EXCERPT: A novice investor may see a rental property as a simple equation of: rental income – (mortgage + expenses) = profit.
While this formula is the basic mantra for an investor, you also need to include your landlord duties and energy into that equation. Investors can choose to hire a property management company to handle these duties or self-manage their rental properties. Alternatively, a lot of investors have found success in self-managing their rental properties as a way to cut down on their management expenses.
In order to decide what option is best for your portfolio, let’s take a look at all the landlord duties you will be taking on if you self-manage or that you could pay a property manager to handle. These duties may include a monetary expense and always include the time required of you or your manager.
Owning a rental property involves managing routine and emergency maintenance. Renters are notorious for harder wear and tear on a house than owners, so rental homes require more energy from the owner or manager to upkeep.
You need to schedule seasonal maintenance to keep appliances functioning, gutters from overflowing and to check in with your tenants. And you need to respond to emergency maintenance from your tenants. Good maintenance management will significantly improve your bottom line.
When a rental property is vacant or vacancy is looming, you need to get the next tenant lined up quickly. Finding your next tenant involves more than just putting an ad up on Craigslist. Don’t forget about property visits, talking to prospective tenants and meeting them for showings. You will need to collect rental applications, complete tenant screenings and approve your future tenants.
Additionally, you will need to prioritize tenant screening. A profitable investment relies on good tenant screening. As part of this process, you should look at a rental applicant’s credit report, criminal history and eviction history, verify income and call references and past landlords. This time investment will give you the best chance of an eviction-free rental situation.
A good manager will check in with their tenants at least once a quarter. This check-in can be regarding seasonal maintenance reminders or asking if everything at the property is working well. If the tenant does have any issues, you will be the one to rectify the situation.
Sometimes a tenant will call you with a legitimate complaint. Other times, you will get tenant calls for things like “the dog across the street is barking again,” a problem that should be the tenant’s to handle. Regardless, you will be your renter’s point of contact for anything related to your property, good or bad.
Rent collection should be easy enough: “Mail me a check by the first of the month and I’ll deposit it.”
But what if the check doesn’t show up? That’s time you have to spend calling your tenant, listening to their excuse and waiting extra time to get your money. What if the tenant lies about the check being in the mail? What if the mail carrier misdelivers the check but your tenant is on vacation and can’t send a new one?
All the “what ifs” that go into rent collection can typically be managed with an online rent payment software, but if a tenant misses a payment, you will still have to figure out what