This guide is meant to outline what’s necessary to be successful at managing rental properties.
As a property manager you’ll be running a business similar to any other. Organization and your own personality are keys to success. The basic things that you’ll be doing as a property manager are finding tenants, collecting rent, sending letters, doing various paperwork, and interacting with people.
- Always post a picture with your Craigslist ad.
- Always make sure people know the number of bedrooms and the rent before they visit the unit.
- Look at what similar units in the same area are going for on Craigslist before setting your price.
- If you’re not getting at least 3 or 4 people per week actually looking at the unit (looking, not making an appointment) then you’re asking too much or not advertising appropriately. You’ll want more people if you want to be able to choose someone with OK credit.
- Notice to pay or quit must be posted the same day the rent is late.
- A late payment can be accepted at most one time per year, only if the renter is courteous and civil.
Notice to pay or quit must be posted even if it’s agreed that the tenant will pay late, in case something else comes up and they are unable to pay at all. The purpose of this is to minimize the amount of time necessary to evict if that ends up being necessary. The longer it takes, of course, the more money is lost.
The following are some examples of why a property manager should or should not call the owner.
- The furnace broke and an emergency repair call will be made.
- This is just a courtesy since emergencies will be handled anyway.
- To confirm the scheduled yearly maintenance service that will be done (gutter cleaning, sprinkler blowout, etc).
- To inform the owner that the rent is late and will be collected soon.
This should really never happen. If it’s necessary the one time per year, then this should not be the main purpose of call. The main purpose of calling should be to inform the owner that notice to pay or quit has already been posted.
Regular maintenance that needs to be done includes the following.
- Gutter cleaning (once or twice yearly)
- Sprinkler blow out (once yearly)
- Sprinkler activation (once yearly)
- Walkthrough (yearly or 1 to 2 months before the current lease expires)
Property managers should schedule these things and call the landlord with the price before the work is performed.
An additional thing that needs to be done yearly is preparing tax information. This includes all income received and the costs of any product or service purchased for the rental property. As a property manager, ideally this should be provided to the owner as soon as possible at the beginning of the year.
The two goals of the walkthrough are to not bother the tenant and to find out whether the tenant has ruined some part of the property. This can be accomplished by doing the following.
- Schedule a time convenient for the tenant, even if it’s a Saturday or after 5pm.
- Don’t touch anything in the residence.
- While the tenant is living there and you both have agreed to a valid contract, then the residence is theirs to live in. As such show as much respect as possible.
Bring a pen and paper with you to the walkthrough and write something down for every room, even the rooms that have no problems. For the rooms with no issues you can write “no issues,” or “seems normal.” Doing this makes it easier to write something down when there are issues, like holes in the wall, cigarette burns in the carpet, or animal waste lying around.
Other things to do during a walkthrough include the following.
- Check the furnace filter to see if it’s been changed recently
- Bring a new furnace filter with you (the three month kind), write the date on it so it’s readable when it’s inserted.
- When done, ask the tenant if there are any issues with the property that need to be addressed.
The last question should be asked even if they’re obviously horrible tenants and their lease will likely not be renewed, because they may know about a leaky faucet or other issue that could be fixed before the next tenants move in.
Do these things, in this order.
- Walk through the property and look for things to fix.
- Schedule a cleaning for the property
- Take a video and/or photos of the interior and exterior of the property to document the condition of everything.
- Post an ad on craigslist (this is much cheaper than the newspaper and is just as effective when done correctly). See the example attached to this page for guidelines on an effective craigslist ad.
- Meet with prospective tenants at the property on a weekly or bi-weekly basis at designated times. Saturday at 10am and Wednesday at 6:30pm are times that seem to work for most people.
- Search craigslist for a rental with the same number of bedrooms.
- Use the city for the search text (or a popular known local area near the rental).
- Choose the “only include rentals with photos” option.
- Order the results by lowest price first.
Price your rental at $50 less than the lowest rental that comes back.
Assuming you’ve setup a time on Saturday to show the property, if the rental is priced correctly you should have at least 3 people looking at the property every Saturday. This does not include people that call to say they will be there and do not actually show up.
If at least 3 people do not show up on Saturday, lower the rent by $50 dollars every week until at least 3 people show up on Saturday. Some people and some books will tell you that you should worry about getting the highest rent possible for your property. This doesn’t really make financial sense.
If you demand $900/month and have a vacant property for 1 month, then you’ve lost one month of rent, or $900. You’ve made about $900 * 11 = $9,900. If you settle for $800/month and rent the property immediately, then you’ve made $800 * 12 = $9,600, only $300 less. Waiting too long eats into your profit.
Additionally, asking for lower rent allows you to be more choosy about who you rent your property to, which is extremely important.
You can do the same as above, except add $100 to the lowest rent you find. Or if you like you can try to look at comparable properties and price yours slightly lower than the best comparable property you find. Remember though that your time is worth something too. If you imagine that you pay yourself $60/hr, then spending 2 hours figuring out the best amount to charge has already cost you $120.