Did you recently buy a rental property? How do you manage real estate properties?
You’ve gotten the keys to your new property and it’s time to run your business. This is the critical time when you need to attract tenants and learn the ropes of operating efficiently.
To learn how to manage real estate properties, read below.
1. Attracting Tenants
The first step in learning how to manage real estate properties is optimizing your cash flow. Meaning, that you need to find tenants. The Book on Rental Property Investment by Brandon Turner recommends making the property as enticing as possible before showing it to prospective tenants. An appealing paint job is one of the best ways to enhance a property’s appeal to potential renters, along with thorough cleanups inside and out.
(Shortform note: A paint job and cleanup may not be enough to attract certain tenants. Another critical way to boost your curb appeal is to ensure the grounds are neatly kept—prospective tenants often react badly to grass or shrubs that are out of control. Also, consider adding exterior lighting to the property—it not only makes the property appear more cared for, but it can also bolster a tenant’s feeling of security.)
Once you’re ready for viewings, invite tenant interest. Turner notes that you could use signs, which are cheap and easily personalized—although visibly advertising an unoccupied property may invite vandals. Craigslist offers similar advantages to signage; it’s also accessible to anyone with an Internet connection. But avoid mentioning a specific address, as this can also invite vandals. Other options include advertising in a newspaper and using existing (trusted) tenants to spread the word and attract equally trustworthy clientele.
(Shortform note: You can further improve your advertising efforts by getting the timing right: Tenant shopping activity tends to be highest during the summer. Advertising at this time may make it easier for you to attract tenants to your unit and get the vacancy filled quickly before vandals strike. Plus, getting any pre-existing tenants to stay until summer can reduce the pinch of an extended vacancy.)
2. Screening and Accepting Tenant Applicants
For Turner, screening is everything when it comes to getting quality tenants. Follow an initial application form with a background check, focusing on criminal records, bankruptcy, and evictions. Call the person’s current boss and prior landlords to confirm their monthly income and past rental behaviors.
When rejecting an applicant, Turner recommends knowing local discrimination laws to avoid appearing biased against certain attributes or communities. To ensure fairness, accept applicants in order of submission, and always provide written reasons for any rejection to circumvent claims of bias.
When you accept an applicant, insist on a holding deposit, which obliges them to put down a lump sum of money as a good-faith gesture while you reserve the unit for them. Turner notes that this covers your costs in the event that the applicant ultimately moves in elsewhere.
Also, find the right kind of lease agreement for your tenants. Turner explains that you could opt for yearly leases in places where you have quality tenants you wish to retain. Alternatively, you may opt for monthly leases if tenants are harder to manage, thus leaving open the option of removing them quickly. Six- or nine-month leases are helpful for avoiding lease terms ending during holiday seasons when you could have more trouble filling the vacancy.
Before handing over the keys, Turner continues, perform a walkthrough with the tenant, documenting the property’s state with a move-in condition report. This makes it easier to identify damage inflicted by the tenant when they eventually move out.
3. Upkeeping the Property
Once you’ve rented out the property, your task is to maintain it. Turner recommends knowing from the outset what you’re legally obligated to do. Many big-picture items—such as appliance care, fire safety, and carbon monoxide safety—are your task to maintain. However, damage created by the tenant often falls on them to both report and pay for.
Turner suggests getting ahead of the most common problems and keeping a checklist of items to maintain. Arrange regular—often annual—maintenance of common features. This includes storm drains, sump pumps, and siding on the outside of the property; and fridges, boilers, and furnaces on the inside.
(Shortform note: Note that some of the maintenance tasks Turner suggests performing may require preemptive scheduling. This particularly applies to anything requiring appointments with professional service providers or inspectors, such as roof, boiler, or HVAC inspections. Establishing appointments in advance can help you keep maintenance and repairs on track, aid your property manager’s workflow, and help you understand the spread of maintenance-related financial commitments each period of the year.)
