Managing Rental Property Profitably

managing rental property profitably real estate properties management landlord

Owning a rental property can be a great investment, but it can also be challenging at times, especially if the owner has a career and/or owns other properties. Hiring a property manager or property management company is a great way to relieve some of the stress of owning and managing a rental. The cost usually runs 8-10% of the monthly rental value but well worth it when looking at the basic, though essential, responsibilities of a property manager. 

Create A Great Listing And Market The Property To Attract Tenants 

Most property managers know that creative listings are a game changer when it comes to marketing rental units. Short snappy titles are a must along with unit or building amenities and detailed descriptions of the neighborhood. Don’t forget to mention updated appliances, the shared courtyard with the new BBQ grill, and over-sized fire pit. If there’s a Trader Joe’s, major hospital, or bus line nearby, make sure to include it in the listing as well. Including as much information as possible limits excessive calls and emails inquiring about the property. A picture is worth a thousand words, right? This is why it’s imperative to have high-res images or a virtual tour of the unit. In this case, a picture might be worth a thousand bucks. 

Once the listing is perfected, it needs to be expertly marketed. If the rental is geared toward a more mature individual, listing it in a college-based classified section will not be beneficial. Same goes for trying to rent a hip urban pad right around the corner from the university, to a couple who have just retired. This is why it is important to know the market before trying to attract tenants. There are plenty of online listing sites available these days, but don’t overlook offline marketing. A “For Rent” sign in the right spot can grab a lot of attention, especially for older folks who are not internet savvy. 

Show The Property 

There are two ways to show a rental property. Either wait until the current tenant vacates or show it while it’s still occupied. Obviously, showing an unoccupied rental to prospective tenants is much easier than showing a unit with the tenant still in it, but it may cost rental loss money. Check out the pros and cons of both. 

Occupied 

Pros: 

• No vacancy - This is the number one pro because it keeps a continuous flow of rent money in your pocket. 

• No transferring utilities - The new tenant assumes this responsibility, which saves you money and hassle. 

Cons: 

• Cleanliness - A dirty, stinky unit will not likely be attractive to future tenants, especially if the current renter has pets or a hoarding disorder. 

• Disgruntled tenant - If the current tenant is unhappy about leaving or just generally doesn’t like the owner or manager, he or she could stay while the unit is being showed, and sabotage any attempt to rent the property. 

• Unexpected delays - Not all renters move out on time, which could delay the new tenant’s move-in date among other disastrous things. 

Unoccupied 

Pros: 

• Tenant notification not required - This is a definitive advantage because trying to work out a viewing schedule in an occupied unit can be daunting and stressful. 

• Cleaning - Time to clean and attend to any necessary repairs the unit many need before the new tenant moves in. 

• Less overall stress. 

Cons: 

• Utilities - Since a unit can’t likely be shown without electricity unless it’s located in an Amish village, not to mention prospective renters want to check water pressure, the utilities will have to remain on. Another con with this is that if they are cut off (say, the previous tenant never paid the final bill) late charges and/or a reactivation fee will be the owner or property manager’s responsibility. 

• Money loss - This is dependent on how long it takes to clean and make repairs. Could be a month’s rent. Could be two or more. 

Tenant Screening 

In order to minimize the risk of renting to an unfavorable tenant, all prospective applicants need to be screened. It’s the best way to identify red flags with potential renters and weed out those who are unqualified, which depending on the criteria may be because of credit or even criminal reasons. 

Owners or property managers may make decisions based on the credit score, other details of the report, or both. These details include personal information, address and employment history, public records, which include eviction records, criminal records, income, and credit history. The majority of this information is supplied by three major credit organizations: 

• Equifax 
• Experian 
• Transunion 

Lease Execution And Legal Requirements 

A lease is a binding contract between an owner or property manager. This means it can be enforced in a court of law if necessary. Leases detail in writing the rights and responsibilities of both parties. Property managers most often use a general lease agreement whereas owners have a more specific lease they generate or sometimes have made by real-estate attorneys. Regardless, any and all clauses in the lease agreement for any rental property must adhere to certain landlord-tenant laws. Keep in mind that real estate laws vary by state, and you need to be familiar with them. For example, San Francisco's Utopia Management, property managers in both Nevada and California, use completely different leases for a San Jose property than they do for a Boulder City property. 

Rent Collection 

Collecting rent is a standard but very important task of owning a rental property. Since it’s the lifeline for both the owner and the property manager, having an efficient way for tenants to pay deposits and rent is crucial. The majority of property management companies offer online systems for tenants to make payments and file maintenance requests, etc. This makes dealing with the money aspect a little less stressful. 

Maintenance And Repair 

As mentioned above, many property management companies offer online systems to make it easier for tenants to request maintenance and repair. A competent manager handles these requests quickly and cost effectively by using licensed vendors. There should be some type of system in place, be it online or other, to handle emergency situations such as busted pipes. As far as what property managers are responsible for should be outlined in the lease agreement so that they are not expected to change light bulbs or any other non-reasonable duty. 

Handle Delinquency And Evictions 

This is probably the toughest aspect of property management, and one of the main reasons rental owners hire property managers. Managing delinquent rent is taxing and stressful. Modern technology has made it easier, however, with online management and automation solutions that offer things like auto-generated collection letters (sent both to email and address), texts containing payment reminders, and even preparation of eviction notices if it reaches that point. Evictions are costly, time-consuming and can be complicated in regards to different states and the laws protecting renters so legal research is necessary. Often, evicting a tenant costs more than several months rent so landlords do not like filing evictions with the court system. Property managers do not take a hit for evictions nor are they responsible monetarily. In this regard, it might behoove the owner to invest in eviction protection insurance. 

These are just the basic responsibilities that come with owning a rental(s). And though a one-person or couple owner might struggle with these tasks, professional property management companies are equipped to handle them efficiently and effectively for a small percentage of the monthly rental income. It’s a small price to pay for living a more stress-free property owner life.

Peter Evering, Business Development Manager of Utopia Management, is an expert in managing rental properties and property management. Utopia Management offers both commercial and residential property management at some of the lowest rates available.

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