It seems that lately a lot of friends with residential rental properties have been lamenting to me about how difficult they are to manage. They talk about constant issues and problems, and how they’re so fed up that they just want to sell their rental properties and get out of the landlord business completely.I can relate – this used to be a consistent source of frustration for me as well. And for a short period of time, because of the frustration and a few other reasons, I got completely out of real estate too.But the good news is that being a real estate landlord doesn’t have to be a frustration. Much like most things in life, the difference between difficult and easy is a little bit of knowledge. I’m going to share a system that I use to manage my properties. My hope is that if you’re experiencing the same issues, you’ll find my system helpful. And by all means, please feel free to adapt and modify my system to suit your particular needs.So without further delay, here’s how I make being a landlord easy.
- I choose the right tenants.
This is so critical, and the origin of most any problem can be traced back to having the right tenant. I’d rather have the home empty than have the wrong tenant in place.
The right tenant is more than someone who pays the rent on time. In fact, paying the rent on time isn’t my top criteria for a tenant. My number one criteria is that they treat the home with care, and communicate with me. Communication is key. They need to feel free to reach out whenever there is an issue (more on how I manage that below); I’d much rather catch a problem early when it is simple to fix than later when it is more difficult.
How do I know that they meet this criteria before they move in? I meet with them! I’m honest and upfront about my expectations of them as a tenant, and give them an opportunity to share with me their expectations of me as a landlord. I scrutinize their application, run the credit and background checks, call their references, etc. And I welcome them to call my current tenants to learn more about me.
- I’ve built an amazing team.
Having the right team makes any landlords job exponentially easier. These aren’t employees, they are simply people who are dependable, trustworthy, smart, knowledgeable in their field, and make themselves available. I’m constantly evaluating new potential members of my team, and adding people to the bench in case one of my “starters” isn’t available. And I keep copious notes on the performance of existing team members, so that I don’t accidentally rehire someone who doesn’t do a good job.
One pro tip: I never burn a bridge. You never know when you may be in a jam and absolutely need to rehire the person you swore you’d never use again. No matter how bad the work product, I never make it personal. I’m not a push over – when a job isn’t done right I address it – but I don’t take it to Defcon 1 either.
My team includes:
- A real estate agent (for each geographic region)
- A lender
- An insurance agent
- An attorney
- A handyperson
- I also keep specialists, like plumbers and electricians, on hand
- A gardener
I insist that the latter two are capable of video chat, and sending me before and after photos … just in case I’m on a beach and cannot be there in person.
- I check on the properties.
When I’m in the area I drive by the properties. I keep in touch with the neighbors. Every three to six months I inspect the inside of the properties. Before the tenants move in, I explain that this will happen and how it will happen (I give them plenty of notice, let them know that they can be home if they like, assure them that I am only looking for specific things like water leaks, etc., and that it only takes about 10 minutes).
If there is an issue, we address it. If there is an issue caused by tenant behavior, we address that too. This goes back to clear, professional communication.
- I create a home guide for each property.
I “borrowed” this idea from an AirBNB host. I loved the idea of an online document which outlined all of the particulars of the property. I have a Google doc for each of my properties which outlines all of the important numbers, local resources, rules and guidelines. If the tenant has a question or problem, they can check there first … then contact me if the home guide doesn’t answer the question (after which I immediately update the home guide!).
- I collect rent using an automated system.
Some landlords accept checks. Some accept direct deposit. I’ve found that both of these are flawed, and use Cozy.co instead. Checks get lost in the mail. Some states make it difficult to evict tenants if they pay and you accept a portion of the rent, which is possible with direct deposit to your bank (not to mention I’d prefer they don’t know where I bank!). Cozy is awesome. They accept the rent, allow tenants to pay with their checking account with no fee (or credit card with a nominal fee), apply late fees if necessary, and don’t charge a fee to the landlord! How do they make their money? They hold the rent income for 7 days before releasing it to my bank account, and make interest on the float. You can upgrade to their pro membership which will transfer payment within 3 days. Cozy also offers a host of optional fee based services like background checks.
Thanks to Cozy, I no longer have to wonder when the rent will show up, drive the my PO Box and hope that the checks are there, deal with tenants who claim the check is “lost in the mail”, etc. Cozy tells me when the tenant has scheduled the rent payment to be paid, so at any given time I know immediately who is planning on paying their rent on time and who isn’t. And Cozy deals with the uncomfortable conversation (for some) about late fees, as the late fees are automatically applied when the rent is paid after the grace period.
- I purchase a home warranty for each property.
Some people don’t know that you can purchase a home warranty for rental properties. While coverages vary, home warranties generally cover issues with appliances (including clothes washers, dryers, refrigerators), air conditioners, interior plumbing, pools and spas, etc.
For each issue, there is a nominal call out fee (ranging from $0 to $150, depending on the plan you choose). The rest is handled by the home warranty, provided it is a covered item. They choose a vendor, coordinate the appointment time, follow up to ensure the work was done correctly, etc. If an issue isn’t covered by a home warranty, I can either use one of my vendors OR the vendor the home warranty company recommends (and pay them directly). They have a list of trusted vendors who have been vetted.
I purchase a home warranty for each of my properties, and build a clause into my lease that the tenant will pay the first $150 of any repair (which covers the call out fee).
There is a lot of debate on whether a home warranty is worth the money. Some people question if the $350-$500 you spend a year on the warranty is more than you would spend on having repairs fixed yourself. I think that this argument doesn’t take into account the biggest value of a home warranty – the tenant has a hotline that they can call 24/7/365 about any issue with the home … and that hotline isn’t me! While I love and expect great communication with my tenants, I don’t want calls at 2 AM nor while I’m on a beach in Hawaii. Not to mention the tenants deserve prompt, professional responses to their immediate needs. The home warranty covers both.
- I turn current problems into future solutions.
It’s unrealistic to think that being a landlord is going to be trouble free. You’re going to have issues from time to time. The trick is how you handle them. My system wasn’t just created, it was curated. Each time there is a hiccup, I focus on creating a solution so the next time the same problem occurs it won’t cause me as much stress.
I call this “future proofing”. It’s why my leases have an addendum with 12 items that aren’t included on boilerplate leases, and it’s why I have a home warranty on each home.
I hope that you find these tips helpful, and it gives those of you thinking of selling your rental properties simply because they are a hassle some other options.If you have questions or suggestions, please let me know. As I mentioned, this system was curated over time thanks in part to people who had more knowledge than me at the time. It can always be improved, and I welcome the feedback!