The Critical Success Factors of Management

As a landlord, managing properties to maximize profit is your business, and as with any new business venture, there’s a learning curve. Familiarize yourself with these strategies and you’ll position yourself for success.

 

Marketing Properties

Marketing property takes a lot of work, but if you don’t market—you don’t rent. Here’s are some things you can (and should!) do to promote the rental property so that you attract the most (and hopefully the best) residents possible:

Haven-CheckMark  Prepare home for rent, both inside and out

Haven-CheckMark  Take professional photos inside and outside

Haven-CheckMark  Write good copy to highlight the strengths of the home and neighborhood

Haven-CheckMark  Place ads in the following: rental listing websites (both paid and free); and on the MLS (may require a real estate agent)

Haven-CheckMark  Put “For Rent” signs in the yard

Haven-CheckMark  Collaborate with other realtors and leasing agents to find a resident

Haven-CheckMark  Answer calls from prospects for questions and schedule viewings either by yourself or through an answering service

Avoid these common mistakes made when managing residential investment  properties.

 

Leasing

Finding the right resident for your property is crucial. In fact, the importance of a resident’s “fit” is often underestimated. As a result, it’s important that managers should expect to devote a significant amount of time and effort to the leasing process.

Once your marketing has brought in applicants, the next step involves screening. Background checks are always a necessity, and it’s important that managers verify financial information and speak to references, including former landlords.

The timing of the leasing process varies, and is often dependent on the number of qualified applicants and whether their contacts are readily available. Once you’ve found someone who qualifies financially and who also seems as though he will take good care of your property, you’re ready to enter into a contract.

 

Inspections

Regular inspections ensure that residents are taking care of the rental property. As a rental property owner, you should familiarize yourself with the four types of rental property inspections:

  1. Move-in Inspection - This initial examination protects both landlord and resident and prevents any landlord says/resident says scenarios. This typically takes place by conducting an exhaustive walkthrough of the property just before a resident moves in. The owner or manager should note—and ideally photographany pre-existing damages which might impact the residents’ security deposit at the end of the lease agreement. This document should be signed by both resident and landlord.
  2. Scheduled Routine Inspection – This type of inspection ensures the resident is taking proper care of the property and complying with the lease agreement. Be sure to inspect for any resident damage, along with any maintenance issues that need addressing. Document all resident damage via photographs and schedule a follow-up inspection to ensure damaged items have been addressed before they become bigger. The frequency of these inspections should be written into the lease agreement.
  3. Drive-by Inspection – Sometimes nothing beats a simple drive-by inspection to get the “true picture” of how a resident is taking care of the exterior of the property. These unscheduled inspections are the time to note any compliance issues (not taking care of the lawn, commercial vehicles in the driveway, unleashed pets or anything else that is not permitted in the lease agreement). Notify the resident of any violations in writing and let them know that you plan to perform an internal inspection to look for any other lease compliance violations. If your property is in an HOA, then this is especially important; you want to catch potential violations before the HOA fines you.
  4. Move-out Inspection – The final walkthrough is when you note any damage that wasn’t there when the resident first moved in or that’s occurred since the last inspection. Write up the damages and put them in the report along with photos as proof. This report should be signed both by the landlord and the resident.

Maintenance vs. Deferred Maintenance

Regular maintenance and upkeep of real estate property ensures the maximum return on your investment and includes:

Maintenance – Common things that break while the resident is in possession, such as a toilet, faucet, or air-conditioner, fall into this category. While these repairs won’t improve the value of the property, they are important to keep the property from going into further disrepair and creating bigger problems. Being on top of maintenance issues and fixing things quickly also enriches the landlord/resident relationship.

Deferred Maintenance – Every landlord knows how important upkeep is to the value of the property. If you let things go, they quickly escalate into bigger and more expensive problems. Deferred maintenance items can be identified through routine seasonal inspections. Deferred maintenance items can include new appliances, carpet, roofs, as well as full HVAC systems. These planned expenses can include non-functional enhancements of the property, such as landscape improvements that increase property value, and may increase the rent.

Renewals

Good residents are hard to find. If you have a resident that pays on time, gets along with neighbors, and treats your property well, you should do whatever you can to make sure this resident renews. Even if your resident is “mostly” good, you should consider the benefits of renewals. The average landlord spends over 40 hours and thousands of dollars to onboard a new resident so it makes sense to try your best to renew leases with the residents you have.

Renewing a lease proves a level of dedication on your part toward your resident making them feel valued. Hopefully, in return, they will do their part to keep the home in great shape and continue to be a good resident. When both parties are committed, it’s a win-win. But before renewing that lease, here are 5 important questions to consider.

Reporting

As a real estate investor, you need to know how the property is performing by generating and reviewing reports quarterly and/or monthly. Whether it’s through property management software or through a property management company, these reports should include:

Monthly Financial Reports – As with any business, success is directly connected to good financial results. Landlords should track finances monthly with financial reports so that they clearly understand the financial health of the property. 

Delinquency/Renewal Reports – These reports provide property rental and resident history. You’ll be notified when the lease is nearing so you can renegotiate the lease. Rental reports provide valuable information such as whether or not the resident pays on time so you can determine if you want to renew their lease or not.

Marketing Reports – Marketing reports allow you to test and compare advertising spend month-by-month, campaign-by-campaign, and venue-by-venue to determine what's working and what's not. Reviewing marketing ROI lets you see where your advertising dollars are best spent, so you know where to increase marketing and where to pull back.

If you don’t understand how much it costs to run the property compared to the rent you’re bringing in, you don’t have a handle on your profit margin. Without that, you can’t find areas for improvement to increase your profit.

Download our free market rent analysis report to determine the right rent for  your property.

 

Special Events (Evictions, etc.)

Besides finding residents, collecting rents and maintaining the property, there are a host of other tasks associated with renting properties. Some include:

Handling Evictions

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 Working with HOAs

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 Negotiating with Contractors

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Important Terms to Know

Like any profession, real estate has its own set of lingo and acronyms. Here are some of the more common ones:

Haven-CheckMark  NOI (Net Operating Income) – This is calculated by Net Rental Income (total rent for the year minus vacancy & delinquency), minus the Operating Expenses (includes all the costs associated with maintenance and upkeep to the property but not the mortgage payment).
Haven-CheckMark  HOA – Home Owner Association. Here are some HOA horror stories to avoid.
Haven-CheckMark  Debt Service – Just another way to say mortgage payment.

Truly, there are just too many to mention. Here are two great sites with tons of definitions: 

Investopedia and Proapod gives calculations and formulas.

It takes some savvy to become profitable in the competitive arena of real estate investment. While a college degree is not a prerequisite to being a successful real estate investor, most top real estate investors share the common trait of learning as much as they can before diving in.

Then constantly educating yourself –whether through university and/or online colleges courses, reading whatever you can, signing up for blogs and newsletters, attending seminars and events and talking with other professionals is the only real way to excel in this industry.