4 Ways Systems Make Landlording Easier, Simpler & More Profitable

by | BiggerPockets.com

Have you ever noticed how every Starbucks store you walk into looks and feels pretty much the same? The same colors, the same aprons on the employees, the same font on the chalkboard. You know that when you walk in and order your “Tall, Extra Hot, Peppermint Hot Chocolate” or “No Water, Extra Hot, With Whip, Chai Tea Latte,” you’re going to get the same drink
taste wherever you go. This is because businesses like Starbucks are simply a collection of systems and recipes that everyone has learned to follow.

Savvy business owners seek to create procedures or systems within their business that instruct how all situations are handled. Systems are repeatable processes that guide how a business operates at all times. A system doesn’t necessarily need to be written, though that is a good idea. It’s simply a way of doing good business consistently.

Having pre-defined systems in place in a business helps in four distinct ways.

4 Ways Systems Make Landlording Easier, Simpler & More Profitable

1. It simplifies decision-making.

When a business has specific systems that guide how things are done, decision-making is a much easier task. To use the Starbucks example once again, because they have defined within their system what syrups to use in their Peppermint Hot Chocolate, the barista doesn’t need to think too long and hard about how the drink should be made. A “Tall” would receive three pumps of chocolate, three pumps of peppermint, and one pump of vanilla. Combine this with meticulously steamed milk and whipped cream, and you’ve got perfection. Customers come to expect this, employees have less chance of screwing it up, and the consistency makes everyone much happier. Additionally, management can feel confident knowing that their employees (or “partners,” as Starbucks calls them) are making each drink exactly to standard without the management themselves having to physically make each and every drink.



Related: 7 Top Business Books to Help You Put Vital Systems in Place

In your landlording business, the same benefit exists. When you have a system that guides how your decisions are made, there is far less chance that something could be screwed up. For example, a tenant calls and asks for an extension (more time) on the rent. If you have no system for dealing with this question, you’ll be forced to make a decision on the fly, which may not be the best choice for your business. Instead, if your system has identified this potential question and determined a process for dealing with it, the stressful situation becomes just a routine answer. No big deal. (We’ll talk about the specifics of this question later in the book and provide several processes for dealing with it.)

2. It frees up management’s time.

Because the business is operating under a strict collection of systems and repeatable processes, management needs to contribute far less to the day-to-day operation of the business. A barista doesn’t need to bug the manager and ask how to make a drink, a teacher doesn’t need to bug the principal to ask whether a field trip is acceptable, a construction worker doesn’t need to bug the foreman to ask where the wall needs to be nailed, and the tenant doesn’t need to ask the landlord if they can hang a picture on the wall. It’s all part of the defined system.

3. It ensures customer satisfaction.

At our core, we are all a little bit “rebellious” against systems and rules. After all, that’s why we decided to get into real estate investing, right? We conjure up images of useless TPS reports from middle managers and robotic-sounding support staff that can’t think outside their script on the other end of the phone when we need help. While systems and processes may be frustrating at times and tend to feel very “un-American,” imagine life without them! As consumers, we come to rely on the systems and processes that businesses maintain because they lead to stability in what we are getting.

We are happy that every 2×4 piece of lumber is the same dimensions because a house would be terribly difficult to build otherwise. We are thankful the DMV has a process for getting our new photos taken and we don’t have to hope that the person behind the desk is in a good enough mood to allow it. We are thankful that the US Department of Transportation has a system for signs and lines on the road, or else we’d be lost every time we got on the highway. And tenants are thankful when their landlord has systems and processes because they know what to expect and how to get what they need. And yes, you DO want your tenants to be happy. You may not be able to give them everything they want, but a happy tenant is a long-term, paying tenant, and that is music to any landlord’s ears.

4. It helps maintain financial stability.

When a business is guided by specific systems and processes, the business can achieve better financial stability because there are fewer unpredictable winds that could rock the boat.

Related: Let Go to Grow: Building Systems to Expand Your Real Estate Business

Of course, not everything is predictable, but systems allow a business to stay level throughout the year. When decisions are made on the fly, it’s easy to go over budget and say “yes” to things that probably need a “no.” For example, Starbucks charges the same $3.42 for a Tall Peppermint Hot Chocolate, and they don’t change the price on a daily whim. This way, they can better predict the revenue they’ll make over the next year and plan occasional price raises that maximize profit. As a landlord, because we have a system in place
for handling advertising, late rent, evictions, and so on, we can maintain a fairly steady cash flow throughout the year.

A business-minded landlord builds systems and relies on those systems to make their business run like a well-oiled machine. Systems help decrease stress and improve the bottom line, no matter what business they are a part of. Throughout this book we’ll discuss hundreds of systems and repeatable processes that you can implement in your business. These are repeatable processes that we use in our landlording business and that have been developed over many years. They can be as simple as knowing how tenants submit
repair requests or as complicated as dealing with evictions or angry tenants.

Once you master these systems, landlording becomes much easier, simpler, predictable, and more fun.

What systems have you implemented in your real estate business—and how have they helped you?

Comment below.

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on BiggerPockets.com. Like… seriously… a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of “The Book on Investing in Real Estate with No (and Low) Money Down“, and “The Book on Rental Property Investing” which you should probably read if you want to do more deals.

5 Comments

  1. Tim Sabo

    In other words, turn the ‘regular’ things you do every day into ‘standard operating procedures’ to be followed each time those situations come up. Regardless of who the person is, tenant screening follows the same steps, asks the same questions, records the answers in the same place: regardless of what time of day, tenant maintenance issues are fed to the party responsible for the broken part; regardless of the location, cleaning out a property after a tenants departure includes cleaning, painting, carpets scrubbing etc. By standardizing the items that occur on a regular basis, you can spend more time focusing on things that are extraordinary AND on becoming more profitable.

  2. Great article Brandon! Systems are definitely a big part of what set successful landlords apart from not-so-successful ones.

    I will also add that it reduces your legal liability. Consistently following strict screening criteria and property management policies is a great defense in case you find yourself defending a Fair Housing challenge.

  3. Casey Culver

    I saw the Starbucks reference in the first paragraph and thought “Did Brandon Turner write this?”…yep…Brandon Turner wrote this lol.

    As an engineer at a manufacturing plant getting into real estate (just bought my 1st deal!), I’m a naturally “systems” oriented person, so this article makes a ton of sense to me. Even just having your go-to carpet/laminate/paint colors in rentals, using the same or similar lease agreement and sticking to it, using a system of metrics or to decide “yes” or “no” on a home, etc… really makes everything black and white with fewer grey areas that leave us uncomfortable, or waste our time on decision making.

    I’m still a newbie but this way of thinking really makes sense to me.

  4. Rob Cook

    I recognize most of this from Brandon’s book on Property Management. A MUST READ for anyone in the business, regardless of tenure and experience. I am literally living this lesson(s) daily as I study property management and experience many of the situations Brandon discusses.

    I learned a long time ago, that the highest paid professionals are boring. That is, they do not reinvent the wheel on every venture, they repeat the same old stuff, over and over again. Same for real estate pros. Find a niche, a modality and a process that works, and then…repeat.

    You literally get paid for being “boring” as a successful pro. So instead of resisting structure and procedures, embrace it. Spend your creative time finding deals and learning, and keep going to the cash register for the business income. Excitement is usually expensive. Another good old saying is, experience is something you get when you expected something else. Rinse and repeat and some say in this business.

  5. John Murray

    Standard procedures are always good to have. Having an entrepreneur mindset I have always been a bit on the wing-it side. The boring lease agreement contracts, standard renovation lists, tax spreadsheets and a program to manage my rentals are the most painful part of my RI activities. My wife has an MBA, I was lucky to get out of High School (not really I was National Honor Society) and she is so much better business manager than I. I’m looking at 6″ of paper to go to my CPA tomorrow, I’d rather go jack hammer concrete.

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