12 Tips to Self-Manage as a DIY Landlord
If you have plenty of spare time, will put in the effort to become a legal and industry expert, will research and invest in all of the latest technology tools and will make yourself available 24/7, you can absolutely self-manage your rental investment property. Here are 12 tips on how to be a successful DIY Landlord.
- Become a Legal Expert: There are Federal, State and Local laws and ordinances that govern exactly how you must manage your rental property. Breaking them could be extremely costly and in some cases, criminal. It is imperative you take the time to become an expert on all of these laws before you begin renting your property.
- Properly Prepare your Property: If you present your property in its best condition, you will attract the best and most qualified tenants. This means making smart decisions on which improvements to make to the property in preparation of marketing and then hiring a professional photographer and videographer to showcase your property.
- Leasing Considerations: Signing a lease with the right tenant is the single most important decision you will make in managing your rental property. It is very important you get it right every time.
- Rental Valuation: Once you have properly prepared your property you need to do the research to accurately price your property using the latest and best technology tools in the industry combine with a local expertise in the market. Price it too low and you leave money on the table; too high and you lose money to a longer vacancy.
- Advertising: Armed with the right price and the professional photographs and video, publish your property on dozens of real estate websites.
- Receiving Inquiries: In this day and age, consumers expect immediate answers to all of their questions, or they move on to the next available rental. So, make sure you are available 24/7 to answer calls and emails about your property. If your advertising is working as it should then you should expect at least ten inquiries per day.
- Showing the Property: Your property should be available for tenants to see on-demand, at their convenience; otherwise they will move on to the next property. However, you do not simply want to put up a regular combo lockbox and give out the code as that would be too risky. So, you should use the latest technology lockboxes or keyless smart locks which will record the personal identity information of every prospect that enters and will also issue out unique combinations to each prospect that will expire when they have completed their home tour.
- Receive Rental Applications: Have a website setup for tenants to be able to quickly and easily complete a rental application online at their convenience.
- Qualification Standards: It is absolutely imperative that you create a thorough policy by which to approve or decline an application and stick to it. Otherwise, you will inevitably and inadvertently commit a Fair Housing Violation, the first offense is a $16,000 fine.
- Tenant Screening: At a minimum, you will want to review credit, criminal, eviction, landlord reference and income verification. Beyond that, you will also want to ask for things like “pet-selfies”, review their social media accounts and develop tricks to determine if you are talking to a real landlord reference or a fake landlord reference.
- Signing a Lease: Once again, tenants expect to be able to sign the lease on-demand, at their convenience from their phones. So, use the latest technology to send your lease out quickly for e-signature.
- Set up a Trust Account: Before you receive the security deposit funds make sure to understand and follow the law and set up a proper trust account that will keep you in compliance with the law.
- Moving Tenants In: Establish a policy to check them in and complete a move-in inspection.
- Should you Rent to Friends or Family? This is a very personal question; if you are going to rent to friends and family, then you need to hire a professional property management company even more so than if you just rent to the general public. Try to picture how you are going to handle the first time your friend or family tenant does not pay the rent on time? It would be much better to have your professional property management company have that tough conversation with them than for you to do it.
- Make it Easy for your Tenants to Pay the Rent: Tenants expect to be able to pay the rent quickly and easily from the convenience of their phone, so make sure to have that option setup for them. They also like other immediate and flexible ways to pay, such as at their local convenient store.
- Be Available 24/7: Maintenance issues can arise at anytime and need to be addressed immediately. Tenants may also have other concerns that they expect to resolve immediately, at any given time, day or night, weekday or weekend. Keep your phone on you and turned on 24/7 and be available for your tenant. You may want to consider getting a separate mobile phone just for your rental property.
- Maintain a Stable of Reliable and Affordable Handymen: Be very wary and cautious of finding handymen on craigslist; it is a real gamble: there is a chance you will luck out and win the jackpot, but a much higher chance you lose your money. Also, handymen are available when they are looking for work (which is often a sign they may not be worthwhile), but then are impossible to reach when they already have work. So, you need to have a lot of them on speed dial. Keep an eye on their prices; as they become busy and more popular, they will also become more expensive. Above all else, make sure they are properly licensed and insured and that they actually send you a copy of their insurance. Keep track of when their insurance expires and get an updated copy of their new policy at each expiration date; this is for your protection.
- Inspect the Property, but also Respect Tenant Privacy: Conduct regularly scheduled inspections at your property to keep an eye on your property. Keep them professional, predictable and give the tenant plenty of notice before you show up.
- Customize Your Lease and Stick to It: Do not use some industry standard or boilerplate lease available on the internet. Those internet leases are generic as they are designed to cover a wide array of landlords, locations and situations; they are often tenant-friendly. Rather, once you have spent the time becoming an expert on Federal, State and Local laws and ordinances, you should customize your own lease that protects your own financial and property interests in every way possible. Pay a specialized attorney to review and optimize your lease.
- Treat it Like a Business: Owning a rental property can be an emotional roller coaster, especially if it is a home that you previously lived in. Resist the temptation of being upset when something goes wrong or taking anything personally. You should develop a budget and understand all of your possible expenses over time and be prepared for them. Owning a rental property is a business and you need to treat it like owning and running a business. As a DIY landlord, you are the owner, the manager, the accountant, the attorney, the property inspector,the administrative assistant, the webmaster, the technologist, the courier, the intern and everything in between. So become an expert in all of those areas.
- Rental Appraisal and Rent Increases: Use the same technology tool that you used to value your property before you rented to value your property again prior to lease renewal. Whatever that value is, raise the rent some, but keep it less than the market value of the property. You want your tenant paying more rent, but you want them to receive a good value so they will stay. Always remember, there is no cost greater than vacancy cost. Don’t be tempted to not raise the rent at all; if you do this, it will eventually catch up to you after a few years when you want to raise the rent to keep up with your own increased costs and it will shock the tenant and they will leave.
- Stay Organized with Software: Keep meticulous records on everything you do. Store all of your legal documents, track your communication with the tenant, keep a tight tenant ledger and keep a tight ledger for yourself to make your taxes easier at the end of the year. Research and pick the best software for you to accomplish all of your investment goals.
Owning a rental property can be a very lucrative investment, when done correctly. You can do it! If you would like to hire us to handle all of the headaches and free up your time, our services start as little as 5% of the rent each month.