option and a $5 per unit option, landlords have some flexibility with how much support they need.
- RentRedi: While RentRedi’s most affordable option is $9 per month, this property management software offers accounting support as well as vacancy advertising, tenant screening, maintenance coordination, and anything else you need to manage a rental property on your own.
Although some landlords resist using software platforms, Garcia says it’s critical to keep some records of your finances. He continues, “At least use an excel spreadsheet to track when payments come in and how much was paid.”
Consider Hiring a Property Manager to Help You With Managing Rental Properties
Self-managing rental properties is a great way to maximize profit, but if you’re busy working full-time, running your own household, or you’re just overwhelmed by the thought of taking on all this work, hiring a property manager could be a better option.
Don’t let the thought of being a DIY landlord keep you from the huge wealth-building benefits of real estate investment. Hiring a property manager can make real estate investing a more sustainable option, and allow you to build equity and bring in cash flow for decades to come.
Landlords who are interested in working with a property management company should start by:
- Asking for referrals: To get a list of potential management companies or individuals, talk with other investors who are happy with the service they receive from their property managers.
- Conducting interviews: Be thorough with your questions when interviewing potential property managers. Ask about the average vacancy and turnover rates in the properties they manage, fee structures, and the extent of the services they provide.
- Visiting properties: Visit the properties your potential property manager operates to see if the buildings are kept in good condition.
- Reading reviews: Read reviews of the properties your potential property manager operates to see how happy their tenants are.
If hiring a property manager sounds like more cost than it’s worth, prepare to manage property on your own by:
- Being thorough with your research.
- Buying a high-quality real estate investment property.
- Building your network, so you’ll have the mentorship you need to succeed.
Considering becoming a landlord and want to learn more about the process? Check out these articles:
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- Mashvisor. “HOW MUCH DO PROPERTY MANAGERS CHARGE? IS IT WORTH IT?”
- United States Census Bureau. “Housing Vacancy Rates Near Historic Lows.”
census.gov/library/stories/2022/05/housing-vacancy-rates-near-historic-lows.html#:~:text=The homeowner vacancy rate declined,from 6.4% to 5.8%
- It’s Mandy. “How to Market a Rental Property | Property Management Tips.”
- Ken McElroy Channel. “Managing Your Rental Property for PROFIT.”
- REI Mastermind Network. “Self-Managing Rental Property with Laurence Jankelow.”
- Ernie Garcia, Landlord Attorney Channel. “8 Things You MUST Have for a Good Lease”
- JDS Home Inspection Services, LLC Channel. “Home Maintenance Tips for New Homeowners – Exterior Home Maintenance Checklist for Spring.”
- Ernie Garcia, Landlord Attorney Channel. “Landlords, Run Your Business Like a Business.”