Your charge into real estate may start with the simple decision not to sell your starter home when you move. But with patience and steady cash flow, you can build your equity and borrow against it for a downpayment on multiple investment properties. As you expand your investment portfolio, there may come a time when it makes sense to hire a property management company.
So once you’re there, how do you find the time to keep up with them all? In order to maximize your revenue, you’ll need to keep multiple rental properties occupied, collect rent, and stay on top of property maintenance and repairs. If you can’t efficiently manage your time, it won’t take long before you’re in over your head.
Meanwhile, every moment you spend dealing with them either comes from your free time or keeps you from researching potential properties to add to your portfolio. So unless you’re ready to hire a property manager, here are some tips to keep in mind:
Keep your files organized
For every rental property, there’s a slew of paperwork to keep track of. Lease agreements, inspection checklists, invoices, and applications—all of which you may need to reference at any given moment.
There’s no one size fits all approach here—some landlords may use file cabinets organized either by property or by tenants, others may prefer a digital approach. Find a system that works for you and don’t let things get out of hand. It can lead to some seriously costly consequences down the road.
Screen your tenants
Do your due diligence with every prospective tenant. Verify their employment, follow up on their personal references, and check their rental history. It may take more time, but a few extra days in lost rental income is worth it to find an ideal tenant who will pay rent on time, stick around for a while, and help you keep the property in good shape.
The major red flags you need to check for are income, credit score, criminal record, and frequent moving in their history. You should also be wary of a potential tenant that’s in a hurry to move in. If you’re not thorough, you can wind up with a bad tenant with a history of delinquent rent or that might cause damage to the property.
Use a written lease
Maybe you prefer to do business through handshake agreements, but renting out an investment property on a handshake is a bad idea. The lease agreement defines everything from rent collection procedures, late fees, ground rules, and what’s expected of the tenant. Without clarifying those terms, there’s no guaranteeing either of you will remember the terms of your arrangement.
The property owner’s responsibilities should be laid out just as clearly as the tenant’s responsibilities. Make sure you take the time to go over the lease agreement with them so they understand their rights and respect the rules you have in place for your property.
With every lease agreement you have, you need to include an inspection sheet for the new renter to fill out. This will give them the chance to request any repairs and review the state of the place, for your benefit as well as theirs. Keep track of this checklist to reference when it’s time to do the move-out inspection. That way there won’t be any surprises when it’s time to return the security deposit.
Stay consistent from one property to the next
Some aspects of a property may require additional language in a lease agreement, but it’s best to stay as consistent as possible for each of your investment properties. Rent should be due on the same day for everyone, and there should be consistent rules for late fees, visitors, pets, maintenance requests, and smoking.
The same should hold true for your tenants. It doesn’t matter how close you feel to a particular tenant–offering them special treatment leaves you vulnerable to discrimination lawsuits and can make it extremely difficult to begin legal proceedings against a tenant if the relationship ever turns sour.
Schedule routine visits
Vigilance is key for successful landlords if you want to fix problems as soon as they crop up. Ideally, you should inspect your properties once every three months, and work these inspections into the rental agreement so your tenant isn’t surprised when you call to schedule your visit.
These visits also give you a chance to build a good rapport with your renters. Additionally, they’ll help you keep an eye out for people living in your property without permission. Still, even if it’s on the lease agreement, you need to give your tenants proper notice and work with their schedule to find a time that isn’t inconvenient for them.
On top of the regular inspections, it’s a good idea to drive by your property whenever you’re in the neighborhood. You can make note of extra cars that are always around or check for any evidence of an unauthorized pet. It can also save you a ticket from the city’s code enforcement if you spot something in the front lawn that doesn’t belong.
Respect your tenants
On that note, It’s crucial that you treat every tenant with decency. Respond to their concerns in a timely manner, be patient, and never drop in without notice. Remember, it may be your property—but it’s also the tenant’s home. They have a right to privacy, and not only is violating that right rude, but it’s also against the law.
Beyond that, you need to take the utmost care to respect people regardless of gender, race, religion, and sexual orientation, and be very mindful about how you speak to your tenants. If you remain professional at all times with the people in your rental units, you’ll greatly reduce your chances of facing a lawsuit.
Budget for disaster
Sooner or later, you’ll run into some unforeseeable expenses. You may purchase a house that needs a lot more work than expected, or one of your current properties may be severely damaged, whether it’s from a natural disaster or a negligent tenant. If you overextend yourself, you won’t have any room in your budget to deal with these expenses, and you may have to liquidate some of your assets to get back on track.
Rental property insurance is crucial for protecting your real estate investment. They can cover everything from fire or flood damage, lost rental income, and rehoming expenses for your tenants. The more properties you have, the higher the risk you face from a lawsuit if one of your tenants suffers a serious injury. An umbrella insurance policy can protect you if you’re liable for a tenant’s injuries.
It’s also a good idea to shop around for local vendors you can count on. Air conditioners and heaters need service regularly, and sooner or later you’ll have to replace a roof on every property. If you establish good relationships with local businesses, you’ll get quality service and save a lot of money in the long run.
Quit your day job
Okay, this may not be an option for everyone. But at a certain point, your investment properties will require so much of your attention you won’t have time for a 9-5. With smart purchasing and low vacancy rates, you’ll have a steady, predictable cash flow each month. It should be fairly clear cut when you can afford to walk away from work.
There are ways to help speed this process along. Every time you consider purchasing a new property, you should always make sure there’s about 10% in the budget to put towards property management. If you’re going to do all the work, you should compensate yourself fairly, and use the extra income to walk away from your other work. If you can’t afford the operating cost, don’t buy the property.
That way, if you do start to get overwhelmed with the day to day operations, you can easily afford to outsource your work to a rental property manager. If you love your job, you don’t have to quit when it all becomes too much for you because of the many benefits of using a property manager.
Hire a Property Management Company
Maybe you love being a landlord. But if your goal is to generate passive income and work towards financial independence so you can retire, is all this running around really worth it to you? So, what does a property management company do, and can certain management services help grow your business overall? A property manager has the expertise and resources to keep things running smoothly so you can enjoy a little rest and relaxation on the weekends.
At Great Jones, we are committed to placing quality tenants for every property we manage using data-driven analytics. And that’s just the beginning—we’ll be on point for all your tenants’ needs through every step of the way, so you can focus on growing your investment portfolio. From routine maintenance to big-ticket repairs, we’ll keep you in the loop, get your permission to go ahead when we need it, and otherwise stay out of your hair. With teams on the ground for property management in Gainesville, FL to property management in St. Louis, our company is well versed in assisting with day-to-day operations for a number of properties.
Want to increase revenue and expand your investment? We’ve got you. Our team has bought, renovated, managed, and sold thousands of properties in each area we operate in. We’re more than happy to help you research the market and vet any investments you want to make.
Learn more about all the ways Great Jones can make your passive income truly passive.