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9 Steps To Managing Properties From Anywhere With Ease
Nowadays with technology, managing your rental properties is super easy. Unless you have a large portfolio, or if you want to be 100% passive, a management company isn’t necessary. I have a 5 rental property portfolio consisting of one 3 unit, one 2 unit, and 3 single family homes, all of which I have not been to in 2+ years. Instead of paying a management company 5% of the monthly collected rents every month and 1 month’s rent everytime they need to rent out one of the units, I just do it all myself. By doing it myself I’m saving $692/mo. For where I am at currently this makes sense for me. If I had 10 properties or more I would hire a management company.
Bank Account Setup
Some people have different bank accounts for each property. So if they have 5 properties like me, they have 5 separate bank accounts. I think that is too much, I have one bank account that ALL my rents flow into and all my expenses flow out of. This allows me to send information to my accountant with ease at the end of the year and it’s not a jumbled mess with my personal finances and other business finances. I would highly highly suggest making a separate bank account where all of your rent flows into and all of your expenses flow out of. I would also recommend getting a debit card for this account because you are going to be paying invoices on amazon and to contractors that need to go fix issues. Make sure all of your properties are escrowed, meaning you pay taxes and insurance on a monthly basis instead of one lump sum at the end of the year. Also make sure you are on auto pay for all of your mortgages, this makes it a seamless process on your end.
Keep Reserves On Hand
I always keep about $5,000 in reserves in my bank account for issues that arise. When I first started cashflow was low and I was broke, so I kept about $1,000 on hand. Luckily for me nothing went wrong and if it did i would have borrowed money from my Mom or a friend. Also after work is done, if you explain to a contractor you can only afford to pay part of the invoice now, but you will pay asap once you get the rest of the money they are usually okay with that. Communication is key.
Getting The Property Ready
Let’s start with the property and how to get it ready for completely hands off management. The first thing I do on all my properties is install combo code locks, that way I can give the code out to people that want to go look at the property. I do not have to deal with putting lockboxes out there with a key. There are absolutely no keys involved which is amazing because you don’t have people getting locked out of their house and you don’t have to rekey the locks when a tenant moves out. When a tenant signs a lease and moves into the property you can provide them with instructions on how to change the combo code to whatever they desire. That way all the other people that looked at the property will no longer know the code. When the lock starts running out of battery it has a blinking red light that notifies you to change the battery. This would be the responsibility of the tenant. I have had really good luck with this Yale lock below.
Yale Assure Lock 2 Key-Free Touchscreen with Bluetooth
Understanding Operations
Grass, Snow + All Utilities
Grass cutting, snow removal, water payments, gas payments and electric payments are all responsibilities of the tenants. Prior to any tenant moving in they have to show me proof that they have the water, gas and electric in their name. I allow them to screenshot all of their account numbers with their names on it and send it to me via text. After they send it to me via text, I save it to their property management folder in google drive where i hold all my information. From applications, to leases, to other supporting documentation Google Drive works great. This allows me to have complete peace of mind that these items will be taken care of and I do not have to make any payments towards them or worry about them not getting done. Unless the property is vacant, then I have to send snow/grass removal people out there. When a property is vacant you also have to remember to switch the utilities back into your name. When a property is vacant in order to find a snow or grass company all you have to do is go to google and type in landscapers near me (in your properties location) or snow removal companies near me. Talk to 3 different companies and pick the best priced one or the one you feel most comfortable with.
Tenants Responsibilities
Furnace filters, light bulbs, ant traps, mouse traps, changing batteries. All these little knick knack items are the responsibility of the tenants. They do not need to be calling me over $10 little things. If they do call me I make sure to remind them that it is their responsibility. The furnace filter is actually pretty important and it needs to be changed every 3 months. There are different sized furnace filters so the tenant needs to make sure they order the correct size. The filter size will be on a filter that is already in the furnace, and sometimes good HVAC contractors write it on the furnace itself. If the size cannot be found, they will have to take a tape measure and measure the filter space. Putting the filter in the right way is also important; the arrow on the filter needs to be facing the right way. I have sent this YouTube video to a couple of my tenants. https://www.youtube.com/watch?v=sOcfx5o9-B4
Owners Responsibilities
Large problem items like leaky pipes or appliances that no longer work, I take care of those problems unless the tenant has done something to damage those items and cause them to break. I have created a list of plumbers, electricians, general contractors, cleaners, painters and anyone else I may need in order to get these things taken care of. After a couple years of calling people to fix things for myself and clients you build trusting relationships with certain companies/people. People that treat you well for a fair price should be kept in close contact. Now I DO NOT want to be a scheduler so I connect the company that is going to fix the issue directly with the tenant to set up an appointment. I ask the company to contact me with a quote while they are at the property before they go ahead and fix anything. That way I keep eyes and ears on how much it’s going to cost. If it is an absurd amount I tell them I’m not interested and I will try to find another solution or get a different company out there. You do not want to be a scheduler, you want to put the company in contact with the tenant.
Professional Photos
Now that you know how to get a property setup correctly for passive management and you know what the tenant is responsible for and what you are responsible for, it’s time to get professional photos done. Now before professional photos you may need to hire a cleaning company to do a cleaning if the previous owner or previous tenants left it a mess. In order to keep things cost effective you should only need to take professional photos once. I have found these to be between $150-$250 and once you have them you save them in google drive and you use these over and over again unless you do a very large renovation to the property. It is important to get pictures of the basement, even if it’s unfinished and the garage, even if there isn’t anything in it. Even more important than the basement and the garage is the washer and dryer. I have found that tenants are very picky when it comes to washer and dryers so putting a picture in the listing saves you time because you don’t have to answer 100 questions about the laundry and if it’s upstairs, downstairs etc. When you post the pictures on zillow you will be able to describe what the photo is showing. I always, always type at least something. For the bedrooms I type Bed 1, Bed 2, Bed 3 etc. For the laundry I type upstairs laundry or downstairs laundry etc. A picture speaks 1000 words.
Obtain Lease From Local Realtor
You are about ready to list your property for rent on Zillow and once you approve an application on Zillow you will need to sign a lease with your tenant. Each state has their own approved lease so you will need to reach out to a local realtor in the area your property is in and have them send you a lease via email. Once you get this lease, read through it so you understand it.
***Use A Realtor Or Not?
Depending on where your property is and what type of property it is you may want to hire a realtor to help you get a tenant in there. Listing properties on the MLS almost always results in a higher rent price. It also limits the amount of time the property sits vacant. The MLS has a ton of realtors looking at properties every single day and the realtors also send these properties to their clients. So by listing on the MLS you have a lot more eyes on your property which results in more offers, higher offers and less time on the market. The cost for a realtor to help you get your property rented out is 1 month’s rent. It is up to you to determine if that is worth it to you or not. Regardless if you hire a realtor to help you and put it on the MLS they will be able to email you the lease no problem. Even if you are not working with them. **You will want to send your professional photos to the Realtor so they can use these for the MLS listing. If you decide to use a Realtor they will do steps 5, 6 and 7 for you. They turn everything back over to you once the tenant is in there.
List For Rent On Zillow + Collect Applications
After you get your professional photos back and have a lease in hand, it’s time to get the property listed for rent on Zillow. I always publish with Zillow Premium and it’s a $30 one time fee for the listing. In order to publish the rental you need to create an account. Once your account is created you are going to add the photos and then draft a description. In the description just highlight all the benefits and if there are any negatives highlight those as well because it will save both you and the tenants looking time. For example if there was no washer and dryer in the property i would say No, washer and dryer on site. That way only serious tenants that don’t care about having a washer and dryer will reach out to you. You can also collect applications from possible tenants on Zillow as well. This is an amazing feature because the tenants have the opportunity to apply right to your property when you send them a link. The link will come from Zillow Manager and you can send it to them via Email. I think it’s a $50 fee that the tenant pays. It does a background check, eviction check and it pulls their credit and it presents it to you very nicely. The only thing you need to collect from them is their proof of income and employment.
Credit Score
The credit score I allow for properties depends on the property location. Some areas attract higher quality tenants than other properties. The minimum score I will ever allow is 650. The rougher neighborhoods attract lower credit score people that will probably rent their entire life. The higher end neighborhoods may appeal more towards renters that are moving in from a different area and want to learn more about their new city before they buy. Or maybe they are there temporarily for a job that only lasts 2 years. It is important to determine their scenarios.
Proof Of Income
I always ask for 2 months bank statements as well as their 2 most recent pay stubs. In addition I ask for their last 2 year’s tax returns and W2’s. That will give you a clear picture of their financial situation. Sometimes I will rent to tenants that only show me their last 1 year of taxes and W2’s, but it depends on their scenarios.
Proof Of Employment
I always ask for current employment with a statement of how much they make and a contact person at their job. I then call their job to verify the information that they gave me is correct. I ask if there is any chance that they will be laid off or fired in the upcoming months and I also ask what type of worker they are to judge their character.
Co- Signer
A co-signer is needed when there is a lack of credit score, lack of income or lack of employment. The co-signer becomes jointly responsible for the rent payments of the tenant. If the tenant stops paying rent, the co-signer must pay the rent. I have had tenants that brought their parents on as co-signers because they just graduated college and don’t have much income in place. Co-signers are a great way to get an extra layer of protection for you as the owner. A co-signer needs to fill out a full Zillow application and they need to show all of the above income and employment information.
Signing A Lease
After you confirm the tenant has a good credit score, is employed and is making enough money to pay the rent you are going to sign a lease to lock them into the property. Depending on the property and tenant I sign month to month leases (MTM) or 1 year long leases. The benefits of a MTM lease is that there is no eviction process needed. You just give them a 30 day notice that they need to vacate the property and it’s done, they need to get out. You as the owner have more control on a MTM lease. The benefit of a year long lease is that they are locked into the property for 1 year and cannot leave within 30 days notice. They have to stay the length of the lease or pay to get out of their lease. Higher end areas I always do 1 year leases. Lower end properties vary between MTM and 1 year long leases based off of my gut feeling on the tenant. About 90% of my leases are year long leases. The security deposit is always due right after they sign the lease. I always collect 1 month’s rent for the security deposit and I collect it via Zelle. I also collect 1 or 2 months rent up front as a move in cost. If I collect 1 month’s rent it is credited towards their last month in the property. This means that they will not have to pay rent in the last month they are in the property. You do this as an owner because it mitigates risk, if they just up and leave without paying or telling you, you have saved yourself 1 month of rent by collecting it up front. If I collect 2 months rent up front I typically credit them the first month and the last month meaning they do not need to pay rent for the first month or the last month they are in the property. This again mitigates your risk as the owner. I collect these payments on zelle as well, sometimes they need to split these payments over a 2 or 3 day period because of send limits, that is okay. You need to make sure the tenant knows that the property is not reserved for them until they make all their move in cost payments, so you as the owner need to keep advertising the property for rent until you collect the security deposit and all the advanced rent. It’s a juggling act, if another good tenant comes along and the tenant you signed a lease with is taking forever tell the other good tenant hey if you give me 4 months rent up front and can send it to me by the end of today via wire transfer i can reserve this property for you. The other possible tenant I had is dragging their feet. Whoever pays first gets the property reserved. All payments are collected through zelle, even the rent they pay to you monthly.
How do you get the actual lease signed? I do this digitally through Docusign https://www.docusign.com/ I think it is like $350/yr, or if you know someone that has an account you can ask them to collect signatures for you. Or if you haven’t used the free trial yet, i think you get a 7 or 14 day free trial. But it sends signature requests right to your email, it’s super slick. Make sure you save all documents in your Google Drive Folder for each specific tenant.
Issues Arise
Issues are bound to happen and as you have turnover in your properties (Turnover means different people moving in and out) things get taken that aren’t supposed to be taken like garage remotes and maybe even smoke detectors. The solution to these issues is amazon. You can order a delivery from anywhere with Amazon and have it delivered directly to your properties door. So if you need to send a garage door opener just go to amazon, type in the garage door opener, make sure its compatible with the garage door motor you have and boom done. If you don’t know what garage motor you have, have the tenant send you a picture. If you need to order smoke/co2 detectors ask the tenant how many, send them and batteries to the house and if the tenant can self install great. If they cannot self install hop on google, type in handy man and get them connected with your tenant to schedule an install. For something simple if you tell them everything they need is on site and all they have to do is install it will be very cheap and they will be able to tell you how much it costs over the phone.
Lets say its a big issue like a leaky pipe that is pouring out water, the first step is to make sure the tenant is being preventative. If it is shutting off the main water valve they need to do that (hopefully you know where it is) or if a large trash can or bucket will suffice they need to make sure the water is being caught in that. Then you need to hop on google and call a plumber, there is not much time to get quotes in this scenario and the plumbers know that so they will charge you a premium. They typically call it a rush fee or an emergency fee, but who cares, you need this fixed. This is where established relationships become very beneficial. Get them in there asap and get it fixed. Done, just like that all you had to do was go on google, call a couple people. You could be in Florida while your properties are in California.
When Tenants Move Out
When tenants move out I always hire someone to go take a video of the property. I tell them to walk and pan the camera slowly so I can have a great visual. I also tell them they need to have an iphone because that’s what i have. I ask them to take pictures of any damage that they see so I can assess the scenario. Based upon the damage I determine if I’m going to keep all of the tenants’ security deposit, some of it or give it all back. It varies on how well they took care of the home.
From this video I make a list of everything that needs to be fixed and I send it to my handyman who then gets everything done. When he is done I ask for video or photo proof that everything is done prior to me sending payment. Once everything is fixed, if the tenants did not hire a cleaning company I hire a cleaning company to get the property ready for the next tenant, and then this process repeats itself over and over again. Typically then tenants do not hire a cleaning company to move out, and if they do i ask them for the receipt. If they cannot provide me with a receipt I take the amount the cleaners cost out of their security deposit. When the cleaners are done I again ask for a slow panning video showing proof, videos area key for remote management.
Real Life Scenarios
One of the most frustrating things I’ve had happen was a furnace went out on my tenants in the middle of winter during the night. It was freezing cold and their house had no heat, this is bad because they are cold and it could cause the pipes to burst. So they called me very early in the morning and made me aware of the situation. All i had to do was tap into my already established relationship and get out there within 12 hours no problem and i paid him $500 and the problem was solved. If you do not have this established relationship just get on google, call around until you find someone that can get out there that same day (you may have to call 10 companies), have them call you while on site and explain to you what happened and ask them how much it will be to fix the issue. If it isn’t an absurd amount, tell them to fix it. You should have a reserve built up from the cashflow you receive from the property. The longer you own property the more you understand pricing for different things that break. At first it can be tough to gauge.
I recently had a new tenant move into my single family home and the previous tenant took the smoke alarms (not sure why) and the garage remote. Pretty expensive items so I didn’t really care. All i did was hop on amazon, send them over, called a handyman, had them schedule a time that worked for both of them, he sent me the invoice, i paid the invoice via debit card and boom done.
Conclusion
I haven’t been to any of my properties in over 2 years, but with the help of Google, Amazon and all the other technology we have, it is very easy to manage your properties by yourself and save money until you get to a point where you can delegate it. I hope this document has shed light on the process and answered many questions you may have had about the process. With these questions answered you should be able to move forward and purchase more properties resting assured you are fully capable of finding the solutions to any management issues that arise. It really is easy, it’s not a difficult task and I hope you see that now. Cheers!
