Expert Tips for Self-Managing Rentals
One of the main goals of owning investment property is to create cash flow and ultimately a passive income stream. If expense cutting is an aim, then property management might be right for you.
At one point, I was self-managing 100 units of inner-city rentals, mostly duplexes and 4-plexes that we had bought in rough shape and rehabbed, then held for many years as solid rental properties. Many of them were Section 8, government subsidized units (the upside to that is apparent in this pandemic: the rent still comes in the mail).
Helpful tips for successful self-management of your rentals:
1. You must have systems in place with written policies and procedures. This is especially true when it comes to fair housing practices. Standard application fees, deposit requirements, pet policies, and even credit and background check procedures are necessary to be used on all rentals. This keeps your process consistent and ensures you treat all applicants fairly.
2. In addition to the background check supplied by a vendor, i.e. Cozy or TransUnion etc., you need a policy as to what you require and is acceptable for your properties. Some cities have rules and ordinances that must be followed, so check into that too. In fact, in Seattle and Minneapolis/St Paul, new ordinances go into effect in 2021 that alter screening procedures for landlords.
3. Check on tenant applicants by calling prior landlords to verify their application information. Check county records of the previous rental to be sure you are speaking to the owner of the prior rental.
4. My favorite tip is the One Hour Rule. When a caller asks about a property, do some pre-screening--do they qualify, do they have pets, etc. Ask, “Why are you moving, When do you need a place?” Find out what you can before showing the property.
After an appointment is set, let the prospect know that they are to send you a text one hour before the showing. It is their responsibility. (The reason for this is to set up accountability.) If they are responsible and send a text, I will drive over for the showing. If they don’t text, don’t go.
If you own property, you know that more than half the appointments DON’T show up. The one hour rule saves time AND helps you learn about the prospect. Most people I teach are too shy to do this at first, and after they drive and wait and waste their precious time, they are quick to say….”Yep, the one hour rule is golden”.
5. Review the payment policy with each prospective tenant. If rent is not paid by the 1st of the month, what is the consequence. If there is a late fee, underline that in the lease, AND ENFORCE IT. Add into the policy what happens on the 5th of the month, the 10th of the month if no payment. It’s about communication. If they call and work out a payment plan, that’s reasonable. Payment plan note: Use a signed agreement: pay x dollars this week and x dollars next week. Again, it holds them accountable.
The biggest tip is that you set the tone of your relationship with each tenant from the first conversation. Self-managing your rentals is an art that can be very profitable and is quite easy if you have the right system and processes. Remember, you are running a business!