10 Steps To Successful Self Management

Experienced investors will be quick to point out that self-managing rental property owners should be prepared for a full-time side job.

For those landlords that prefer to defer the headache of dealing with late night maintenance calls, tenant complaints, late rent payments or unauthorized pets, hiring a property manager is the solution to capitalize on your passive rental income with minimal effort.

Working with a property manager, however, is not without its own associated cost.  And despite the benefits of using a property manager, some investors are not willing to part with the management fee collected from their rental income.

The good news is, even if you are unsure about whether you want to hire a property manager or not, you can easily enter the rental real estate market by self-managing your properties while deciding if landlording is truly the right choice for you.

Here are some important steps to get your started with self-managing your rental properties – no property manager needed.

1. Picking the Right Rent -The right price for a rental property is a balance between wanting to maximize your income from rent payments and wanting to ensure the property is continuously occupied by trustworthy tenants. The right rent amount is determined by finding out what similar properties in the neighborhood rent for, known as the fair market rent. While property managers are experts in knowing a communities fair market rent, you can discover it yourself by doing a little research about rent in your area.

   Other factors that may affect a rental property’s monthly rate include: the number of bedrooms and bathrooms; whether you include utilities, like electricity, gas, water, or internet; if you allow pets; if you provide property extras like additional storage, garage, parking, or backyard; what kind of amenities the property has; and the property’s location to schools or other community attractions.

2. Automate Your Process – One of the biggest burdens of property management is finding the time to successful complete all your tasks efficiently.  Many real estate investors self-manage their rental properties as a side project to their regular career. Property maintenance, inspections, rent collection, and application processing will take up a big chunk of a landlord’s time.  In order to supplement this time commitment, a majority of landlords have seen tremendous success with helpful tools like property management software that automates the tedious administrative tasks.  Online tools, like Rentec Direct, are designed specifically for rental management and will allow you to streamline rent collection, screen your tenants, track your income and expenses, and market property vacancies all from one convenient platform.

3. Become an Expert on Landlord-Tenant Laws –  Laws pertaining to rental housing are established to protect both parties of the landlord-tenant relationship. Knowledge of and compliance with federal, state, and local regulations is crucial for both landlords and tenants. You can be sued for not obeying laws and ignorance is not a viable defense.

   Nolo provides a great starting point when conducting your own research on state landlord-tenant laws. The U.S. Department of Housing and Urban Development (HUD) is responsible for regulations covering discrimination and other federal issues affecting your tenants. You can also check with your state real estate board or join a local professional agency for property managers or landlords who should be able to provide guidance on state regulations.

4. Screen Your Tenants Diligently – Great tenants pay their rent, maintain the property, and communicate appropriately with their landlord. The trick is to be selective with your legal tenant approval process, set the right rent amount, and provide a nice property that good tenants want to live in.

   Landlords have the legal right to approve tenants based on income, rental history, debt to income ratio, and other factors that are verified in rental applications and tenant screening reports. Tenant screening is designed to help landlords make smart and informed decisions about tenants to protect their investment property.

   Landlords find that reviewing an applicant’s credit report gives good insight on a future tenants bill-paying behavior and reveals their debt to income ratio. If an applicant has outstanding balances and collections against him, what’s to say he won’t fall behind on his rent too?

   Landlord’s looking for an solution that provides instant credit, criminal, and eviction reports should look at Rentec Direct’s tenant screening solutions.

5. Use a Legal Lease Agreement – A strong lease is a landlord’s best friend when it comes to clearly defining expectations between you and your tenants. A lease is a legal contract that outlines the conditions of renting your home that is mutually agreed upon when signed. You should have every tenant named on the contract and review the lease in person with them during the signing process.
   Because each state has slightly different laws that impact a landlord-tenant relationship, be sure to use a state-specific lease rather than a more generic lease to best protect your investment and yourself.  Additionally, make sure your lease is reviewed by an attorney familiar with landlord-tenant laws in your state before your first tenant signs it.

6. Keep Up on Property Maintenance – Property maintenance for rental properties includes seasonal & routine maintenance, emergency maintenance and regular maintenance associated with owning a home and protecting your property.  As a housing provider you are legally obligated to maintain a habitual property for your renters. This means you need to provide a safe and livable home, with items like study structural features, locking doors, a roof that keeps out water, water, heat and the absence of known toxins, like lead and asbestos.

   Besides the legal requirement of providing a safe place to live, you will find the nicer home you provide the more rent you can reasonably charge and you will increase the likelihood of your tenants maintaining the property. Landlord maintenance also extends to responding to repair calls and establishing guidelines for tenant maintenance expectations in your rental agreement.

7. Perform Regular Inspections – The best way to ensure your rental property is properly maintained and in great condition is to conduct regular inspections.  Inspections provide 2 key benefits to rental property owners:
   – You will identify any maintenance issues that need to be fixed before they become expensive problems.
   – You can make sure your tenants are following lease terms and taking care of tenant required maintenance.

If you self-manage your rental properties you should be prepared to conduct 4 types of inspections, these include routine inspections and those related to the beginning and end of a lease term.

8. Get Insured –  Insurance policies designed specifically for landlords provide added protection for financial loss and obligations associated with your rental properties. While some landlords assume they can rely on their standard homeowners insurance to cover their rental property, homeowners coverage is usually not sufficient to protect an investment property. Homeowners insurance covers owner-occupied homes while landlord insurance covers liability and damages connected to tenant-occupied homes. Also consider having your tenants take out their own renters insurance policy.

9. Get Ready For Tax Time –  Rental real estate is praised for providing more tax benefits than almost any other investment. Landlords get to deduct items such as insurance, maintenance, and utilities from income, which homeowners do not. Other deductible expenses may include interest, property taxes, and deductions for depreciation.  Make sure to keep excellent records so tax time is a breeze (or at least as painless as possible).

10. Talk To Other Investors – Joining a professional organization will expand your network and will help you connect with your community.  You will be impressed to find out there are tons of real estate investors just like you that love sharing ideas and advice with each other.  There are national professional organizations with local chapters for real estate investors as well as dozens of online communities like BiggerPockets or ActiveRain where you can interact with your fellow investors to find out what is the best options for you.

While self-managing rental properties requires a significant time commitment and is a big responsibility, it is a popular solution for several real estate investors.  Alternatively, you may decide that hiring a property manager is the best option for handling all the management duties listed above.

After you have spent some time as a landlord, you can decide if you like self-managing or if you would prefer to delegate the tasks to a property manager.  Remember every experience is different, some self-managing landlords will tell you that property managers are unnecessary until there is that one tenant that makes you lose sleep at night.