When first investing in rental properties, many consider being a landlord the least desirable task. While it is true that being a landlord is a time consuming task, there are some things that you can do it make it easier. I have been doing this for several years and I have learned a lot of lessons. This article will summarize my techniques for reducing the hassle associate with being a landlord.
Your tenants and prospective tenants must have a way to contact you. For a phone number, I have what I call my nowhere number – this is a phone number that does not actually ring anywhere. There are several companies that will provide you a phone number with a voice mail account, and a myriad of notification options. In my setup, this phone number forwards to my cell phone and I have the option of ignoring it. I have it set to not forward between 8PM and 9AM so the caller will only get a voice mail. This is essential for reducing the time you spend managing the properties. I will explain this in more detail in the following sections.
I have been a landlord for almost 5 years and I now have 13 properties. Some of these properties have had multiple tenants. I have found EVERY tenant by putting out a ‘For Rent’ sign. I once used a newspaper add and got no calls. I have posted a few properties to a rental website, which resulted in a few calls but the prospects did not show up to view the property. I see no need to use any method other than a ‘For Rent’ sign for finding a tenant. (Your market may be different).
The key to finding a tenant with a ‘For Rent’ sign is traffic – the more people that see the sign, the greater your chances of renting the property. To increase traffic, I use a ‘For Rent’ arrow sign placed on a major road to direct people to my house. If needed, I will have multiple arrow signs at intersections in the neighborhood to direct people to my property. If there is a house on the corner where I want to put the sign I ask the person living there if I can put up the sign. I have only been told no once, and then I just went across the street. But when I don’t ask, I have noticed people will take down the sign – especially when cutting the grass. Trust me – these arrow signs work like magic.
My nowhere number has a recording that gives the details of the house. These details include the number of bedrooms, the rent amount, and the deposit amount. After the recording, the user can leave a message if they want to see the property. This recording will weed out a lot of callers looking for lower rent, more bedrooms, etc. This nowhere number notifies me each time I get a message – this saves a lot of time.
I call back each person that leaves a message and schedule a time to show the house. I try to show it that day if possible, but I will try to schedule later in the day so I have time to schedule more appointments. I like to have several prospects view the house at the same time. This means less work for me, and the prospects see the competition which adds a sense of urgency to their decision. I have tried scheduling an open house one day a week, and giving the day and time on my message. However, very few people show up for this. I find it is better to talk to them and get a commitment for the meeting – and meet that day before they find another house.
When it comes to selecting a tenant you need to weigh many variables. How likely is the tenant to pay? How well do you think they will take care of the property? How many other prospects do you have? Frequently, theses decisions will vary based on the property and are outside the scope of this article.
My first rule for maintenance is ‘Do No Work Yourself’. If you do work, there is a good chance that you will get burned out on the entire process and consider it too much hassle. Your time is better spent looking for more deals than fixing a toilet. You need a list of go-to people that you can call for all maintenance needs. Hopefully, you have such a list if you have been through a rehab effort. If not, you may need to build the list and that can add to your workload upfront – but in the end you will be thankful that you have the list.
My nowhere phone number is the only number the tenants have to call me. My message starts by instructing tenants to press one to be connected – before the message describes any available properties. I will be notified that I am receiving a call, but I do not answer the call and I let the tenant leave a message. If the message is about a maintenance issue this gives me time to contact someone to do the work. Most cases are fairly straight forward and I just have a contractor call the tenant – and I do not get involved. From that point on, I just work with the contractor. If the issue is about rent, this approach gives me a chance to check my records before talking to the tenant.
All rent is to be paid by check or money order and sent to my post office box. It is the tenant’s responsibility to make sure the rent is IN THE BOX by the due date – they should mail it a few days early. I provide the tenants with colored envelopes with my address pre-printed. The color makes the envelop stand out and this way I am sure the tenants know how to get the rent to me.
Frequently I have tenants call and want me to pick up the rent. Never do this, or it will happen repeatedly and become a nuisance. When they ask this, I tell them to mail it and that I will not consider it late this time. But make sure they understand this is a one-time only exception.
I do not chase rent. I do not call tenants and try to get them to pay. I handle everything by mail. Rent is due on the 5th of the month. If the rent is not in my PO Box at that time I send a late letter demanding payment and late fees by the 10th. If the rent is not there on the 10th, I send another letter demanding rent and late fees by the 15th, or that the tenant vacate the property by the that date. If the rent is not there on the 15th I file for eviction.
I do not call the tenant. They will certainly have a sob story for you. Will you let that sway you? If not, then why did you call? If so, you are in the wrong business.
I will talk to the tenant if they initiate the call. I will generally work with them on the payment and agree to not charge late fees if they pay as agreed. I want them calling me when there are problems, and my goal is to get the money not to chase them off. I try to get all the rent in the month it is due but in some cases I may stretch that a little bit. I do require that they pay late fees up to the time that they called me. If a tenant misses two rents and has to pay late fees it is cheaper for them to move – and many of them do. Do not let them get two months behind!
Usually, the tenants pay after being served with the eviction papers. I accept this payment and charge them the cost of the eviction and all late charges. The tenants that do not pay usually leave shortly after the being served. I have only had to go to court once – and that tenant did not show up.
Using a Property Management Company
I do not recommend using a property management company, but I admit I have never used one. First, they are very expensive. The ones I have contacted wanted the first month’s rent and 10% of the monthly rent. This amount in negotiable, especially if you have several houses, but it would have to come down a lot to be worth it.
The most time consuming aspect of being a landlord if finding tenants. You have to respond to phone calls and show the properties. It would be a great help for a property management company to do that, but I am not convinced that they would do it as well as I do. One drawback is that the management company may have many properties available, and all the houses they manage would be competing for your tenant.
Will they screen your tenants? What will they look for? Are you going to be involved in picking the tenant? If so, why use the management company.
The property management company acts as a buffer between you and your tenants. When a tenant calls for repairs the management company can have the repairs handled – but you get a bill. How do you know you are getting the best price? They can run every repair by you, but if you do this why do you need the management company. Using the maintenance tips above you can reduce your involvement to the same level without the cost.
You are a real estate investor. You should spend the time you have allocated to real estate investing on the most profitable activities – finding and acquiring investment properties. You need to develop a system that keeps the properties rented and maintenance issues handled, but this system should not cause you to spend a lot of time interacting with tenants.