Guide to Self-Management of a Rental Property
Now, let's delve into the process of how landlords can effectively manage their own rental properties. Once you have acquired a property and prepared it for renting, here are six crucial steps to follow for successful self-management:
Establish a Fair Market Rent
Determining the appropriate rent is a delicate balance of art and science. Setting the rent too high may discourage potential tenants, while setting it too low can reduce your returns. Consider the following factors when determining rent:
Median household and per capita income in the area.
Target tenant demographics, such as singles or families.
Comparable rents charged by competition in the vicinity.
Property amenities that can justify a higher rent, such as a spacious garage or community swimming pool.
Utilize online resources to identify rent comparisons and determine a fair asking rent based on current listings, rent comparables, and market trends.
Market the Vacant Property
Numerous online platforms cater specifically to DIY landlords and property managers, offering rental listings and tenant screening services. Avail and Rentec Direct are examples of sites that enable landlords to:
Create appealing rental listings.
Automatically syndicate listings to top online rental platforms.
Direct prospective tenants lead to the landlord.
Provide online tenant applications and screening services.
Request credit, criminal background, and eviction reports from applicants, with the cost borne by the applicant.
Generate and sign customized leases tailored to the rental property's state.
Once a suitable tenant is selected and the lease is signed, collect the security deposit and initial rent payment, and arrange a meeting at the property to complete a move-in checklist.
Inspect and Maintain the Property
The responsibilities of a landlord extend beyond the tenant's move-in. Maintenance and repair issues are bound to arise, and addressing them promptly enhances tenant satisfaction and increases the likelihood of lease renewals. Regularly drive by the property, without disturbing the tenant, to identify any exterior damage. Additionally, conduct routine inspections of the interior and exterior after providing the necessary notice to identify and address minor issues before they escalate.
Perform seasonal maintenance on the roof, heating and cooling systems, water heater, and appliances to prolong their lifespan and manage capital expenses within budget. To streamline repairs and promptly respond to maintenance requests, many DIY landlords:
Maintain a list of tasks that landlords or affordable handymen can handle.
Compile a directory of licensed and insured contractors for heating and cooling, plumbing, and electrical work.
Seek referrals from fellow landlords for trusted contractors and vendors.
Regularly contribute to an emergency fund or capital expense (CapEx) account to cover major repairs without personal expenditure.
As an investor, collecting rent in full and on time is crucial for generating profits. Rather than relying on traditional mail-based payments, many DIY landlords opt for online rent payment systems like Cozy and TenantCloud. These platforms enable same-day rent collection, with any processing fees borne by the tenant.
Online rent collection not only streamlines the process but also improves rent collection rates. According to an analysis by GlobeSt.com, tenants prefer the convenience of paying rent online and are more likely to do so promptly. In the event of late rent payments, landlords should be prepared to enforce any late fees stipulated in the lease agreement. Allowing habitual late payments without penalties can disrupt cash flow and potentially necessitate eviction.
Despite a thorough tenant screening process, eviction may occasionally become necessary. Residential evictions can be costly, ranging upwards of $3,500, and can take several weeks depending on the property's location and circumstances. During this period, landlords experience a loss of rental income and may have to address significant damages caused by the departing tenant.
Instead of investing further resources into an eviction process, some landlords adopt a pragmatic approach and offer a tenant a cash incentive in exchange for returning the keys and vacating the property. This "cash for keys" strategy helps avoid costly evictions and facilitates a swift return to positive cash flow.
Utilize Effective Rental Property Accounting
A robust accounting system is vital for managing rental property finances, maintaining a paper trail, and generating accurate financial reports such as income statements and net cash flow reports. While some landlords resort to basic spreadsheets or off-the-shelf software, an increasing number of real estate investors are turning to online platforms.
Online platforms provide a comprehensive solution for tracking real estate investments and automating income and expense tracking. By signing up for a free account and inputting property and banking information, DIY landlords can easily monitor property performance, track finances, and maintain an organized paper trail. Most online platforms allow investors to:
Manage unlimited single-family, multifamily, and short-term rental properties.
Automate income and expense tracking.
Generate reports and export tax-ready financials.
Monitor financial performance at the property and portfolio levels.
Track expenses on-the-go using the iOS and Android app.
Securely store and organize real estate-related documents.
The aim is to provide powerful tools to the investor community at the lowest possible cost, offering basic services entirely for free. Optional premium services, such as market research, mortgage financing, and rent analysis, are usually available for a fee.