Want to know how to manage a rental property? You’ve come to the right place.
In this article, we’re going to cover everything you need to know about rental property management, including:
- What you need to take care of as a landlord
- The pros and cons of having a property manager
- How to manage multiple rental properties at once
…And more.
Ready to learn more? Let’s dive in.
You’ll learn…
The responsibilities of a landlord
As a landlord, you have three main responsibilities:
Tenant management
Being a landlord requires people skills.
You need to be able to solve issues and communicate with your tenants.
That includes choosing the right tenants in the first place (which we’ll talk about in the next section).
After all, good tenant-landlord relations make being a real estate investor so much easier.
Property management
Dealing with your tenants is one thing. You also have to make sure that your tenants live in a safe, comfortable home.
That means you’re responsible for regular property inspections and structural repairs.
Thankfully, property management isn’t all on you – your tenants play a part too.
Make sure it’s clearly outlined in your lease exactly who is responsible for what.
Financial management
Finally, you need to keep an eye on the numbers to make sure your real estate portfolio remains profitable.
By that, I mean making sure the rent you collect covers any mortgage, maintenance, insurance, and property tax payments.
You also need to keep tabs on:
- Security deposits
- Property taxes
- Late fees
This all needs to be organized in an accounting system or you can hire a bookkeeper to help you.
Ultimately, good financial management helps you achieve financial freedom and invest in more properties.
Important note: Tenant management, property management, and financial management change dramatically depending on the type of rental properties you manage.
For example, multi-family and single-family properties are very different.
Multi-family is when you have a property split into several rental units. Even though these properties are more scalable, they can be harder to manage.
For one, these properties are larger, so they require more maintenance. You also have more tenants to manage.
I prefer to rent student housing (single-family) as it’s more manageable while still making a great return because you can rent by the room.
Here are my numbers:
In the next section, we’ll talk about how to manage a rental property, no matter what type of rental you own.
How to manage a rental property
Here are the steps you need to take to manage a rental property:
- Set the rent
- Market your property and screen tenants
- Collect rent
- Maintain and repair
- Manage your finances
Let’s dive into each step one by one.
1. Set the rent
First, how do you set the right rent for your property?
Because it’s not about the cost of the home or how much you want to charge.
The rent you set is determined by the market. You want to choose a fair market rent that will keep your business profitable but also be attractive to tenants.
You should calculate your expected return on investment before you buy a property.
But if you already have a property, you can take this step now.
Research the rental market in your location to find a fair price. If it’s going to put you in the red to rent the house at that price, you might be able to do some renovations to increase your return.
For example, when I review a house, I think about how many bedrooms I can create in the space. That way, I can maximize my rental income by renting to several single people at a time.
Here are some more ideas so you can ask for more rent:
2. Market your property and screen tenants
So your property is ready to go. How do you find tenants?
Advertising online is one of the most effective marketing strategies.
You can use platforms like:
Placing ads in local stores, libraries, and college halls can also help.
Now, let’s talk about choosing tenants.
I have a framework I teach my students called the PRIME method. It goes like this:
- P – Placement of the ad: Where you advertise will impact the quality of the tenants you attract. Avoid places like Facebook Marketplace and Craigslist.
- R – Review social media: Take a look at potential tenant’s online profiles. If they seem to be heavy drinkers or drug users, you might want to avoid them.
- I – Identify the type of person: You want to speak to the tenant and get to know them. Can you get along with them? A call or meeting to show the tenant the property will give you an idea of who they are as a person.
- M – Measuring responsiveness: Is the tenant communicative? And is that communication professional and respectful? This is key for your landlord-tenant relationship to go well.
- E – Ensuring proof of income: Ask for their FICO scores and pay slips to prove that they can afford the rent. Ideally, you want to see that they have savings too in case they lose their job. If they don’t have proof of income, ask for a co-signer.
Once you’ve found the right tenants, make sure you have an airtight lease agreement. This protects you and your tenants.
You can consult a lawyer to help you with this step.
3. Collect rent
Collecting rent seems simple right?
It can be if you have the right system set up.
First, make sure your lease agreement is crystal clear on:
- Date of rent payments
- Cost of rent
- Method of payment (e.g. Venmo, Stripe, etc.)
Next, set up your business account separate from your personal finances. This will make your accounting easier as you grow your business.
If you want to make your financial management even easier, you can use a platform like TenantCloud make collecting rent completely automated.
Now, should you charge late fees?
It’s up to you. You’re within your legal right to charge late fees if they are clearly outlined in the lease agreement.
Late fees can prevent bad behavior because tenants who pay late might consistently pay late.
In the worst case, you might have to evict them.
And evictions can be expensive and time-consuming.
In fact, the amount can range from $500 to $10,000, depending on the number of tenants, the location, court fees, legal fees, and lost rent.
Some landlords even offer tenants money for vacating the property and giving back the keys.
It sounds counterintuitive but given how lengthy evictions can be a quick exit can be worth it.
Of course, the best solution is to avoid evictions altogether.
Fortunately, I’ve never had to evict a tenant because I’m diligent with my screening process.
I talk more about how to avoid evictions in this video:
4. Maintain and repair
Maintenance and repairs are normal for any rental property so it’s a good idea to define your system.
Ask yourself:
- Do you have some trusted professionals on call? (Plumbers, electricians, and so on.)
- Have you set aside some of your rental income for repairs?
- Are your repair and maintenance responsibilities outlined in the lease agreement?
- Are your tenants’ responsibilities outlined in the lease agreement?
If you answered “no” to any of these questions, try to fix them as soon as possible.
You don’t want an emergency to happen and get caught short.
Now, what do you do when an emergency occurs?
First, communicate with the tenants.
Often, my tenants can handle a lot of emergencies as they come up and I reimburse them.
So instead of me being the middleman and arranging repairs, I get my tenants to call the services themselves.
The issue is usually resolved much faster if I empower them to act fast.
That doesn’t mean you’ll never have to deal with repairs and maintenance yourself. All landlords have to get involved with emergency repairs at some point.
Some landlords are more hands-on than others – it’s up to you whether you want to handle all repair calls or delegate with your tenants like I do.
But you can avoid many emergencies from happening just by conducting regular inspections on the property.
I recommend doing this seasonally. That way you can identify any small issues that could later become bigger issues.
The most important thing is that your property complies with local regulations as a habitable property for your tenants.
Making sure you stay on top of repairs and maintenance also builds a better relationship with your tenants over time.
5. Manage your finances
You can make a lot of money as a real estate investor, but only if you know how to manage your finances.
And if you’ve never managed a rental property before, this is one of the most crucial skills to learn.
Start with a system to track your income expenses.
That includes:
- Rent
- Mortgage payments
- Property tax
- Income tax
- Insurance
- Utilities
- Legal fees
- Maintenance costs
- Marketing costs
- Property management services (if applicable)
Track everything. Not only does that make accounting easier but it’ll give you a clear picture of your ROI.
ROI, return on investment, is how much profit you’ve made compared to the amount you originally invested.
To make a good ROI, the cost to run your expenses needs to be much lower than your annual return.
Ultimately, the best way to do that is to choose the right property from the start.
Otherwise, you could end up spending thousands of dollars on repairs like I did with my first property (more on that story here).
Financial management doesn’t need to be complicated. Get into detailed accounting practices now and it’ll get easier as you scale.
Now, if you read these steps and thought:
“That sounds like a ton of work!”
Then, you’re right. Managing properties and growing a successful real estate business takes work.
Hiring a property manager could be an attractive alternative. That’s what we’ll talk about next.
Do you need a property manager?
There are three main ways you can manage your rental properties:
- DIY property management: Managing a property by yourself is great because you have full control of every aspect of your business. But it can also be more work. You’re responsible for marketing your property, screening tenants, arranging maintenance, and so on. If you’re an organized person, self-management can be highly profitable long-term.
- Full-time property management: This is when you hire a property manager to do all of the main tasks for you. That can include showing and advertising your vacant property, as well as dealing with all tenant queries. Some property managers can help you with legal documents too like creating lease agreements or evicting tenants.
- Part-time property management: Let’s say you only want help, marketing your property but you can handle the maintenance and tenant management yourself. A property management company can work with you on an ad-hoc basis for specific tasks.
So which is right for you? It depends.
Hiring a property manager has many pros.
Because they handle all of your tenant and maintenance, you don’t have to spend too much time managing your property. That’s valuable if you’re trying to build a real estate portfolio while you’re working a 9-5 job.
Plus, if you have a large portfolio, a property manager can make sure nothing falls through the cracks.
On the other hand, property management can be expensive.
Typically, property managers cost around 8-12% of your rental income. Long-term that affects your profitability – especially if you want to scale your business with multiple rental properties.
This is why I chose to self-manage my properties and build systems to make the management process smoother.
Want to know how I do it? Read on.
How do you manage a lot of rental properties?
To be a successful real estate investor, start with one property.
Your first property will teach you so much about how to be a good landlord and manage your business.
But once you’ve figured out how to manage one property, you might want to scale.
That’s what I did. By investing in more properties, I made enough to quit my job and achieve financial freedom.
So how do I manage multiple rentals without the stress?
Simple, I use a strategy called tenant empowerment.
Basically, I involve my tenants in the management of the property.
For example, you can ask that one tenant send the money for the utility bills for the whole property.
Of course, tenants can split the utilities between each other, but by collecting from one person, I drastically cut down on my paperwork.
You can also empower tenants to purchase necessary items or replacements for the property that you reimburse. That way, you’re not going out and installing things yourself.
Want more tips? Check out this video:
Tip: You don’t need 10 or 20 real estate properties to become financially free. I did it with just four properties. Four properties are way easier to self-manage, especially if you have a 9-5.
Next steps
There you have it!
Now you know how to manage a rental property – even as a total newbie.
But there’s so much more to learn about owning and managing rental properties so that you can achieve financial freedom.
I started investing in real estate as a total newbie and made multiple mistakes. Today, I have a seven-figure portfolio.
Want to know how I did it?
Find out how you can work with me here.
Read more:
How to Make Money on Rental Properties
