Hi everyone,

We recently purchased a duplex in Ohio we are going to owner-occupy and we are looking for any advice you all have as we become landlords. I’ve read the Book on Managing Rental Properties so I feel like I have a good foundation but would appreciate any additional information you can share!

I plan on using Cozy and Stessa to manage the property and financials. I also plan on setting up business checking and savings accounts as well as a business credit card. We also are going to “pay” ourselves market rent in order to track the performance of the property. We plan on acquiring additional properties and this property will eventually become 100% tenant occupied. Any suggestions you have on how to setup the foundation of our systems and processes to make things scalable in the future would be helpful!

Also, any comments on finding the best tenants would be great. We plan on following the guidelines laid out in the book.

Thanks!

@Andrew B. Tell the tenants that your uncle owns it and you just work for him. Blame everything on him and the lease.

Congrats!

That's how I got started in Indiana and I've done it more than once.  Actually, when I retire I might even do it again. No problems living next door to my tenants.  I suspect the culture in Ohio will be similar.

For "systems" I'd say to make a standard packet of info that has a sample lease, floor plan with square footage, list of "features" like what appliances are there or if there are storm doors, etc., an introduction letter, and an application.  You'll use it over and over again thorugh the years.

You're at the right website/forum to learn. :-)

@Remington Lyman

Good suggestion. That’s definitely something I’ve waffled back and forth on. I’d like to create boundaries and manage it as if I am the property manager, not the owner occupant. Do you think many tenants would look up the owner on the county website?

@Scott P.

Thanks for the info Scott! Definitely something to be said about Midwest sensibility and the neighborhood we purchased in is low A/high B class.

Since I know I want to own more properties I’ll be looking for every opportunity possible to create reusable materials, processes, etc.

Even if they don't look it up they may see main adressed to you. You just lost all your credibility if you get caught with that lie and I dont think there is a reason to lie. I usually say I am one of the owners (there is my wife and then technically there is the bank..) - I'll get back to you is always a good response.

Boundaries are important. Communication is through text messages, I don't take phone calls, unless it is a call we have scheduled. I listen to the VM and text back. I am always very friendly, but also firm, just like a rep for a big airline would be: no sir, you can't take an meotional support cow on the flight. Is there anything else I can help you with?

A lot of my younger clients start investing with a house hack and it usually works very well; the only source of rub is usually from an inherited tenant. They feel they have seniority and will tell you all about how they had agreements with the previous owners. Always best to expire the lease and place your own tenants. They know you as the owner and will respect you much more.

Congrats- in my opinion, that's the BEST way to start your portfolio. A couple tips- first of all, start an LLC for a property management company. Your next door tenants only need to know that you work for that company and are the on-site maintenance person. No good things can come from your tenant (who shares a wall with you) knowing that you are the landlord. Cozy is great, we used it for quite a while.

Second- start to read up and learn about leveraging your equity in the duplex. If you learn the right strategies, you can scale much more quickly than you think. 

Finally- tenant screening- this is really simple, people tend to overthink it. Read up on fair housing guidelines and know how they effect your screening process and criteria. Identify the specific criteria you will use to identify your tenant. The first person that meets that criteria gets the place, it's that simple. People get themselves in trouble when they take in 20 applications and then start trying to figure out who the "best" tenant would be. Don't do that. 

Best of luck- go get it!

Originally posted by @Andrew B. :

@Remington Lyman

Good suggestion. That’s definitely something I’ve waffled back and forth on. I’d like to create boundaries and manage it as if I am the property manager, not the owner occupant. Do you think many tenants would look up the owner on the county website?

Intelligent tenants will but those are not the ones you need to be worried about. "Coincidentally my uncle has the same first name as me. Andrew is a common name in my family"

@Marcus Auerbach

Thanks for the insights! We are taking over a vacant property so we can place our tenant ourselves. We will be following the guidelines laid out in the Book on Managing Rental Properties very closely to avoid any fair housing issues and place a quality tenant.

@Corby Goade

Awesome feedback! A PM LLC is definitely something I am considering setting up in order to create a more professionally managed situation with tenants and then it'll be helpful to have in place as we scale.

@Remington Lyman

Makes sense to me. Due to the quality of the neighborhood we expect to have a very qualified applicant pool so we are hopeful that we will avoid many of the issues that could create hostility from tenants/former tenants.

@Remington Lyman

I’m hoping your answer was a joke. Honesty should always be what you strive for. If you’re dishonest, why should your tenant be honest with you?

@Andrew B.

I see some really terrible advice to you already. Be honest with your tenants. If you can’t handle being the owner, and being honest, and being responsible for some tough business decisions, hire a Property Manager. Starting your business by lying is truly not the way to go.

@Anthony Wick

Definitely understand what you are saying here. I suppose if you set the guidelines early for how the relationship will operate there shouldn’t be any issue.

Don’t let tenants know you own it and put it in a trust @Andrew B.

@Kenny Dutton

Why a Trust?

Originally posted by @Anthony Wick :

@Remington Lyman

I’m hoping your answer was a joke. Honesty should always be what you strive for. If you’re dishonest, why should your tenant be honest with you?

It was not. I actually got the idea from listening to BiggerPockets podcasts years ago when I was first getting started. I did not see the point at the time but after doing a couple of house hacks I see the benefits of it. I am a strict landlord and it is a lot easier to charge the $50 late fee when it is my uncle's fault. I always blame the lease and blame my uncle when enforcing the rules.

@Remington Lyman

I am truly sorry you feel like lying is the best business practice.

@Andrew B. Congrats.  To get back to your systems with ability to scale, unfortunately that is something I have found you can only do with some knowledge and experience.  Having one tenant is not hard.  Having 7 is not hard. 

You will find your systems and then be able to create or buy better ones that match how you want to handle things.  

From my perspective, your first system should be getting Quickbooks online, and getting it setup.  You can setup your property as a customer, and your units as sub customers.  Then you can track your income and expenses per unit.  For property level items, they go on the main customer.  Link QBO to your bank account and credit card so you can reconcile your account monthly.  

Originally posted by @Anthony Wick :

@Remington Lyman

I am truly sorry you feel like lying is the best business practice.

It is okay. You do not have to feel sorry for me. I do not feel bad about lying about this. I never tell my tenants I own the property. Easier to get things done if I can blame someone else for making me enforce the rules.

@Evan Polaski

Thanks Evan! QBO is preferable to something like Stessa that is tailored for real estate?

@Andrew B.   I like QBO only for a few reasons: I am used to it and had another, non-real estate, business.  So I could use for both.

Also, every CPA I have spoken to uses QB, so review for tax time, sending to a bookkeeper, etc is seemless and generally results in a cost savings equal to, if not more, than the cost of QB.  

QB really works for any and all businesses. But, because it is not catered directly to RE, there is more in there than you may need, and/or the user interface may not be as streamlined.

You can find many many how-to's to optimize QB for rental properties, like this thread https://www.biggerpockets.com/forums/52/topics/590160-how-to-setup-quickbooks-for-personal-rental-portfolio

@Evan Polaski

Makes sense and thanks for sharing the link on getting set up!