3 Property Management Tips For Real Estate Investors
They get it! Our Mastermind Team has learned to buy and hold rental properties without banks and it is exciting to interact on topics of debt financing, equity financing, catalyst and private lenders…
Now what? Once you own rental property you have to learn to deal with tenants and manage it effectively.
Here are 3 property management tips for real estate investors.
1. Screen your tenants
When I bought my first duplex back in the 1990’s I had zero training and my management systems were that I would rent to the very person who had a pulse and the rent to move in. My tenant screening was invisible because it did not exist…
I quickly learned the dangers in this approach to property management and it led to hassles, no rent and many headaches as I went through the school of hard knocks property management.
The first tip to make management easy is to carefully screen your tenants.
The screening process starts with having a great rental application and expecting the application to be completely filled out. Once you have a completed rental application and everything looks good be sure to diligently call all the references on the application and ask questions to verify employment, rental history, etc. The two most important items on references are the employment and rental history. When calling current and past landlord I like to ask “would you rent to this person again.” There is value in verifying all the information on the rental application. Some tenants are very good at trying to deceive the new potential landlords with false information and when screening tenants diligently confirm all information. Once you have gone through the references, be sure to pull credit and criminal background. The credit check and criminal background checks will shed a huge light onto potential tenants and give you an idea on how important it is for them to pay their bills, check for past evictions and if they had a stint as a “jail-bird.”
2. Lease
So many people use other people’s leases without ever reading them to see what they define. The lease is a contractual agreement that calls for the lesee (tenant) to pay the lessor (landlord) for use of a real estate asset. There are many elements of leases and they contractually obligate both parties to the terms of the lease including length, rental amount, late fee’s and a huge host of other terms from move in to move-out. Be sure that you read your lease and are 100% comfortable with all the terms of your lease so that you can properly explain it to your tenant when they sign it. It sets all the expectations for rent payments, taking care of your assets and what happens when tenants do not perform to the terms of your lease.
3. Firm but Fair
What do you do when your tenant does not pay rent on-time? What happens if your tenant does not have all the rent, but has a partial? Being a firm, but fair property manager is a good method for handling most situations. Never tell the tenant that you own the property they live in and that you always have to get approval from your boss before making a final decision. Last spring I was at dinner with John Groom and he told me a story where a tenant asked him for a specific improvement to the house he was living in. I asked John what he did which was tell the tenant he had to check with his boss (who is actually John’s wife in this case). You see the point that if tenants know you “own” their property they are more likely to ask you to have “sympathy” on them for being late on rent, or asking you to fix something that they broke, etc. If you are simply an employee at your own property management company, you can tell them you are bound to the company policies and can manage more effectively at an arms length away. Do not become personally attached to your tenants, do not become their best buddy, do not become personally involved with their families, struggles, etc. Manage your properties as if you are an employee and stay firm but fair and you will be able to manage through most situations.
Want more? Check out my two books! Here is the link to my first book, Investing Now by Jim Ingersoll and my second book Cash Flow Now by Jim Ingersoll
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