Eight Tips for Managing Your Investment Property Easily

By
Real Estate Agent with Keller Williams Capital Properties DC AB15253
https://activerain.com/droplet/5q5T

Congratulations on becoming a landlord.  You have taken an important first step in the path to building wealth for you and your family.  I love being a landlord - at least most of the time - because you are enjoying passive income.  While you are on vacation or sleeping or buying another property - your investment property is generating cash flow.

However, if you don't take a few simple steps in advance to set up your rental property correctly, you can create avoidable problems with accompanying stress.  Don't worry. In general, the good tenants outnumber the bad ones and you’re able to manage your property profitably.

To help reduce or eliminate some of the stressors associated with being a landlord, take these seven simple steps:

1. Set up a separate LLC or other entity for your rental property.  You want to make sure that your rental property is separate from your personal residence and other assets.  If something unimaginable happens and you are sued, your liability should be limited to the asset of the rental property.   Putting the title to the rental property in a separate entity will help to protect your other assets.

2. Set up a separate checking account for rental income and expenses It is much easier to keep your rental income and expenses separated from your other assets if you set up a separate checking account.   Tax preparation will be much easier also if all the income comes in to one account and you pay your rental expenses and mortgage out of the same account.  A separate account also supports the argument that the rental property is its own asset, separate from your other assets.

3. Make It Easy to Collect Rent.  Automating the process can make rent collection much easier.   Set up your separate checking account with a bank that accepts credit or debit cards or even automatic bank transfers. This is more convenient for both you and your tenants, and it provides a transaction history for bookkeeping.  If you have a multi family rental property with several tenants paying you rent each month and you are receiving checks, you will want to deposit each rent check separately so that you can track who has paid and on what date.  

4. Outsource Maintenance and Use Service Contracts. Anything beyond a few units can be a headache in maintenance, including painting and cleaning up after sloppy tenants. Hiring a crew to take care of this involves all the problems of recruiting and training employees, managing payroll and benefits, and other concerns.

If you don’t want those additional stresses and don’t need full-time help, outsource these routine maintenance tasks to another company. It may cost a little more than doing the work yourself, but you’ll have more free time and less anxiety. 

At a minimum, make sure that you have reliable contractors on speed dial and that you have an HVAC service contract.  You can count on your furnace dying on Christmas Day and your air conditioner icing over on the 4th of July.  Without a service contract, you will be at the back of the line waiting for service while your tenant checks into a hotel at your expense.   A service contract will guarantee that your HVAC receives priority treatment during the busy seasons and a good service contract will also provide maintenance checks twice a year.

5. Keep an Emergency Fund. Whether you opt for employees, contractors or the DIY route, you’re still going to pay for repairs and upkeep. Some routine maintenance you can budget for, but events such as careless tenants, storms, litigation or burst pipes are something else. If your insurance policy won’t cover it, or units aren’t inhabitable, you’re losing money. It’s best to set aside what you can from the very beginning so that one major setback doesn’t cripple your cashflow.

6. Find a Property Manager. You could also pass on your landlord troubles to someone else by hiring a reputable property management company or professional. Those with special training and significant experience may be better suited to handle maintenance, budgets and bad tenants than you are. A manager will cost you money, but eliminate the difficulties of being a landlord while you sit back and take the profits.

7. Tenant Screening. Better tenants mean fewer missed rent payments, less property damage and longer tenant retention. Getting good tenants requires screening each applicant to weed out those who may represent a high risk. Screening requires verifying employment, conducting background checks, checking credit scores, calling references and anything else you consider a good indicator.  If your tenant is moving from a nearby single family home, drive by the property and see if it looks maintained.  Has the tenant brought in the trash barrels after trash day? Is the yard cluttered?  Chances are that is how your property will look after this tenant moves in.

I use a company called Smart Move, which checks credit scores and criminal back grounds.  The prospective tenant fills out the application on line and pays the company.  I get the results and then follow up with checking references and past landlords.   When checking references with past landlords, do not rely on the word of the current landlord.  If the tenant has been a problem, that landlord may not tell you the real story about the tenant because the landlord just wants him or her to leave ASAP.  Call the landlord previous to the current landlord.  That landlord may give you the "real" story about the tenant.

Familiarize yourself with the Fair Housing laws and protected classes in your county, state and on the Federal level.  Certain classes of people are "protected" and you cannot base your rejection on those classes.  For example, you can not reject someone because of a disability but you can reject the prospective tenant because they are smokers.  If you are not sure about the protected classes in your local area, get guidance from your city or county landlord tenant office.   This is important.  Make sure that you document the reasons for your decision. 

You also don’t want to be too fussy. If you reject one applicant after another, you’ll wind up missing out on rent. Tenant screening is another time-consuming task you could delegate to a professional service.

8. Pick a Good Property for Your Investment and Maintain It.  You can't always guarantee that you will have financially solid people apply for your rental, but I really do believe that well maintained properties in good neighborhoods attract desirable tenants.   If you offer a clean, well maintained home in a desirable school district, chances are that you are going to have stable people with steady income applying to be your tenants.  You certainly are going to have more people to choose from than if you offer a property that is dirty, in need of maintenance or in a marginal neighborhood (by whatever definition you choose.)

Having argued in favor of solid properties in good neighborhoods, there is another approach.  If you buy an investment property in an emerging neighborhood, you may not get as much rent and your tenant may or may not give you more problems, but you may see more appreciation in the value of the property itself.

Being a landlord has been a great source of income throughout human history. It may be a little more complicated today with all the legalities and paperwork, but it can still be profitable and rewarding if you’re thoughtful in spending your time and money.

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Joe Jackson 01/06/2021 06:05 AM
  2. Will Hamm 01/19/2021 08:38 AM
Topic:
Real Estate Best Practices
Tags:
tenant screening
property management

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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Lise this is very good advice.  For me #4 and #6 would be a must.

Jan 06, 2021 12:03 PM #9
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

George Souto - property management is not always easy but if you set up the property correctly going in - and you get the right contractors, then it can be easier.

Jan 06, 2021 01:50 PM #10
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

CANDACE (Candy) STEVENS - it is good to know that there are knowledgeable people like yourself out there

Jan 06, 2021 01:50 PM #11
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Will Hamm - of course you can reblog it - thank you! very much!! Have a great week

Jan 06, 2021 01:51 PM #12
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Chris Ann Cleland - I agree completely.  My son, daughter and I have several properties together and I am so glad that we do.  It really is generational wealth building - but it takes some organization - dropping in accidentally can be a big problem

Jan 06, 2021 01:52 PM #13
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Barbara Todaro - you always write the nicest comments - thank you so much!

Jan 06, 2021 01:55 PM #14
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Grant Schneider - thanks for stopping by and for your kind comments

Jan 06, 2021 01:56 PM #15
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Rocky Dickerson Thanks for stopping by.  I always appreciate hearing from you!

Jan 06, 2021 01:57 PM #16
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Roy Kelley - thank you - you are always so kind to me!  Hope you are staying warm on this cold afternoon

Jan 06, 2021 01:57 PM #17
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Joe Jackson - I am glad that you found the post useful - have a great week

Jan 06, 2021 01:58 PM #18
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Kathy Streib
Room Service Home Staging - Delray Beach, FL
Home Stager - Palm Beach County,FL -561-914-6224

Hi Lise- I love all of the tips especially having emergency funds and maintenance and service contracts. 

Jan 06, 2021 07:19 PM #19
Rainmaker
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James Dray
Fathom Realty - Bentonville, AR
Exceptional Agents, Outstanding Results

Morning Lise.

With my temperament and knowing what I expect, I would not make a good landlord.  

Jan 07, 2021 12:23 AM #20
Rainmaker
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Brian England
Vacasa - Gilbert, AZ
MBA, GRI, REALTOR® Real Estate in East Valley AZ

These are definitely tips that all investors should read and adhere to for their investment to be successful.

Jan 07, 2021 06:18 AM #21
Rainmaker
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Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

James Dray - I think that is a very good point  While owning investment properties is a great goal, some people should definitely hire property managers.  My son is one of those - and even with a property manager, it was not a good fit, so he is selling and will make a comfortable profit.

Jan 07, 2021 06:50 AM #22
Rainmaker
1,948,337
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Kathy Streib - thanks - and yes - the emergency fund and the service contract are really important.  With luck, a good investment property generates enough profit that it creates its own emergency fund!

Jan 07, 2021 06:51 AM #23
Rainmaker
1,948,337
Lise Howe
Keller Williams Capital Properties - Washington, DC
Assoc. Broker in DC, MD, VA and attorney in DC

Brian England - thank you so much! It is always a joy to hear from you.

Jan 07, 2021 06:52 AM #24
Rainmaker
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Nina Hollander
Coldwell Banker Realty - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Fantastic list of tips for investment property buyers, Lise. Having worked with any number of investor buyers here in Charlotte, I know how important each one of these tips is.

Jan 07, 2021 07:38 AM #25
Rainer
394,152
Jim Smith
The Property Management Company - Round Rock, TX
Broker,CRS,GRI,RMP,CNE,TRLP

As a long-time professional property manager, You have offered a good overview.  I strongly urge, however, like any other venture, it is best to get VERY educated with our constantly changing field in regards to legislation, ordinances, fair housing, and maintenance codes, just to mention a few.  Consulting with investors is part of my business and always emphasize: Cheap is Expensive.  Hire a competent, professional property manager, as this is their area of expertise.  If you want to learn, pay that property manager to consult for guidance.  it's not about collecting rent; it IS about liability, tenant/landlord issues, maintenance (required and cosmetic), fair housing, the emotional aspect of tenant playing the landlord, etc.

Jan 08, 2021 07:29 AM #26
Rainmaker
455,382
Susie Kay
Ultra Real Estate Dallas Fort Worth - Plano, TX
North Dallas Specialist

These are wonderful tips Lise Howe !  Thanks for sharing with us!

Jan 23, 2021 01:18 PM #27
Rainer
558,241
Dorte Engel
RE/MAX Leading Edge - Bowie, MD
ABC - Annapolis, Bowie, Crofton & rest of Maryland

Dear Lise,

Outstanding tips. Which bank do you use that lets you accept credit card payments. I have never heard of this. Might be a good idea for those eBay sellers or Etsy artists too.

Jan 24, 2021 08:36 AM #28
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Assoc. Broker in DC, MD, VA and attorney in DC
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