Congratulations, you’ve made the jump and purchased your first rental investment property. Now you are a landlord!
Being a landlord, in many ways, I like being a parent and the rental property is like your new born baby. Learning how to be a good landlord is almost as important as learning how to be a good parent. Being level headed and cautious is a starting point but having the right tools and ongoing education about the ins and outs of managing property will keep a good rental investment from going bad.
The first thing a new landlord should do is find a property manager or management company. A property manager will provide the expertise and guidance you need to find good tenants, navigate legalities and share the work load for property upkeep. Draw up all appropriate contracts, sign the dotted line and get to work.
After you have retained a property manager, the next thing is to discuss expectations and who will take care of what. Get everything written down, preferably as an addition to any contract or legal paperwork drawn up between you and your manager.
The specifications may look something like this:
Property Management:
1. Collect the rent.
2. Take the calls from the tenant.
3. Arrange for repairs.
4. See that the repairs are done properly.
5. Send appropriate notices to the tenant for late or nonpayment of rent.
6. Send appropriate notices to the tenant for violations of the rules, etc.
7. Perform or oversee evictions.
8. Get your approval for major expenses.
9. Inspect the property occasionally.
10. Provide an accounting of all money received and disbursed monthly or quarterly.
Landlord:
1. Pay the mortgage, taxes, HOA and insurance payments.
2. Oversee the maintenance and repairs for the property.
3. Approve repairs above and beyond the set budget as needed.
4. Create guidelines for property manager when selecting potential tenants.
5. Approve tenant applications.
6. Check on the property from time to time to see if everything is up to standard.
Some property manager’s will take care of all of the Landlord items listed above for an increased fee but it’s best for a landlord to stay involved at the beginning and through the development of a working relationship with their property manager. Mistakes at this point would be just as much your fault as the manager’s since the subtleties of expectations aren’t clear to either party yet.
There are several points on the list of responsibilities that overlap, mostly with repairs and the management of property funds. While it’s the property manager’s responsibility to oversee the flow of money coming and going, all financials are ultimately the landlord’s job. It’s a rude shock to look over the accounting after 6 months and find that your property manager has spent too much on repairs.
Another shared point of management is tenant criteria and approval. Property managers should know the Fair Housing laws forwards and backwards. There can be guidelines and limitations for the type of tenants you’ll accept for your investment property but they cannot cross into prejudiced territory. That’s a lawsuit waiting to happen.
Communication, communication, communication is vital to a smooth and successful landlord/property manger relationship. More communication means less surprises when looking over financial records or talking about tenants. Everything counts towards building trust and what is expected when. For example, small repairs won’t need your approval but larger projects, like carpeting or appliances should always be discussed first. Once you and your property manager have gotten to know each other and learned the nuances of working together, trust will be built and you will be well on your way to a headache free life as a landlord!
It also goes without saying that a business relationship where communication is sparse is a potential problem. Think carefully about retaining a property manager or management company where phone calls go unanswered and email inquiries seem to disappear into nothing.
TAG Home Management is only a phone call or email away to answer all your questions or address your concerns about Property Management.