Orders have arrived, you’ve weighed whether to rent or sell, and are now deciding if you can self-manage a rental property. AHRN.com has invited military spouse, home owner and property manager Elizabeth Colegrove to outline her 5 tips for self-managing your rental!
When I talk to accidental landlords (people who became landlords due to the inability to sell their home), 90% of their struggles stem from how they view and handle their rental property. No one is going to treat your house with the same love and care that you did. If you plan to self-manage, here are 5 tips to make management a successful venture.
1. Bumps and Bruises
To prevent tenant irritation and large bills from repairmen, make sure the “little” things are all done. While we homeowner tolerate and laugh about “bumps” in the road of home ownership, most tenants are not going to tolerate the knob falling off, screen breaking, etc.
2. Keep it Official
A very common mistake is renting to friends, family or the general public without a lease. Remember that everything is going to be fine until it is NOT. When things are not okay, they go bad quickly. The only thing you have to prove your agreement is the signed lease. You can download your state’s standard lease on Legal Zoom or a similar legal site and add to it based on your needs (consulting a real estate attorney would be a good idea if you don’t know where to start!).
3. Price It
When establishing price, aim for as close to market value as possible without letting the house sit vacant. Keep in mind, you are required to keep the house up. If the tenant is only paying your mortgage, you will experience a loss every time you have to do a repair. A fair price is one that enables you to rent it out at a “fair” price so that you, the landlord feel there is value for the heartache.
4. Establish Expectations
Your lease should establish expectations for both you as the landlord and your tenants. Unless you have a written agreement, they could expect you to pay all utilities, provide lawn service, change batteries and light bulbs, and assume it’s okay to deliver rent at any time of the month! Remember you NEVER know what the other party expects. Those who have lived in the barracks, housing and apartments had landlords do everything (provide/change light bulbs, smoke detector batteries, etc) while many previous homeowners will call about nothing and fix everything themselves. The lease is the time to establish these expectations to prevent conflict or lack of payment over misunderstandings.
5. Money Matters
For IRS and personal reasons, it is recommended that you open up a new saving/checking account to handle rental income. In many cases, states require the security deposit to be kept separate. Therefore I recommend that you open a separate security and checking account. I personally have two accounts per rental. One is for the security deposit (savings account) and the other general account (checking) for the direct deposit and expenses. Do not spend “earnings” from renting the house.That should become your emergency fund should something happen to the home that requires repair.
Are you ready to self manage?
Self-managing is do-able, even from a distance. I manage seven units – three from across the country. It is hard work and requires constant attention. You must ensure that you are able to take phone calls and act upon any issues or other concerns that come up. With care and planning, it can be viable solution for your family.
While there have been bumps in the road, self-managing has helped me save my family thousands of dollars. At the same time, I can provide a great service to my tenants!
We want to know:What lessons have you learned about self-managing a rental property?