This is my last post in the “Becoming a Landlord” series. I know, sad. In hopes of avoiding some disastrous pitfalls we’ve hit all the major highlights of becoming a landlord. Now you hopefully know how to get started, find a good tenant, and list your property well. But what happens after they move in? How do you go about maintaining your rental property well? Glad you asked.
First things first. Are you going to manage this property on your own? Lots of landlords opt to go with a management company, and while living out of state might require that, I generally am against it for several reasons.
You pay them 10%. Do you really want a big chunk of your profit going elsewhere? I prefer to manage the property myself so I can keep all the income. Property managers certainly have their place. Property managers often charge a 10% fee on top of repair bills as well. Ouch!
They could suck. There are all sorts of folks in the property manager game. Some of them are legit and do a great job, others aren’t and won’t. They’ll take your money and do nothing to ensure your property is being well maintained.
You have a vested interest in the property – they don’t. If you aren’t ready for a little maintenance maybe you should reconsider step 1. A home, duplex, condo, or apartment that you are renting out is a pricey venture. It should be in the most capable and careful hands – yours.
So now that we’ve hopefully seen that managing your own property is important, how do you do that well?
It really helps to live nearby your investment property. I am fortunate enough to drive or walk by mine almost every day! I do the lawn maintenance every other week which helps me keep tabs as well. If you live an hour or more away it is important to schedule time to see your place even though it isn’t easy. If you don’t, your investment could be on a downward spiral with an out of control tenant and you wouldn’t know until the rent was past due. That’s not good.
You don’t have to be a handyman
There’s a good post from the real estate blog Bigger Pockets about maintenance items you should look out for around your house. Just know that you don’t even have to be capable of changing your own oil to do some of these uber basic repairs. And the others? Find a good local handyman that can tend to your maintenance needs. Instead of paying for a manager, use your money on actually keeping your property in tip top condition. And if you do know how to swing a hammer and fix your own appliances you are one step ahead of the game.
Find good local professionals
Sites like Kudzu, Yelp, and Angie’s List are your best friends. I never put too much stock in recommendations from friends or coworkers. While they really might have had a great experience I prefer to see what hundreds of people are collectively saying as opposed to just one. A lengthy track record of good work helps ensure that you are hiring a competent company or individual.
Collecting the rent
This is the tough part, right? Not if you have good tenants! There are a few important aspects of collecting rent you should be aware of.
– Collecting the rent in person is a great option. Even in our electronic age I still pick up a handwritten check personally. It goes back to my visit often principle. Plus its just good to catch up with my tenant.
– Automatic payment of funds to your bank account is another. I use Capital One 360 and they make it really easy for people to pay automatically from their account. No funny business. Plus, if they set the payments on auto-pilot mode it’ll make your life so much easier.
– Offer an incentive. My tenant pays $25 less for paying the rent by the first. They have always paid early. Plus, everyone likes to feel like they are getting a deal, right!?
– Enforce your late fee policy. On the flip side, if the tenant knows that they’ll actually be penalized, they are more likely to pay on time. Don’t be a pushover on this.
The key to owning investment properties and doing it successfully is to be an active investor. If you take a backseat approach to this process you won’t be as pleased with the results. As always, don’t hesitate to contact me with questions or just post them in the comments section below. This certainly won’t be my last post about rental properties but it does conclude this mini-series. Thanks for reading!
[photos courtesy of Pepe and ozinoh]
5 Comment responses
Very informative post. I am curious as to whether you are treating rental property as part of your retirement portfolio and what percent you are allocating to it. What is your perspective on carrying additional debt on these properties. I am planning to buy some property outright at a later point in my life but have always been afraid of taking on debt. Thank you for your insight.
Good question Nik. I am treating my rental property as both a current source of income and a small piece of my retirement. It’s a double whammy for me. I’ve purchased both of my homes with 20% down. I think that is a good rule of thumb. Don’t over leverage yourself in order to get a rental property or else you won’t like the experience. And there’s no point in doing it if it drains the life out of you!
Thanks for the great info! My husband and I are about to rent out a home I lived in before we recently got married. We have a renter but need rental contract help. Do you have any sites you would recommend that have this information?
Hey Abbie. The guys over at Bigger Pockets did a great write-up on finding a rental contract. Check it out. I think it’s exactly the sort of advice you are looking for! http://www.biggerpockets.com/renewsblog/2015/05/12/find-good-rental-lease/
I like they idea of having a property manager, because they can handle finding tenants and other issues. However, I also agree that landlords should visit their property often. Showing this vested interest in the property is a great way to show people that you genuinely care about what is going on.