Robert S. Griswold - Property Management Kit For Dummies

To get a firm grasp on managing your residential rental property, you need to understand what good management is. Good management entails having a well-maintained rental property that’s occupied by a paying tenant on a long-term lease who treats the property like their own. As with many things in life, managing well is much easier said than done, but by doing your homework and understanding what it takes to be a good manager, you can reduce beginners’ mistakes.

Who hasn’t heard about or even experienced horror stories about a greedy or downright unpleasant landlord who took advantage of their tenants? The image of rental property owners and managers as being overbearing, stingy, and snoopy has become part of the culture. You’ve probably also heard about tenants who don’t pay their rent, damage the rental property, and harass the neighbors and owner. Virtually all of these horror stories are true, but it isn’t a coincidence or bad luck that they happen to the same landlords again and again.

Bad management can bring down a rental property investment — pure and simple. If you choose the wrong tenant or fail to address certain maintenance issues, your real estate investment may turn into a costly nightmare. You can be financially devastated when you have a mortgage to pay and your new tenant gives you a rubber check for the security deposit and first month’s rent. To make matters even more challenging, you may find that your occupant skipped town after trashing your rental unit.

Fortunately, you can master good property management skills. Where do you start? Well, aside from this book, I encourage you to look into professional organizations that have qualified staff who can present educational offerings for property owners and managers. Here are three of the best of these organizations:

Institute of Real Estate Management (IREM), www.irem.org

National Apartment Association (NAA), www.naahq.org

National Association of Residential Property Managers (NARPM), www.narpm.org

Owning and maintaining your home is good experience for many aspects of rental property management. You may be very handy at fixing leaky faucets and painting cabinets, for example, but owning a home doesn’t give you all the skills needed to become a successful residential rental property owner. The main difference you need to remember is that a rental property is an investment — nothing more, nothing less. Although in a perfect world, you’d find your rental property personally appealing, ultimately. it’s just an income-producing investment.

In your own home, you’re in full control of making sure that you have money to pay the debt service on the property, and you take a serious interest in addressing small maintenance problems while they’re still low-cost items. As a homeowner, you also probably have experience in trying to live on a budget.

When managing rental property, you must be able to put your personal tastes and style aside in favor of what keeps your tenants happy and your costs reasonable. Because you don’t live in your rental property, you need to make sure that the furnishings and the property’s condition appeal to the broadest number of potential renters, even if you’d rather decorate it like the Palace of Versailles. You also have to be practical, thinking about the long-term implications of your management decisions. You may prefer drapes for window coverings in your own home, for example, but cordless vertical blinds are more practical for a rental property. Although they may not be as luxurious as drapes, vertical blinds are more durable and much easier to clean, and a broken or bent individual slat is easy to replace.

For most rental property owners, managing rental units is a part-time job. They handle tenant calls, collect the rent, show the units, and even perform most maintenance in the early evenings or on weekends. Managing your time is an important part of managing your rental properties. It’s about evaluating how much time you have and then looking for ways to streamline tasks so that you make the best use of your available hours.

Although rental management can be a part-time job, don’t be fooled: Making a success of it takes a lot of time, patience, and hard work. At first, most people assume that they’re equipped to handle any and all property issues. They may even find they can manage two or three units without problems or time conflicts. They enjoy managing their rental properties and appreciate the savings. As their portfolio grows, however, they have to be even more efficient in handling management activities. The challenge of being a landlord is finding the time required for this second job.

The good news is that the time required to be a landlord is in your control. If you acquire sound properties and master the skills of marketing (see Chapter 7), tenant screening, and selection (see Chapter 11), you can greatly reduce the amount of time you spend managing your rental property. You also have to work smart; otherwise, you may find that your time is better spent in areas other than management, because time is money.

Many people who manage their own rental properties value being their own boss, and they often run their business from a home office. Many people are looking for an opportunity to work at home, and rental management can provide a second income with flexible hours. During the pandemic, many traditional office employees experienced the advantages and disadvantages of working from home. If you prefer working from home, owning and managing your own residential rental properties could just be the answer.

Or you may expand your real estate holdings to the point that you outgrow your home office or prefer to have a separate business location. Postal service centers and office suites can combine the best of a home office with the image of a professional operation. Also, many rental properties offer you the opportunity to have a small separate management office on-site.

As a landlord, you may look at all the tasks you have to do and get a bit overwhelmed. But dealing with some responsibilities yourself and delegating some to other people can make your job much easier. To manage your property to the best of your ability, look at your personal skill set to determine which tasks you can do and which ones you need to delegate.

Throughout this book, I tell you various ways that you can delegate certain management activities and responsibilities to a personal team of experts, composed of the following:

A property manager: Ultimately, you can delegate all the management activities to a professional property manager. Having a property manager doesn’t mean you’re totally off the hook, however. Depending on your arrangement with your property manager, you may still find yourself providing the oversight and approvals that allow you to materially participate at an ownership level — an arrangement that has income tax advantages and also gives you the peace of mind of knowing that your rental property is well managed. (See Chapter 3for more on using a property manager.)