Congratulations on becoming a landlord. It’s an exciting and rewarding experience, but it can also be stressful. But you’ve already done the heavy lifting; you’ve learned about passive real estate investing, compared REITs vs rental properties, investigated the different types of rental properties, honed in on the best state to buy a rental property, conducted a rental analysis, closed your first deal, and are now ready to manage your first rental property.
The internet paints a landlord’s life as constantly fixing toilets, being on call 24/7, and almost always dealing with tenant issues. While landlording, and managing properties isn’t always a walk in the park, it’s far simpler than most people think. But, at times this “passive” income stream isn’t so passive.
Before you buy your first, or next, rental property, here’s what you should know about how to manage a rental property.
Responsibilities of a Landlord
In exchange for getting paid monthly rent, you’ll need to fulfill your end of the bargain to your tenants. Here are some things you can expect to do as a landlord:
Manage Tenants
You’ll be responsible for finding and screening potential tenants, then signing a lease with them. Once your rental property is occupied, you’ll have to ensure that everyone follows the terms of their lease agreement. This may include things like making sure they pay rent on time each month and ensuring that they don’t violate any laws (e.g., noise ordinances) or your lease.
Common Responsibilities:
- Screening Tenants
- Drafting and signing lease agreements
- Ensuring your lease is followed and tenants are comfortable
- Giving tenants proper notice of rent raises, scheduled maintenance, evictions, property sales, etc.
Property Management
This is THE most important aspect of being a landlord. You’ll have to manage your rental properties, which means making sure they’re maintained and running smoothly. This may include things like fixing leaks or broken appliances, finding qualified contractors, and ensuring your home is up to standard, safe, and comfortable.
Common Responsibilities:
- Source and hire contractors, handymen, and maintenance workers
- Perform routine maintenance on your property
- Handle emergency maintenance requests and repairs
- Schedule and perform preventive maintenance tasks (replacing air filters, cleaning gutters, etc.)
Record Keeping
You’ll need to keep track of all your income, expenses, and other details related to your rental properties. This will help ensure that you’re making enough cash flow from your rental property to cover the costs and make a profit. It will also help you determine which properties are worth keeping for the long term and when to sell a rental property for reinvestment.
Common Responsibilities:
- Obtaining and keeping proof of insurance or rental property home warranty
- Organizing and securing signed lease agreements/lease amendments
- Building walkthrough checklists for when units turnover
- Organizing all files, receipts, purchase orders, and other documents relating to your rental business
Accounting
Unless cozying up to an IRS agent sounds like an enjoyable weekend plan to you, you’ll need to make sure your accounting is always in good order. This means knowing the numbers of your business back to front, and systematizing your rent revenue, maintenance costs, and other expenses so you don’t have to scramble during tax time.
Common Responsibilities
- Collect and document rent payments
- Manage deposits for current tenants
- Maintain a balance sheet to show your profit/loss
- File taxes and report expenses when needed (hire a CPA!)
How to Manage a Rental Property
Regardless of the type of rental property you own, modern landlords can manage their rentals from anywhere. You don’t have to be at the property to get things done and with the rise of rental property apps, managing your rentals has become that much easier. I have multiple out-of-state rental properties, all while I’m living in sunny California. If I can remotely manage multiple rental units and a self-storage facility, you can too!
So, if you’re ready to self-manage, here’s what to do BEFORE you collect your first rent check.
Read more: If buying a rental property out of state interests you, then check out our comprehensive list of the best states to buy a rental property, plus which states to avoid.
Make Repairs and Improvements
When you take over a property, it’s usually in need of repairs and improvements. This can be both a blessing and a curse. You get to fix up your new rental property and make it better than when you found it and increase your rent potential and property equity! If you have any handyman skills at all, this is a great way to save money on maintenance costs too.
DO NOT try and do plumbing/electrical if you don’t have any experience. Saving money is cool, but not ending up with a flooded house or in the hospital is even cooler.
Protect Your Asset
Keep your property yours by setting yourself up with the right insurance. Make sure you have adequate LANDLORD insurance (NOT homeowners insurance) that has high personal liability protection in case you ever get sued. I personally require my tenants to always carry renters insurance, which will reimburse their rent and protect their things if a fire, flood, or burglary happens.
You can also opt to buy umbrella insurance, which will add another layer of legal protection over you for just a few hundred bucks a year!
Market Your Rental Property
Know your market’s local rent prices using tools like Rentometer. Always try your best to provide a quality rental at slightly lower than market price. This will make yours a hot commodity and can open you up to a large pool of renters where you get to pick the best tenant of the bunch. When listing your rental, use tools like Zillow, Hotpads, Apartment List, and Apartments.com to market your property.
If you need to differentiate yourself, do so wisely. Some landlords will specifically market to families or tenants with large dogs, as many landlords will not allow these two groups in their units. If you do, make sure you’re baking any extra headache into your rent price (and insurance!).
Screen for Reputable Tenants
You’ll need to personally set your criteria for renters. Some landlords allow pets, while others don’t. Some allow smoking outside, while others strictly prohibit it on the property. Regardless of your requirements, make sure your potential tenant passes a background check, credit check, and eviction check to ensure they’re not taking you for a very expensive ride. Property management tools like Avail make these checks simple and at no cost to you!
Create a Lease and Stick to It
You don’t have to reinvent the wheel when it comes to leasing your property. There are plenty of low-cost templates online (like this one from BiggerPockets) that will help you create a standard lease agreement for your tenants. You can also talk with a lawyer about creating one that works for you and your property specifically. Once a lawyer drafts up a lease agreement, you can plug and play with it for years to come!
Schedule Proactive Maintenance
I make a checklist of preventive/proactive maintenance tasks to take care of every six months or so. This includes changing air filters in the furnace/AC units, getting the gutters cleared, scheduling routine pest control, and asking the tenants what (if anything) is causing them trouble in the property.
Collect Rent
Collecting rent is an important part of being a landlord. You can’t let your tenants get behind on their payments or it will become a nightmare to deal with! I try to collect rent once per month and send out late notices if they are more than two days late. You can do this through electronic payment, check, or property management software.
Keep Track of the Money
Always record your rent payments. Either do this through a custom spreadsheet or use tools like Stessa, LandlordStudio, or the other twelve-thousand different property management software picks. Don’t do this on pen and paper, as there are MANY ways to more efficiently track your rent.
Evict as a Last Resort
I’m not going to sugarcoat it: evictions are a pain in the ass. It will cost you money, time, and energy. You can avoid it by collecting rent on time in the first place or by offering incentives for tenants to leave if they refuse to pay (cash for keys). If you do have to evict someone, make sure you abide by the law and avoid any illegal property management practices and find a good lawyer who knows what they are doing!
Skip the Hassle: Hire a Property Manager
Property management companies are a godsend for busy landlords. They can help with everything from screening tenants to handling repairs and maintenance, allowing you more time to focus on other aspects of your business. If you happen to purchase a turnkey real estate investment, chances are the turnkey company offers turnkey property management services. If not and you’re interested in hiring a property manager, be sure to ask them about how they screen tenants, what kind of backup they have on hand (in case there is an emergency), and how they handle evictions (if they don’t handle those themselves).
Remember, you’ll be paying a property manager 7% – 10% of your monthly rent, so you want to ensure that they’ll be doing something worth the money!
Manage Your Rental Property with Confidence
In the end, managing rental properties isn’t that difficult to do. But, the way that you set up your systems from the start will directly affect how much stress you have in the future. We hope this guide has helped you realize that you can self-manage if you need to and that this easily-repeatable process can always be outsourced if you get too busy!
How to Manage a Rental Property FAQS
Still feeling a bit skittish about managing your own rental property? These FAQs may help you on your journey to becoming a real estate empire owner!
Yes, managing a rental property can be hard. There are lots of responsibilities that come with being a landlord, and you need to make sure that you take care of them all. Self-managing is definitely doable for people who have the time and patience for it! If not, hire a property manager!
The biggest downside of being a landlord is the stress. It can be very stressful to deal with tenants when they have problems, especially if they are not paying rent or causing damage to your property. You will also need to make sure that you’re collecting enough income from each rental unit in order to cover all of your expenses.
Landlords care most about the quality of their tenants and the condition of their properties. They want to find good people who will pay rent on time, take care of the property, and not cause any major damage or disruption to other tenants in the building. Landlords also care about making sure that they are collecting enough money from each rental unit in order to cover all of their expenses like mortgage payments and maintenance costs.
