Managing rental properties: A landlord's complete guide

If you’ve bought a rental property and plan to manage it yourself, you’ll find it’s a lot like starting a small business. You’ll have customers to deal with, accounting to take care of, and daily tasks to keep you busy. Here are some tips for managing rental properties like a pro.

Rental property management: Your main responsibilities

Most of the responsibilities of managing your investment property will fit into three main categories:

• Tenants
• Property
• Finances

As a rental property owner, you can handle each category yourself or hire someone to do it for you. Either way, you’ll need to make sure all three aspects are covered to get the most out of your investment.

Tenant management

You can think of tenant management as the client-facing side of your real estate investment. Finding good long-term tenants who take good care of their unit can be key to success. Here are tips on managing renters.

1. Find reliable tenants

You’ll want to market your property so potential tenants can find it. Use online databases, social media, or local ads to spread the word. Make sure to add high-quality, attractive pictures to your property description.

Once you start getting applications, you’ll need to screen applicants. Tenant screening may include:

• Running a credit check
• Running a background check
• Verifying income
• Checking references

Make sure you consider your legal obligations such as meeting federal and state fair housing laws as you screen applicants.

You’ll need a lease agreement for approved applicants to sign. You can find standard leases online, but experts recommend having a lawyer review the lease to ensure it complies with your state’s laws and covers any potential liabilities.

2. Be available to your tenants

During the leasing period, ensure you or someone you trust is available to:

• Respond promptly to repair and maintenance requests
• Investigate complaints 
• Answer questions from your tenants

As a landlord, you’ll need a good understanding of all state and local landlord-tenant laws. This includes how much notice you must give if you plan to enter the property. You'll also need to know what the eviction process involves and how long you have to fix issues on the property.

3. Keep tenant turnover low

A vacant property can cut into your return on investment. Plus, it’s a whole lot more work to fill vacant units on a regular basis. The name of the game is finding reliable tenants who plan to stick around for a while.

Here are things you can do to make your tenant want to stay:

• Charge a fair rent. Come up with a rental price that makes sense with what you’re offering in your location. Take a look at listings for comparable properties in the area to get a better idea of what your competitors are charging. If your tenant can find a cheaper rental with more amenities, that can contribute to turnover.
• Be a good landlord. Make sure the property is appealing and well cared for. Respond to tenant requests quickly and complete repairs as soon as possible.
• Communicate regularly. Build a good relationship with your tenants. They’re more likely to stick around if you create a safe, well-maintained environment where their issues are addressed and concerns are heard.

4. Set move-in and move-out dates

Make sure the lease specifies when a tenant can move in and when they must move out if the lease agreement isn’t renewed.

You’ll need to prepare the property in advance of the move-in date, so it may be worthwhile to get started even before you’ve found a tenant. Change the locks, clean the home, remove any safety hazards, and perform necessary repairs and maintenance.

It’s a good idea to document the condition of the home before your tenant moves in. When they move out, you can use it as a reference to assess any damage they may have caused.

As the move-out date approaches, communicate with your tenant about the process. Schedule a final inspection and make sure they understand their responsibilities regarding cleaning and repairing damages.

Property maintenance

Another vital part of managing a rental property is upkeep and maintenance. Landlords are legally responsible for providing a safe and habitable home. If you skip regular maintenance or improvements, it may be more difficult to find and keep good tenants.

If you put off routine repairs, small issues can quickly turn into more expensive headaches, so staying on top of maintenance can save you money. An aging roof, for example, can cause more damage if it starts to leak or you need to replace large portions of it.

Neglecting the maintenance of your property also can hurt its value and make it difficult to sell later. Your rental property is a big investment, so the idea is to boost its value, not let it deteriorate.

Maintaining a rental property involves the same tasks as regular maintenance on your primary residence, such as:

• Changing batteries on smoke and carbon monoxide detectors
• Installing new air filters
• Spraying for pests
• Scheduling service and inspections for the home’s systems, such as the HVAC

Managing rental property finances

You’ll need to stay financially organized. You’ll have money coming in as your tenants pay rent reach month, and you’ll also be spending money on maintenance and repairs. Here are some tips for keeping your finances in order:

1. Get some help

Consider buying property management software to keep track of things. This can be a useful tool, especially if you don’t have much experience managing finances for a small business. You also can hire an accountant, which can be especially helpful during tax season.

2. Track income and expenses

You’ll need to track your income and expenses, including rent payments and security deposits. It’s also important to track how much you’re spending on:

• Maintenance
• Repairs
• Utilities
• Your mortgage
• Insurance
• Property taxes
• Landscaping services
• Additional costs

You’ll also need a plan to keep your business afloat when you aren’t generating income. Let’s say a tenant leaves and it takes a few months to find a new one. Make sure you have enough to keep paying your mortgage and maintain the property until you can find new tenants.

3. Keep documents in a safe place

It’s important to create an organizing system for your files. It can be a dedicated filing cabinet, but a digital document management system may make more sense and allow you to back up your documents. No matter what you choose, you should always know where your important financial or legal documents are.

Options for managing your rental property

Real estate investors can manage rental properties in different ways. Here are some common management styles:

Self-managing

The more hands-on approach is to do everything yourself. You’ll be in charge of every aspect of managing your rental property. The do-it-yourself route can save you money, but it also adds up to a lot of time spent taking care of the business. There’s also opportunity cost. The more time you have to spend managing the property, the less time you’ll have for other work and investment ventures.

Hiring a property manager

At the other end of the spectrum, you can hire a property management company to do all the work for you. You’ll still own the property, but the property manager or management company handles keeping the business running. This costs money but can save time and minimize stress.

Outsourcing specific parts of the job

You also can take a hybrid approach. With this method, you manage certain responsibilities yourself and outsource others. This can be a good way to play to your strengths without having to carry all the responsibilities on your shoulders.

Let’s say you’re good with numbers, so you decide to handle all the accounting, but you’re not super handy with tools or repairs. In that case, you can hire a superintendent to handle repairs. If finances aren’t your strong suit, you handle the groundskeeping and hire an accountant.

Should I manage my property or hire a property manager?

Whether you should hire a property manager to handle some or all of your duties will depend on your budget and bandwidth. Consider the amount of time you have and your ability to complete all the responsibilities of a landlord. Managing everything yourself may be relatively simple if you have one rental property with one tenant. But if you’re managing and financing multiple rental properties, it may be unrealistic to do it all yourself.

However, it costs money to hire a property manager. You can expect a property manager to charge anywhere from 8% to 12% the monthly rent price to manage the property. On top of the management fee, property managers often charge additional fees such as:

• Set-up fee
• Leasing fee
• Maintenance and inspection fee
• Eviction fee
• Late payment fee

Can I pay management fees to myself?

If you plan to handle all the management duties yourself, it’s possible to pay yourself the fee you’d otherwise be paying a property manager. Create a management agreement to be signed by you and the tenant and include the fee in the rent. You’ll want to set up a separate account to track your management fee separately from the rental income you’re receiving.

The bottom line: Managing rental properties takes time and money

When you own rental property, managing it can be a full-time job. If you prefer the hands-on approach and have the time, you can choose to self-manage your property. If you want to rent your property but would rather offload all your landlord duties, you can hire a company to manage the property. You’ll save time and potentially reduce your stress - but their service fees will come from the money you make from the investment.

Looking to buy your first investment property? Get started online at Rocket Mortgage^®.