How to Save Time Managing Your Rentals
Those benefits are great but they come at a cost. You have to deal with pain-in-the-neck tenants and management problems that eat up your time. Some investors find these drawbacks so heavy they give up on rental real estate all together. While hiring a property manager might alleviate some of this burden, you can still find yourself face to face with Everest-sized headaches no matter who you hire.
Here are 5 things you can do today to reduce that burden to the absolute minimum.
1. Better Screening: The key to worry-free rental real estate is having great tenants. You already know that. And you also already know that you can't fully judge a person by their application and credit score. Nonetheless that is where you start your screening process. But if you really want great tenants, don't stop there.
Talk to at least five references including current and previous landlords and employers and/or bankers. If your prospective tenant can't come up with at least five people for you to talk with, don't rent them%VIRTUAL-pullquote-If you really want to save time, empower your tenants.% your place. Keep looking for someone who can supply the required number of references. You might give up some quick cash, but over the long-haul you'll save money by being very picky.
I also recommend that you run a criminal background check just to be on the safe side. This isn't expensive and it's a good way to make sure your tenant isn't on "America's Most Wanted."
2. Easier Banking: In order to save as much time as possible, make sure to streamline your banking. Only rent to people who set up automatic deposit and put all the bills you can on auto-pay. I suggest you use an online bank that caters to business owners -- most do not. The nice thing about online banking for property owners is that there aren't any branches so you can't waste time going to any.
That means you and your tenants will be forced to deal with the mail and internet rather than you having to go around, collecting checks and wasting time.
3. Simple Record Keeping: Along with user-friendly banking you certainly want to make bookkeeping as easy and straightforward as possible. My suggestions are as follows:
a. Use one bank account and one credit card for each property you own.
b. Use the credit card for as many of your expenses as possible. Anything that can't be paid by credit card should be put on auto pay. Never accept cash and never use cash to pay for anything if you can help it.
c. Make sure the bank and the credit card company allows you to upload your data into an accounting/bookkeeping software package. Any good bank will have this already available.
d. Make sure your accounting software uploads to a good online tax preparation program. This is important even if you don't do your own taxes because it will be easy for you to prepare all the reports for your CPA or tax preparer.
The beauty of this system is that tracking is done automatically and effortlessly. The data will flow from the credit card and bank into your software program and from there to your tax prep software.
By refusing to accept or use cash or write checks, you'll save yourself hours of time you'd otherwise waste tracking and you'll be able to maximize your tax refund because you won't overlook any of your expenses.
4. Proactive Property Inspections: The bane of a property owner's existing is the "my toilet is leaking and its midnight please come over and fix it now" call. You can't totally get rid of those unexpected emergencies, but you can put a damper on them by making pre-emptive inspections and having scheduled maintenance. It's true that these actions might reduce your operating profit over the short run but in the long run this step pays off.
First, since those repairs will have to be made sooner or later so it doesn't really create costs to be proactive. It just helps you manage expenses on your own schedule. This step reduces the wear and tear on you and allows you to tolerate owning property much longer.
And don't forget that scheduled maintenance keeps the property values high and will maximize your resale value. This is an important step if you really want to save time and make more money over the long run.
5. Empower Your Tenants: If you really want to save time, empower your tenants. Make them feel like it's their home (because it is). Talk about the property in terms of what it means to them -- not you. Make them feel pride in living there by how you speak with them and the work you do on the property.
After they demonstrate their responsibility, let them take care of minor repairs themselves. Tell them that if a repair cost less than $100 all they have to do is let you know they are going to do it before hand and they can take care of it themselves. This saves you the time and energy of having to go out to the property and meet with the repair people.
And since your tenants will have to live with the repair, he or she will be far more interested in a positive outcome than you might imagine.
The best way to save time managing your property is to look at all of your tasks and try to outsource and/or automate them. That includes your credit screening, bookkeeping, banking, maintenance and getting your tenants to feel like owners. What other tips do you have for making property ownership less onerous?