Property Management – This Can Be Easy
I don’t want calls at 3am asking me to come fix a broken toilet. I don’t want the call that the neighbor is making too much noise every weekend. I don’t want the call that someone is parking in my tenants parking space.
These are just a few examples of the reasoning I have heard from my peers regarding why they will never invest in real estate. Funny how these fictional stories get legs and everyone seems to know that when you own a rental you have to fix toilets at 3am. My friend received a call on a recent Saturday afternoon asking (telling) him he had to come in to work. Maybe we should all just not work, you know, just in case someone would call and tell us to come in on a Saturday?
This is yet another reason I have chosen to invest in real estate. Control. I can not only control my time though real estate investing, but I can be my own boss. As an entrepreneur I have nearly always worked for myself in one of my companies. However, I am still a slave to the machine. I HAVE to get up and GO do what I do or the business would fail. I do love what I do so I am lucky, but to be in TOTAL CONTROL of my time… now that sounds great. Then I could spend more time with my family doing what we want to do together.
So, the phone calls in the middle of the night, noise complaints, and parking issues can be real. But if we treat our real estate investments like a business we can control them. We can create rules by which our tenants have to live by and follow. We can form partnerships with subcontractors and vendors who can take those calls and deal with them.
RUN IT LIKE A BUSINESS
Run your investments like a business. This means contracts, agreements, doing what you say and when. When you slave over that cute house you just found to get it perfect for your first rental, you aren’t just going to let anyone in there, are you? No. You will need to create some rules. Write them down and don’t be afraid to review them with potential tenants. A good tenant will embrace reasonable rules; a bad tenant will complain immediately.
First things first, you will need to decide if you are going to manage your own property or hire a professional Property Manager. There are definitely pros and cons to each.
Hire a Property Manager – This is the easy way, a bit more expensive but if you are not a hands on person it is a great option. A property manager will typically take from half to a full first month’s rent, some will only take 10% of the rent each month, and then there are some who do both. I believe that a good property manager is worth every nickel. A good property manager will find good tenants that fit your property. They have much experience in conducting background checks and calling references. Hiring a veteran property manager can ensure your success in the investing arena far quicker than learning the hard lessons from day one. Be sure to discuss with your new property manager that if any of their other investors want to sell, you may want to make a deal and buy their rental properties (this can be a great way to acquire more than one property at a time).
Manage Your Rentals Yourself – If you have experience as a manager or you are a good planner you will be fine. There are many books out there about managing rental property, I recommend that you read a couple before you begin! Your learning curve will be greatly reduced and you can thank me later. One of the most important items you will want to tackle is using a rock solid rental contract. Yes, call your attorney as discussed in the “There is no I in TEAM” article. Have he/she assist you in drafting a quality lease agreement. It should not only include the property address and the rental rate. It should discuss when the rent is due, how it will be paid, when it is late and what happens. Do not allow renters to be late, I promise you it only gets worse. We all have problems and you cannot solve everyone’s by allowing late rent. Charge the late fee or move to evict. Remember, this is a BUSINESS. You will go broke trying to accommodate people that cannot pay their bills.
Side Note: People must have a place to live. Remind your tenants of this, a place to live is pretty darn important! And if they choose not to pay their rent you will evict and come after them for the damages. Nothing personal, this is just business.
Now, go enjoy the extra time you have earned with your family. The hard work it takes to save, invest in a rental, get it ready, and collect every month can be rewarding. Just like anything else, nothing is easy. But I have found that real estate investing is not only fun, but financially rewarding as well!