Tips And Tools For Managing Rental Properties
Molly Grace6-minute read
October 20, 2023
Renting out a property you own may seem like an easy, low-effort way to earn some extra income. But in reality, becoming a landlord is a lot like starting a small business. You’ll have customers to deal with, accounting to take care of and plenty of day-to-day work to keep you busy.
If you’re ready to build your real estate investment portfolio and become a landlord, let's review the three major responsibilities of a landlord and explore how to manage your properties solo or with some help.
Managing A Rental Property: Top 3 Responsibilities
Managing an investment property includes a wide variety of responsibilities that can be sorted into three basic categories:
As a rental property owner, you can either oversee each category yourself or hire someone else. But no matter how you handle the management of your property, you’ll need to make sure your tenants, property and finances are all taken care of.
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Should You Self-Manage Or Work With A Rental Property Management Company?
The more hands-on approach is to do everything yourself. You’ll be in charge of every aspect of managing your rental property, from sending out rent reminders to completing or hiring a professional to take care of repairs to bookkeeping.
The DIY route can save you money, but it also adds up to a lot of time spent taking care of the business.
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, of course, but the property manager or management company will handle every aspect of keeping the business running, including vetting potential tenants, dispatching repair services and performing property maintenance.
This option will cost money but can save time and minimize potential stress.
Can You Outsource Specific Parts Of The Job?
You can also take a hybrid approach. With this method, you manage certain responsibilities and outsource others.
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 building superintendent to handle all repairs. Or vice versa, you handle the groundskeeping and hire an accountant to oversee the finances.
Ultimately, which management method is the best for you will depend on your needs, the amount of time you have and your ability to complete all of 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 several properties, it may not be realistic to try to manage all the properties by yourself.
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How To Manage A Rental Property
Here are some of the most important things to know about managing rental properties yourself:
1. Tenant Management
Managing your tenants is about more than finding suitable renters and collecting rent checks every month.
First, 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 the applicants, which may include running a credit and background check, verifying proof of income and checking references.
Make sure you comply with federal and state fair housing laws as you go through the screening process.
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.
During the leasing period, you’ll need to be available – or ensure that someone is – to respond promptly to repair requests, investigate complaints and answer questions from your tenants.
As a landlord, you’ll need a good understanding of all state and local laws regarding the landlord-tenant relationship, including how much notice you must give if you plan to enter the property, what the eviction process involves and how long you have to fix issues on the property.
Keeping Tenant Turnover Low
A vacant property can cut into your property’s return on investment while you search for a new tenant. Do what you can to either avoid this scenario or make it short-term.
Here are things you can do to make your tenant want to stay:
- Charge a fair rent: 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 and looks well Respond to tenant requests quickly and complete repairs as soon as possible.
- Communicate regularly: Build a good relationship with your tenant. Tenants will likely stick around if you create an environment where their concerns are heard, repairs are promptly taken care of and the property is safe and well-maintained.
Setting Tenant Move-In And Move-Out Dates
Make sure the lease specifies when a tenant can move in. And make sure the lease specifies when a tenant must move out if the lease agreement isn’t renewed at the end of the leasing period.
Prepare the property before the tenant moves in. Change the locks, clean the home, remove any safety hazards and perform necessary repairs and maintenance.
Document the condition of the home before your tenant moves in. Before 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.
2. Property Maintenance
Taking care of your tenants is just one part of being a landlord. Another vital part is overseeing the management and maintenance of the property.
Landlords are legally responsible for providing their tenants with a safe and habitable home. And keeping your property maintained benefits more than your tenant. After all, you own the property.
If you skip regular maintenance or improvements, you may make it harder to find and keep good tenants. Neglecting the maintenance of your property can also hurt its value and make it difficult to sell down the road.
Maintaining A Real Property Inside And Out
Rental property maintenance involves the same tasks as regular maintenance on a residential property:
- 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
The property must be maintained inside and out. If you need to replace a feature in the house, don’t put it off – an aging roof, for example, can end up costing more in damages.
3. Managing Rental Property Finances
As with any small business, you’ll need to keep a good record of the finances for your rental business.
Consider purchasing accounting software to help you keep track of everything if you don’t have much experience managing finances for a small business. You can also hire an accountant to manage the finances, which can be especially helpful during tax season.
Tracking Income And Expenses
Managing your rental property’s finances means keeping track of all the money that goes in and out of your business, including recording rent payments, collecting security deposits and tracking how much you’re spending on maintenance, repairs, your mortgage, insurance, taxes, utilities and other costs.
You’ll also need a plan to keep your business afloat when you aren’t generating income. If a tenant leaves and it takes a few months to find a new one, make sure you have the funds to keep paying your mortgage and maintaining the property until you get rental income again.
Keeping Documents Safe
As a landlord and a small business owner, you’ll need to keep track of a lot of important paperwork.
You’ll need to create an organizing system for your files. It can be a dedicated filing cabinet or a digital document management system. No matter what you choose, you should always know where your important financial or legal documents are.
The Bottom Line: Managing Rental Properties Takes Time And Money
The money earned from an investment property is often described as “passive income,” but there’s nothing passive about the work and responsibilities of a landlord.
If you want to rent your property but would rather offload all your landlord duties, 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, so hiring a management company will eat into your profits.
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