How to Upgrade Your Landlording to Make Your Investment More Passive

by | BiggerPockets.com

It’s a typical story…

Investor hears about all the ways real estate can be a good investment. Now that he has the real estate bug and is seeking financial freedom, he puts a little money aside. He’s ready when his first “great deal” comes along. Because he’s starting out on a small budget, he decides to do all the rehab and property management himself. What at first appears to be good experience gaining an understanding of all sides of the business quickly turns into a very time-consuming portfolio of 10+ self-managed rental homes. He’s knocking on doors collecting rents, mowing lawns, fixing toilets, painting walls. He’s a jack of all trades. Before he knows it, he’s white-knuckling his way through days at his W-2 job and nights and weekends working on his side hustle, hoping he’ll someday make it to financial freedom but forgetting to enjoy the road there.

Sound familiar? If you too are getting bogged down in the minutia of rental properties, perhaps there are a few ways you can make your life easier and more enjoyable. Here are some ideas to add a little more freedom and sanity to your investment game.

1. Automate

If you find yourself frequently doing monthly tasks like collecting rent, paying mortgages, renewing insurance premiums, etc., then you are in luck. These are the simplest chores to automate for free. Set them up to auto-deposit or draft directly to and from your business account the first time. You won’t have to touch them again. Just watch your bank statements for bookkeeping purposes and to catch any mistakes that may pop up.

Use free web-based sources to help with free, automated rent payments through ACH, like cozy.co. They provide other free services, like online applications and background/eviction/credit checks that can be sent via text or email to the applicant through a link. These require that they pay the site directly for those checks, taking that step off the landlord’s shoulders. Don’t like cozy.co? Keep looking. Of course, there are other sources out there, both free and paid, that could make your life much simpler as a landlord.

2. Create Systems

There are tasks landlords do on a regular basis with predictable steps and processes. Tasks like listing openings, screening tenants, showing properties, signing leases, and even problem-solving calls with tenants (like plumbing issues) can be dealt with much more efficiently and with less stress when you create a system for each situation. You can even use free tools like Trello and Google Voice to make it more automated and easier for others in the process to communicate with each other.

Related: 3 Technologies Changing the Way Landlords Manage Rental Properties

For example, “Landlord A” has a clear system for screening tenants. He creates a free business phone number through Google Voice, saving his cell for personal calls and emergencies only. All of his listings and business calls/texts go directly to this business number. When an applicant calls the number, they hear an outgoing voice message with information about his available properties and directing them to leave (or text) their: 1) name, 2) phone number, 3) email address. These messages are directly forwarded to his personal cell, and Google transcribes them all into text form. He then uses a block of time each day to go through these calls and texts.

He sends each one the same email with detailed information about the property, his application requirements, and process. He’s created an application workflow board through Trello, where he can keep information on each applicant and where they are in the process. He quickly adds cards for the new interested parties to the first step on this board. The first-response email eliminates many applicants that don’t meet his requirements. He never hears from them again, and he moves on to the next step in his application funnel. Applicants that say they do meet his minimum requirements are sent a link to the free, online application through cozy.co; sent a video walk-through via email; and are required to supply him with verification of income and previous landlord references. This eliminates more applicants. He moves further through his funnel, entering the final stages for those that are truly interested in the property and appear to actually meet all of the requirements. If this is the case, he can take the time to meet them at the property for a walk-through and send them a virtual link for credit, background, and eviction checks.

This is a system that is clearly reproducible and can be created for any predictable, recurring tasks that a landlord has. Writing it down, practicing it, and refining it treats rental investing like a business — therefore allowing investors to make better business decisions to scale and increase their revenue faster. Smart, right? It also allows the processes and systems to be communicated to someone else when it’s time to hire help.

3. Virtual Assistant

Now that you’ve created systems for your predictable, regularly occurring tasks as a landlord, you can hire a virtual assistant to do them for you. Virtual assistants are freelancers who work from their computer and get paid a specified and agreed-upon wage for their work. Often, they work from other countries where the livable wage is lower than in the U.S., making them more accessible to a landlord growing her business.

Do you really hate screening tenants in the first stages of the application process? Is it time-consuming and/or makes you dread acquiring new properties? Hire a virtual assistant and eliminate this task. You’ll be able to grow your business quicker because you’ll have more time to do the things only you can do (the most valuable tasks) and you’ll look forward to getting new properties.

4. Separate Utilities

If you’re managing your own properties, make it a habit to look for those with as many separate utilities as possible. This can be easier in single-family homes of course, but is just as important when you’re buying a multi-family property. This means the tenant can put the utilities in their name. Then they’ll spend their time paying them each month, saving the landlord not just money, but very valuable time.

Related: 8 Awesome Tech Tools for Landlording, Lead Management, Productivity & More

If a property does have a shared utility, it’s almost always possible to automate those payments each month. This avoids spending precious time paying bills. However, it may be worth paying to have separate meters installed up front when possible, creating more cash flow and time for deeper tasks in the long run.

5. Yard Maintenance

This may seem obvious, but I continue to be surprised at the number of landlords that think they are the only person who can maintain a pristine yard on their rental properties. Remember, it’s your investment, not your house, (from this blog post). Just let it go. You shouldn’t be doing that. Especially if you’re reading an article about how to make landlording more passive. Tenants renting single-family homes should be required to maintain their own yard. In multifamily cases, this expense should be accounted for before buying the property.

6. Property Management

Any advice on automating landlording and making investing more passive would be incomplete without bringing up hiring a property manager. A good property manager is worth their weight in gold. When they do a good job, their 10 percent (or whatever they charge) fee is well deserved. Anyone who’s managed several properties understands this well. The time and energy a good property manager gives back to the investors they manage for is easily made up by allowing them time to do the deeper work of finding more ways to make their money work for them through further investments.

If your investment properties are in an area where property management is an option and you’re not enjoying the landlord game or are finding yourself short on time, hire a property manager. Keep looking until you find a great one. Then use all that free time to scale up.

What are your best practices for making rental investments more passive?

Share them with us below. We’d love to know what’s working for you!

About Author

Debbie Emick

Debbie and her husband went from 0 to 19 (and counting) rental units in less than 3 years, when her illness led them on a search for financial freedom. She helps manage and grow their investment properties, near and far, from home while she homeschools their two daughters. She writes about all the freedom they’ve found in their lives because of her diagnosis on her blog . Hear more about her family’s story on the BiggerPockets Money Podcast Ep. 25 .

15 Comments

  1. Curt Smith

    Hi Debbie, you skipped right over the biggest reduction in landlording hassel, time eating and that is learn to upgrade your tenants to ones who never call, fix minor things and never move out. LOL Right, what work would you have if tenants just paid their rent (via some rent collection system like cozy.co, or other payment systems) etc.

    I might offer a help I wrote up in a talk i give at local REI events; a file off my profile in the first paragraph: how to buy a bullet proof rental portfolio. It starts with choosing a low problem tenant type. For me its middle blue collar, a permanent renter, dual incomes, and a dog. Then i buy 3/2’s only with a fensed back yard, decent locatoin close to freeways and jobs. JOBS are what pays your rent, so invest in areas with growing good jobs. Dead cities abound, do your research for employers adding jobs and new employers coming to town. Only buy where jobs are growing perhaps is the foundational tip to low landlording effort. 🙂

  2. Christopher Smith

    Until I got to the last one I was beginning to wonder, but you got it.

    When I add my underlying appreciation to my cash flow, property management expense has been just a little less than 5 percent of my bottom line. They do 95 percent of the work (and do a great job at it), and I get 95 percent of the profit. That’s Warren Buffett rates of return, and I can live with that until they put me in a box and plant me in the ground.

    • Debbie Emick

      Thanks, Christopher! I’m very grateful for good property managers. Many of our rentals are in an area where property management is unavailable, so I’m getting lots of good experience with it that’s making me appreciate them even more.

  3. Domenick T.

    Great tips! I’d add one more. Finding and keeping good maintenance professionals to deal with repairs and turnovers. It seems like a never ending challenge to find someone who consistently does good work. Once you find one, do everything to keep them happy and working for you!

  4. PJ Muilenburg

    I have five rental properties (6 doors) but am mindful to automate early, before I really need to, so that increasing my portfolio feels easily doable with my full time job. That said, I’ve been considering using virtual assistants but not sure I would really have much for them to do. I like the ideas of using them for listing tasks though. What virtual assistant platform do you use? Or does anyone else who’s reading use?

    • Debbie Emick

      Congratulations on your 6 doors, PJ! There’s probably no need to use a virtual assistant before you really need one, though you can certainly hire one for as little as 1 hour a week. You’ll just want to create the systems and document them clearly so that you can transfer those processes to an assistant when you are ready, as smoothly as possible. I just spoke with someone recently that had some great advice in this area too. He has the manuals that he documents all of his processes in “peer reviewed” before handing them over to an assistant. This really just means that he gives them to a friend, who then reads through them and can let him know where they see holes or don’t understand what to do.

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