Now that we’ve got the “property management versus self-management” question out of the way, let’s zoom in on the world of self-management. Let me ask you a question: Are you excited for middle-of-the-night phone calls, sleepless nights, and profitless rentals? If so, manage your properties the way most people do, as a hobby.
If, however, you want your rental property experience to be different, you will need to be different.
The difference between success and failure as a landlord often comes down to the method used to manage those rentals. Is this a hobby for you? Are you just doing this “on the fly,” with no plan, direction, or purpose? Or is this a business for you, one you’ll run with efficiency, systems, and processes? If you chose the former, like most landlords, prepare for some difficult years ahead. But if you chose the latter, welcome to the world of property management!
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Managing Tenants is a Business
This means you need a process for doing things. Yes, I know you didn’t get into real estate investing just to get back into the corporate world of systems and processes, but trust me, this is designed to help you work less and experience less stress in your management.
Let me tell you about one kind of landlord, and you can decide whether you’d enjoy this life.
The buzzing cell phone wakes him up at 2:27 a.m. He picks up the phone, and the tenant on the other end of the line begins screaming about how someone is parked in their parking spot. He tells the tenant he is sorry and says, “There is nothing I can do,” but the tenant insists. So he calls the other tenant upstairs, at 2:28 a.m., and asks them to move their car. They insist that they only parked there because the downstairs tenant was in their parking spot. But while they have the landlord on the phone, the upstairs tenant lets him know that although rent is due tomorrow, they won’t get paid until next week, so they’ll need another extension. He tells them to make sure they drop the rent off at his house next Friday, and it’ll be fine.
Related: 16 Illuminating Questions Landlords Should Ask Every Prospective Tenant
But next Friday comes, and the rent doesn’t show up. The landlord drive to the tenant’s place, only to discover that the lawn—which is the landlord’s responsibility—hasn’t been mowed in almost a month. The landlord kicks himself for forgetting again and makes a mental note to try to come mow the lawn on Sunday. When he knocks, the chained door opens three inches, and a pair of unfamiliar eyes stares out blankly. The landlord assumes this must be the upstairs tenant’s new girlfriend, whom the landlord didn’t know was staying there. Smoke billows out of the partially opened door, and it doesn’t smell like cigarette smoke. Her boyfriend isn’t home, she says, and she isn’t sure when he’ll be back: “Might be a few days.” The landlord asks her to ask the tenant to call and walks away shaking his head. He’s used to this.
On his way down the steps, he’s stopped by the other tenant, who again complains about the upstairs tenant parking in his spot too often. The landlord reassures him that he’ll talk to the upstairs tenant about this and try to fix the problem. The tenant also reminds him that the bathtub faucet has been continually running for months, and the landlord promises once again that he’ll come fix it soon. He just needs to wait for both tenants to pay rent so he can afford the new faucet.
As the landlord walks back to his car, defeated, he asks himself, “Is this really financial freedom? Is this really what I fought so hard for? Is this what I saved all my extra income to invest in?”
You are probably a bit depressed after reading this. Good! But you need to understand that this is reality for millions of landlords across the world. Defeated. Burned out. Broke.
Is This the Life You Want?
Of course not! The landlord in that story approached his business like a hobby, a side project, something he does when he finds time. He’s deep inside his business and can’t seem to get out. He’s fighting a losing battle with his tenants and losing ground every day. But if there is one silver lining to this story, it’s this: when this landlord goes bankrupt, and he most likely will, you and I will be there to get a great deal on his property, turn it around, and start managing it like a business.
Related: Should Landlords Consider Bartering and Doing Business With Tenants?
We’ll create office hours, have a system in place for parking, collect rent automatically, issue legal notices the day after a tenant is late, kick out bad tenants, move in great ones, raise the rent, hire the right people to do maintenance jobs, and work far less but make far more money.
Treat Your Business Like a Business
If you can nail down that one basic principle and fully internalize it, you’ll be able to handle all these situations on your own because you will be in the right mindset.
- Owning a business means creating a policy of how things are done—and sticking to that policy.
- Owning a business means having rules—and enforcing those rules.
- Owning a business means setting boundaries—and making sure others abide by those boundaries.
- Owning a business means continually finding ways to become more efficient and profitable.
- Owning a business means outsourcing the things you aren’t good at or don’t enjoy.
- Owning a business means being productive and maximizing every second.
- Owning a business means working on your rental business, not in your rental business.
How do you ensure you treat your rental business like a business?
Weigh in with a comment!