The fact is that all landlords have to start somewhere -and every seasoned professional was once new to the game themselves!
To help you cover all of your bases, and enable you to avoid some of the pitfalls that are common for first-time landlords, we've compiled a list of things that will help you to get your A-game on. From assembling your all-star team and setting clear objectives, to establishing boundaries, and playing fair -here's a look at what you should know before you step up to the plate!
Create a Winning Strategy
First things first. Property management, like baseball, is a game of strategy more than anything else. With baseball, there are key components that need to fall into place in order to win the game, and with rental properties; the same principles apply. Being able to make money at your venture requires a business mind, and clearly established goals from the start. Know your objectives, how much you want to make per year, how many properties you'll need to purchase to make that happen, and what type of ROI you need to generate from each of the properties. Next, you'll want to establish systems to help streamline your processes, and remember to always treat your rentals like a business, rather than a hobby.
Establish Boundaries
Baseball is a game with clearly defined rules, and as a landlord, you'll need to set clear boundaries as well. This includes establishing set office hours, where you can be reached, and having a designated line for emergencies. It also means establishing policies -and ensuring that you and your tenants both abide by them. This is especially vital for helping to enforce that the rent is paid, on time, every month.
Educate Yourself
Property management is full of curveballs! And it's important to learn everything that you can about it, before you dive in. Start by reading books on real estate investing -here's a list of books that we recommend, and head over to helpful communities like Bigger Pockets, as well as blogs like InvestFourMore and Landlordology. Gathering knowledge from people who have been there and done that, can help you to avoid learning everything the hard way, and will help to get you off to a winning start!
Get Organized
Never underestimate the power of organization! It may seem somewhat trivial, but being organized can do wonders for your property management venture. When you own a handful of properties, and are playing in the big leagues, you'll be thankful that you took the time to document and file things early on. Remember to keep your properties separate. Consider putting things that pertain to different properties into separate folders; and then filing the folders by year.
Assemble Your Team
Having an all-star team is important to your success as a landlord. This is especially important if you're going to be managing multiple properties, or are investing in property that's out of town. Connecting with a good real estate agent is a good start; and will give you someone who can alert you to potential investment properties in the area. An experienced attorney is also vital, allowing you to run your lease agreements and other legal documents by them to ensure that you've covered all of your bases and are on the right side of the law. A good accountant is also vital, helping you to navigate the often-confusing world of taxes and informing you how investments will impact you from a tax point of view. Finally, don't forget about a property manager -who will be able to take on all of the day-to-day management responsibilities, as well as tenant sourcing and screening, rent collection, and even evictions. Many landlords will vouch that the decision to hire a property manager was one of the best things they could have done.
Crunch Some Numbers
You'll also want to do some number crunching, before you go pro! Run the numbers before you invest, to make sure your property will produce the type of returns that you're after. First, find your cash flow by tallying up your projected expenses -the mortgage payment, insurance, utilities, maintenance and repairs, fees, as well as vacancies (at least one month per year); and subtracting them from your projected income. Then, you'll be able to take things a step further and find your cash on cash returns and capitalization rate.
Document Everything
Unless you have an umpire on your team to call things as they see them, you're going to want to get everything in writing -starting with an airtight rental agreement. This should include everything from the rent amount, payment dates, length of tenancy, noise rules, and more. It should also spell out the consequences of breaking the lease; such as a fine or even eviction. By putting it in writing, you can ensure that you treat every tenant equally and fairly. It will also help to prevent unnecessary disputes, and make it easier to prove your case if you find yourself in court.
Play Fair
Don't forget to play by the rules! It's your property, but it's your tenant's home. As a landlord, you can't barge in on your tenants any time you'd like. It's important to schedule walk-throughs, maintenance, and repairs -and always provide at least 24-hours' notice; although state laws vary on the amount of time that you're required to give. The only exception to this is in an emergency, where you have no choice but to enter without notice. Equally important is respecting your tenant's privacy when it comes to their personal information and data. Don't gossip about the neighbors, and don't leave a tenant's information -phone numbers and account numbers -lying around where someone could see it.
Start an Emergency Fund
You'll also want to start saving for a rainy day. There will come a point where you'll need a new water heater or roof, and having a portion of the rent put aside in an emergency fund will allow you to make those necessary repairs. It's a good idea to put at least one month's worth of rent per year into this account.
Fix Things
Don't drop the ball! A lack of repairs is usually a tenant's biggest complaint, and can quickly ruin a landlord-tenant relationship! Make sure you fix issues that arise as soon as possible; and to a high standard. Don't be stingy when it comes to repairs; a subpar fix usually won't last long, and in some cases, could end up costing you more later on.
Don't Lose Your Cool
As a landlord, it's important to stay professional. Even when confronted with a difficult situation or less-than-polite tenant. While it can sometimes be difficult in the heat of the moment, it's important to maintain your cool and keep a calm and professional demeanor -you won't regret it later on.
Finally, successful rental management, just like baseball -isn't a game of luck. It's all about clear-goal setting, lots of practice, and plenty of mistakes and fumbling the ball. But by establishing clear objectives from the start, learning as you go, and assembling your all-star team -real estate agents, property managers, attorney, and accountants; you'll be all set to grow your property management empire, and start hitting home runs! Batter up!
Are you a first-time landlord -or have you been overseeing rentals for a while? Share your best tips for new landlords!
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