Archive for the 'Property Management' Category
The constant fluctuations of the housing market can mean many things in terms of property investment, rental rates and the life of a landlord. We know, for instance, that there is a higher percentage of renters in the United States than there has been in quite sometime. But what we haven’t addressed is that there are also more landlords.
Whether you have found yourself in a property investment deal that didn’t go quite as planned or you’ve moved to another house while your old property has sat on the market for far too long, you yourself may have already become a landlord due to a lack of options. The life of a landlord can be financially rewarding, but it can also be complex and draining with many rules, laws and advice to wade through. In this article we want to distill a few of the more important tips that will lead to a better life for both you and your tenants.
Bad tenants are a landlord’s worst nightmare. Between not paying their rent, trashing your rental property, allowing pest infestations, committing criminal acts in the property and a hundred other miserable acts, bad tenants can make a landlord’s life miserable. Fortunately, there are tactics you can employ to minimize the damage caused by bad tenants.
First Line of Defense: An Airtight Lease Agreement
Before you allow a tenant to move into your property, you can lay the groundwork for addressing future problems by using an airtight lease agreement. Every state has different landlord-tenant laws governing what your lease agreement can contain, so be sure to use a state-specific lease agreement. Sometimes they can be obtained through your state’s website, but more likely you’ll have to buy one online.
Many entrepreneurs believe that, if you want something done right, do it yourself. Personally, I believe that is the rationalization of control freaks unwilling to delegate.
In reality, your dream team will help you reach your financial goals faster than you ever can alone.
Sure, you can find motivated sellers and build a great buyer’s list on your own, but other tasks require the expertise of others.
Some of the members of your team should include:
- real estate agents, who can bring you sellers
- home inspectors, who can spot things you might never notice
- rehab crews, who can do work in much less time than you could,assuming you want to pick up a hammer
- Read more »
Ideally, you’d have tenants who paid promptly every month, never complained, and lived in your property for a long time while maintaining it in pristine condition. But that ideal seldom happens for the simple fact that we’re dealing with human beings. They move, get sick, marry, have different temperaments and needs, and so forth – all of which can affect the goals you have for your properties.
However, there are general guidelines you can follow in order to get the best possible tenants, the ones who do pay on time and who seldom complain unless there’s a good reason to do so:
Guideline 1: Qualify Your Applicants
This is a vital first step, because it helps identify great tenants and eliminate potential trouble-makers. The process of qualification involves a combination of asking good questions and using your intuition about an applicant. What are good questions to ask? Here’s a suggested list to which you can add your own questions:
If a property owner manages a growing number of investment properties, it’s inevitable that the day will come when they ask, “Should I outsource the day-to-day operations of my business to a property management company?”
Deciding when to outsource and which company to hire is one of the most important business decisions a property owner can make. Choose wisely, and an owner will be rewarded with the peace of mind that comes with responsible property management. Choose incorrectly, and an owner will end up working harder after hiring a property management company.
Whether an owner owns one or one hundred properties, it’s important to consider whether or not they’re prepared to hire a property management company. Handing over the management of property is a major decision. Before making that choice, owners will want to make sure they understand the following:
- The implications of self-owned management;
- The pros of outsourcing management to a third party;
- The corresponding cons; and,
- The alternatives to outsourcing.
Let’s take a look at each consideration in detail.
1.) If the vacating tenant has been a long-term tenant, and you had a good relationship, simply ask him. I bet over the years he’s followed the neighborhood and knows from friends and fellow renters. He can tell you if he thinks you should charge more or less. Feedback from your vacating residents should be ONE piece of the info you assemble to determine.
2.) The quickest way to figure out the market rent is to put your tenant "shopping" hat on and start looking. I observe area rentals (signs, newspaper, etc.), see how they are priced, and watch to see how long they stay vacant. Many times, I’ll even stop by to get up close to see the condition of the investment property. In every case, one that is priced right and sits for very long has "issues".
3.) Another resource is a property manager with local rentals (and a website) who knows what they’re doing. They make the most money by pricing at the top of the market and usually have little interest in discounting unless a property sits vacant for too long. I usually price mine 2% to 5% below their prices.
The caveat with property managers is that some have owners that force them to overprice. That happens fairly often, but it is usually pretty obvious.
A good real estate team is the way to assure your investing success. Failure increases when you tend to be a “lone wolf” and try to do too much by yourself.
In real estate, you need a good team of people you can trust and rely on. Here are some possible team members, and why they need to be on your team.
Mortgage broker or banker: A broker can offer you many loan options and shop your mortgage to find the best deal that meets your needs. A mortgage banker may be limited in the loan options they can offer you but they can make more decisions on your loan than a broker can. They each have their advantages and you should have both on your team. In either case, it’s important that they understand your needs (i.e. fast closing, low interest, concession approval, etc.)
Property manager: Be sure that the company you hire has experience, is responsive, and will have time for you when you call. Good property managers can tell you what you should get for rent in a given area BEFORE you buy. Your property manager is one of your most important team members. Your real estate investments live and die by them.
Good real estate agent: An agent with experience in the area you invest in and access to the MLS (Multiple Listing Service) can be a great help. Even if they are a seller’s agent, they can still ethically bring you the best deals once they know you’re a serious investor.
Real estate investment firm: In addition to a real estate agent, you should work with a good real estate investment firm. These companies offer pre-screened investment properties in growth markets around the country. Read more »
Setting the right rent can be one of the most difficult areas for many people who are investing in rental property. If your property rents out in no time, it could be an indication that you are not charging enough rent. On the other hand, if your property seems to take a long time to rent out, it could be a clear indication that your rent is too high. So, how do you go about setting a rental rate that is in line with the current market?
One of the best places to start is the local newspaper. It is imperative that you do some research to find out what rent prices are driving the local market. Location is the most important factor in determining rental rates. For example, a three bedroom, one bath home in one part of town may rent for $1,100 a month while a similar property on the opposite side of town may only be able to draw $900 per month.
The ultimate goal of investing in rental property is to turn a profit. To ensure that you achieve that goal it is essential that you follow several critical guidelines.
First, always make sure that you check tenant references. This can be a burdensome step and many landlords overlook it because they feel as though they have good instinct when they meet with the tenant. But not checking references can lead to a number of problems later on. You will uncover a wealth of information about potential problems before you rent to a prospective tenant.
Second, make sure you have everything in writing. This is to protect your rights as a landlord as well as the rights of your tenants. Everything from the code of conduct you expect your tenants to abide by while renting your property to the rental application itself must be in writing.