Being a successful landlord takes more than just spending a week every month chasing rent payments and doing a bit of maintenance here and there. Property management is far more complicated—especially if you want to succeed and grow. Your income potential depends on the strategies you have in place to manage your properties.
Being a landlord and property manager is a great career that can open the door to plenty of opportunities—in particular, attractive profit potential. According to Salary.com, in 2019, the average income of a property manager in the U.S. was $99,524, not including bonuses and benefits.
If you are serious in your commitment to own and manage rental properties, there are 10 crucial steps to help you become successful.
1. Be sensible about your properties.
When investing in properties, there is sometimes a tendency to become emotionally attached. Sometimes landlords see themselves living there or become attached to a stunning feature of the property that is difficult to let go of. There is no room for emotions, and each property needs to be in line with your financial strategy and management model.
When creating your financial plan, you need to take into account the savings for a down payment (usually 20%), the cost of any repairs and maintenance, and insurance. You will also need to have the ability to pay the mortgage repayments if the property is empty for a while.
2. Don’t neglect due diligence.
There are many tasks involved in managing rental properties. You have to search for the right property, complete the purchase, and then prepare the home so that it is ready for tenants. On top of this, there is continuous work when you have tenants—property upkeep, inspections, accounting, and collecting rent online or by check.
You will also need to dedicate time to finding the right tenants and strengthening your online presence.
3. Location, location, location.
From the tenant’s viewpoint, the property needs to be in a location that is safe and has local amenities. The type of tenant that you want will also play a role. If you hope to attract families, the property should be in a good school district. If you are renting to students, then proximity to public transport and universities is vital.
From your point of view, it’s ideal if you live close to your rental units. Being on the other side of the city from your home and office may make your life a bit more challenging and some days a little longer.
4. Build a network of trusted experts.
If you are happy to manage your finances, that’s great. Using online rent collection solutions can help give you more time to spend on managing your rental units. But you can’t go it alone. You should find a real estate attorney who can deal with the essential legal side of things.
It is also worth developing a strong relationship with a qualified real estate agent. A trusted and experienced agent can advise you on finding the right investment properties, even calculating the cost of the rent. Knowledgeable professionals are almost a must if you are just starting or if being a landlord isn’t your only job.
5. Understand the law.
Even if you are using a real estate attorney, you will benefit significantly from having an understanding of local, state, and federal laws. At the same time, you need to know what local regulations say about tenants’ responsibilities. After all, you don’t want to be out of pocket due to delinquent tenants who don’t pay rent on time. You will be able to find plenty of online courses for landlords that can guide you in the right direction.
6. Choose your tenants wisely.
What you don’t want to do as a busy landlord is deal with late rent. You’ve got enough to do without chasing up the rent, issuing late payment fees, and dealing with complaining neighbors. Your tenant screening process should include employer and previous landlord references, credit checks, and an interview.
Remember that tenants can make or break your rental business. Good tenants will make your life easy and allow you to dedicate time to becoming an awesome landlord. On the contrary, bad tenants will make your life miserable. The extra stress may cause you to start taking out your frustrations on other tenants.
If financially feasible, you could hire a property management company to screen tenants, collect rental payments, and—in extreme cases—evict bad tenants.
7. Word your lease carefully.
There is no point in small print that is ambiguous and allows tenants to misinterpret the lease terms. Drawing up a badly worded lease agreement usually leads to more hassle later down the road.
The lease is the first official communication between you and your tenants and can set the tone for future discussions. Tenants appreciate a good, clear contract that explicitly states the lease terms and conditions. This type of lease makes it easier for both parties to comply with their responsibilities. It will also help you communicate respectfully with your tenant and build your business reputation.
8. Stay on top of your inspections and maintenance.
When you get a new tenant in, it makes good sense to keep the inspections quite regular, at least at the start. You need to know that your property is in good hands. If you want to be a good landlord, you should keep the property in good repair and maintain it regularly. Even if a tenant complaint doesn’t seem like a significant issue, you still need to get on top of it before it develops into something worse.
Your budget should include a maintenance and repairs safety net. While there may not be any repairs needed, you may still have to make upgrades depending on the state or city building codes.
9. Make sure your record-keeping is above excellent.
We know the importance of keeping track of large property expenses. For example, you would keep all receipts if you installed a new kitchen or bathroom. But it’s also necessary to keep all of the receipts of the smaller purchases—because they do add up.
Each property should have an individual file, but you may also want to set up files for the more significant expenses. For example, keeping track of when appliances need replacing is vital to developing a reputation as a trusted landlord. This way, you can plan so that you don’t end up having to buy 10 washing machines in the same year.
More crucial is the record-keeping of your collected rents. With all that is going on, it is possible to miss a rent payment, and this will affect your cash flow. And if you know a tenant is leaving soon, start the process of finding a new one so that your property isn’t left empty for too long.
10. Have tenants pay rent online.
Property management software allows tenants to pay rent online or in cash and set up automatic repayments. The top property management apps also have several built-in tools to help with real-time accounting and record-keeping.
Many apps offer all-in-one communication solutions beyond just a way to pay rent online. Software will free up a lot of your time so that you can focus on building better relationships with your tenants and quickly prove you’re an awesome landlord.
What distinguishes a great landlord from just a good one?
Tell us what sets a landlord apart in the comments.