Robert S. Griswold - Property Management Kit For Dummies

Late or missed rent payments: Timely payment of rent is the lifeblood of real estate investing, because you can’t pay your mortgage or expenses without it. A written rent collection policy is a valuable tool for minimizing these problems. You also need to know about any government or private financial resources available to your tenant to help them pay the past-due rent, as most courts in a post-pandemic environment are less likely to enforce an eviction until all such resources are considered.

Loud tenants: It takes only one boisterous tenant to disrupt the tranquility of the whole neighborhood and destroy your tenants’ right to “quiet enjoyment.” Developing and implementing rental policies and rules can prevent your problem tenant from chasing the good tenants away. At many properties, the one bad apple is the reason why more of the good-apple tenants leave than any other single issue. So don’t underestimate the importance to your cash flow of removing disruptive tenants in a timely and legally allowed manner.

Chapter 15gives you some additional tools for dealing with problem tenants effectively. I also describe the best way to handle common tenant problems and the pros and cons of alternatives to an eviction.

Are you familiar with the saying “To own is to maintain”? When you have only a few rental units or are just starting, you often do much of the maintenance work on your units yourself. But as you acquire more properties or advance in your primary career, you need to explore the benefits and consequences of using employees. If you own a medium-size to large property, having an on-site employee who’s responsible for its day-to-day management is mandatory.

To keep your property in tip-top shape, you also need to work with outside vendors and suppliers who are pros within their industry. Always keep in mind that you get what you pay for and that maintenance can be one of the largest expenses that landlords face. Part 4helps you navigate the nitty-gritty, hands-on aspects of managing employees, vendors, and contractors and maintaining your property.

Like many property managers, you probably consider your property to be an investment. If you continuously lose money, having the property isn’t worth the hassle or the expense, right? Not to worry. Although you can’t predict bad weather or crime, you can safeguard the value of your investment by doing the following:

Being aware of environmental hazards that can occur: Minimize your risk, and be prepared for natural or environmental hazards such as storms, fire, carbon-monoxide gas, bedbugs, and mold. See Chapter 19for details.

Buying the necessary insurance: You can’t avoid buying insurance, so I make sure that you know enough to be dangerous when your insurance agent says you need coverage for snowstorms at your duplex in Phoenix. Chapter 20covers the types of insurance you need to consider.

Paying your taxes: Property taxes are a reality of life almost everywhere. Chapter 20makes sure that you know how they’re calculated and what you can do to minimize your tax payments by appealing your property’s assessed value when market conditions decline.

Tracking your money: You may not want to be a greedy landlord, but you’d better track your income and your expenses, as you’ll need to file income tax returns annually. In Chapter 21, I cover the best way to organize your files and the top property management software that you can use to streamline and simplify this important but potentially time-consuming aspect of managing rental housing.

Increasing your cash flow: Sometimes, recouping all the costs for your property isn’t easy, so you may need to find ways to get more cash in your hands. As you discover in Chapter 22, a wide assortment of options awaits, including government-subsidized housing programs, special niche housing markets, and lease options.

Chapter 2

IN THIS CHAPTER

Classifying types of residential rental property owners

Listing some advantages of owning residential real estate

Understanding what makes a good residential property manager

Assessing your management skills and experience

Real estate can be a great source of income, whether you’re looking for steady, supplemental retirement income or a secure financial future. Most residential rental property owners want to become financially independent, and real estate is a proven investment strategy for achieving that goal. But after you sign your name on the dotted line and officially enter the world of residential rental property ownership, you face some tough decisions. One of the very first concerns is who handles the day-to-day management of your residential rental property. You have units to lease, rents to collect, tenant complaints to respond to, and a whole host of property management issues to deal with. So you need to determine whether you have what it takes to manage your own residential rental property or whether you should hire and oversee a professional property management firm.

Owning investment real estate and managing rental units are two separate functions, and although nearly everyone can invest in real estate, managing it takes time, special skills, and the right personality. In this chapter, I highlight the importance of relationships with people, because property management is really people management. I also give you the lowdown on some of the advantages of owning residential rental property and help you assess whether you have what it takes to manage your own property.

Some rental property owners find themselves managing their own properties without even knowing what management requires. Managing the physical aspects of your properties (the buildings and common areas) and keeping track of your income and expenses are fairly straightforward tasks. But many rental property owners’ most difficult lesson is the management of people.

Rental housing management requires you to deal with many more people than you may think. In addition to your tenants, you interact with rental prospects, contractors, vendors, suppliers, neighbors, and government employees. People, not the property, create most rental management problems. An unpredictable aspect always exists in any relationship with people.

As in most businesses, the ability to work with people is one of the most important skills for being a successful property manager. If you enjoy interacting with people and are adept at working with them, you’re off to a good start toward becoming a successful — and likely prosperous — property manager.

Residential rental property management has been around for hundreds of years, ever since property owners first realized that they could earn income on their land and buildings by renting them to tenants. These days, the title landlord is no longer bestowed only on the landed gentry. There are as many different ways that people become property owners as there are types of rental properties. Although the nature of the business has changed over the centuries, today you can classify rental property owners in two categories: the inadvertent rental property owner and the long-term investment rental property owner. No matter which category you find yourself in, one thing is constant: The key to your success is sound management.