A lot goes into effectively managing rental properties, including collecting rent, managing rent increases, handling maintenance, performing inspections, and taking care of difficult tenants.
Can I Manage My Own Rental Property?
You can legally manage your own rental property. In fact, nearly 80% of property owners also handle the management of their properties.
However, the question becomes if you should manage your own property. Some owners are better off handing the day-to-day responsibilities to someone else, while others can handle it with ease.
Here are some of the factors when deciding to hire or DIY property management:
- Experience level – Can you effectively screen tenants, handle maintenance tasks, understand landlord-tenant law, and more?
- Number of properties – With a single property, you might only have to get involved a few times a year. If you have 10 properties, you’ll be handling major tasks frequently.
- Geography – If you don’t live in the area, managing from afar becomes nearly impossible.
- Profit – If your margins are slim, hiring a property manager might not make any sense.
- Control – Do you want to know everything that’s going on and handle things your own way? You can likely train your property manager, but it could never be 100% how you want to run things.
- Stress management – For some, managing a property is a non-starter because of fear, anxiety, or constant headaches. Others can roll with the punches without a problem.
Basics of Rent Collection
Effective landlords will need to understand the best ways to collect rent, handle late fees, and even delicately handle rent increases.
Best Ways to Collect Rent
There isn’t a single solution for landlords, as the best methods depend on a few factors, such as how many properties you own and how you want to track the payments.
Here are a few of the different methods you can consider:
- Payment Apps – These are solutions like Apple Pay, Zelle, and Venmo. Landlords choose these for smooth transactions with easy tracking.
- Rent Collection Software – For larger landlords, these online platforms typically have portals for tenants to pay rent. They can handle much of the automation and reporting.
- Direct Deposit – If tenants are willing to give you their banking information, you can get paid automatically. This can be a good solution for a landlord with only 1-2 tenants (if you have more, go with a software).
- Cash – It’s a bit old school, but some landlords prefer not having to deal with any technical issues. Cash requires manually creating receipts and separate tracking, which is extra work.
- Check – It’s still a preferred method for some older tenants, but be sure to never accept a personal check. Require a cashier’s check, money order, or certified check.
- Mail – Some tenants like to mail checks in, but sometimes mail gets lost or delivered late, which can then lead to disputes over late fees.
- Drop-Off Box – Landlords with many properties in close proximity may find this the best solution. A tenant can drop off a check on their way out of a building, or with a short drive around the block.
How to Keep Track of Rent Payments
Depending on how you want to run your rental business, there are a few different choices for tracking rent payments.
Rent Ledgers
The first would be to keep a physical rent ledger. Usually landlords will fill out their ledger with each rent payment, and then store in a filing cabinet. While this isn’t cutting-edge technology, some landlords like having actual copies they can pull out and look at. It’s also great as a back-up solution to a digital system.
Spreadsheets
Next, some landlords like to use spreadsheets. Again, this is for landlords who are willing to manually enter in details every time they receive a payment. This is a viable solution for landlords with a smaller number of properties.
Rent Automation Software
Last, landlords could use automated software. These generally include an online platform where tenants can go to make payments. The software would manage all the reports, minimizing the day-to-day accounting a landlord has to do. These software often include other features such as screening services, online applications, and a maintenance portal for tenants to submit property issues.
What Day of the Month Should Rent Be Due?
Most landlords choose to have rent due on the first day of the month, but there’s more to consider.
For example, many people get paid at the end of the month. Someone who’s living paycheck-to-paycheck might not quite have access to their money on the 1st of each month.
Also, landlords must consider grace periods. Is the rent due on the 1st, but no late payments are due until the 5th? If that’s the case, then you’ll probably have tenants frequently paying on the 3rd or 4th, meaning they’re technically paying late each month.
Whatever day you choose, be sure that you’re consistent in enforcing the due date and late fees.
What to Do if the Tenant Won’t Pay Rent?
For some landlords, eviction is the go-to strategy for any tenants not paying rent. This may be the best solution for you as well if you believe the tenant isn’t one worth keeping around.
However, if you can use a different solution and keep an otherwise good tenant in the property, you can avoid a costly vacancy.
Here are a few alternative solutions to eviction when it comes to non-payment:
- Talk to your tenant. Have they been an otherwise excellent tenant, but had an unforeseen major expense pop up? It may be worth giving a little more leeway.
- Set up a temporary payment plan. The tenant might be able to pay their owed rent on an installment plan until they are caught up. For example, you could add an extra $200 per month for 10 months, if they missed a $2,000 rent payment.
- Offer cash for keys. If the tenant is someone you want out, offering them a cash bonus to leave keeps an eviction off their rental history. You’ll also be able to avoid a lengthy—and perhaps bitter—eviction process during which you don’t get any rent payments.
How to Raise Rent Without Losing Tenants
Raising the rent is an inevitable (and often unpleasant) part of being a landlord. Good handling of these situations can mean more income and happy tenants.
Here’s how to increase your rental income while keeping your best tenants happy:
- Follow rent increase laws. Some states have rent control laws that determine how much you can raise the rent. In addition, you can almost never raise the rent during the lease term.
- Be transparent. Tenants (generally) understand that reasonable rent increases are part of the game. Taking the time to explain why you’re increasing the rent (e.g., increased taxes or market rates increasing) can go a long way.
- Write rent increases into the contract. From the very beginning, you can put into the contract that there’s a yearly rent increase of $50. Explain that this is instead of raising rent $200 or more all at once.
- Be a stellar landlord. In other words, make sure the property merits a rent increase. Be communicative, perform repairs quickly, and make updates to the property, if necessary.
- Stay $25 – $50 under market price. Even if you need to increase the price, staying a bit below comparable properties (and explaining that to the tenants) can keep everyone happy.
Common Rental Property Repairs and Maintenance
Perhaps the part of managing a rental property that landlords dread the most is dealing with repairs and maintenance. There are some issues that are much more common than others, and understanding how to handle them can make you a better landlord.
Here are the most common property repairs and maintenance:
- Replacing Smoke Detectors and Batteries
- Handling Pest Problems
- Repairing Air Conditioner Issues
- Repairing Standing Water in the Dishwasher
- Repairing a Dryer
- Fixing a Broken Window
- Repairing a Clogged Toilet
- Painting the Property
- Silencing a Loud Refrigerator
- Removing Cigarette Smell
- Repairing Water Damage
What is Considered Emergency Maintenance?
This definition differs depending if you’re asking a landlord or a tenant. However, tenant emergencies should generally mean that there’s a serious risk to people or property.
This includes things like:
- Fire
- Flood
- Leaking roof
- Gas leak
- Carbon monoxide leak
- Break-in
- Loss power
- Loss of fresh water
Despite what some tenants think, clogged sinks, broken windows, loud fridges, and burned out light bulbs aren’t emergencies.
There are a few that might be considered emergencies, such as malfunctioning A/C or heating, or being locked out of the unit. These are dependent on the situation.
A tenant losing A/C in the middle of a Phoenix summer, or losing heat in the middle of a Minnesota winter can be considered emergencies.
Apartment Inspections
Apartment inspections are an important ongoing duty of a landlord—if they wish to keep their unit running smoothly and profitably. Landlords who ignore inspections run the risk of missing lease violations and the property going into disrepair.
What Can a Landlord Inspect?
Most parts of the unit are fair game, as landlords are entitled to a near-comprehensive check to ensure their units are being treated with respect. This includes the exterior of the unit and the landscaping, as well as the interior. Any shared spaces are also important to inspect.
Landlords cannot inspect private areas, such as inside drawers or bedroom closets. Essentially, anywhere a tenant would keep personal items and want privacy is off limits.
What Should Landlords Look For During an Inspection?
The best landlords hold regular inspections in order to make sure that the tenants are taking care of the property. During inspections, landlords are usually on the lookout for lease violations and items that need maintenance.
Lease Violations
Identifying tenants who are breaking the rules is the most important reason to hold regular inspections. This is how you can find out things like:
- Pets in the unit
- Extra tenants
- Too many cars parked outside
- Obvious damage
- Smoking
If a tenant has lived in a unit for 12 months or more and has never been inspected, they’re much more likely to break the rules. They don’t think anyone will notice.
Maintenance Items
Landlords who inspect regularly can also identify simple maintenance items as well as smaller issues that could grow larger.
Some tenants will learn to live with some issues, such as peeling paint, and won’t bother the landlord. This is your chance to proactively take care of these things and improve your tenants’ quality of life.
Also, you’re more likely to notice (or at least care) about something that looks small, but could be a sign of a larger issue.
For example, some warping at the bottom of baseboards could be an indication of larger damage. Or, a hairline crack in the ceiling could grow into something more serious if left alone.
How Long Do Inspections Take
Generally, inspections should last between 15 minutes and an hour.
There are a few different factors that can affect how long an inspection should take:
- Frequency of inspections
- Type of inspection (e.g., a simple drive-by versus a complete interior inspection)
- Size of property
- Overall condition of the unit
A one-bedroom property that gets inspected twice a year will almost always require less time than a five-bedroom house that the landlord hasn’t inspected before.
Managing Difficult Tenants
Unfortunately, handling bad tenants comes with the territory of being a landlord—unless you’re extremely lucky.
If you have enough units, you’ll certainly come across most issues. However, your strategy for handling tenants is a massive factor to your long-term success.
Most Common Tenant Complaints
Here are the most common things that your tenants will complain about:
- Lack of communication
- Maintenance requests
- Security deposit returns
- Rent increases
- Noise
- Privacy violations
- Safety concerns
- Pet policy
- Pest issues
- Available parking
Strategies for Creating the Best Outcomes From Bad Tenants
In some cases, eviction is the only solution. However, it’s often a better long-term solution (i.e., more profitable) to work with your tenants to correct their behavior.
You might have a great tenant who happens to be a very poor communicator. By setting expectations and leading by example, you might be able to help them improve.
Here are a few actions you can take rather than eviction:
- Explain expectations verbally. Perhaps all a tenant needs is for you to share with them, in great detail, exactly what you want them to do. If they’re having trouble with a rule about late-night parties, a straightforward conversation about rules and consequences could help.
- Be rigid with the rules. If you don’t charge a late fee, that tenant’s new norm might be to pay late.
- Lead by example. If you would like a tenant to communicate respectfully around things like scheduling inspections, mentioning maintenance issues, and sharing plans for the end of the lease, much of that starts with how you communicate.
- Stay calm. If you escalate the situation, you’ll likely only end up with a tenant digging their heels in. In a worst-case scenario, you could end up in court for an action you regret.
- Hire a property manager. Perhaps you have some troublesome tenants, but they’re not worth evicting. A trained property manager not only keeps you out of the regular communication loop, but may also be able to more deftly handle the issues.
- Offer cash for keys. This means you pay the tenant to leave the unit. Usually, handing cash over to a misbehaving tenant means a landlord has to swallow their pride. However, it keeps the tenant from having an eviction on their record, and the landlord avoids a lengthy, expensive process.
How to Avoid Bad Tenants Altogether
The best solution for bad tenants is to figure out how to weed them out during the screening process.
A good screening process includes:
- Patience. Don’t pick the first tenant because they look good and vacancy is expensive. If you have to put up with two extra weeks fronting mortgage payments yourself, it’s worth it in the long run for a great tenant.
- Pulling screening reports. If you’re not willing to check criminal background, rental history, and credit reports, then you’re certainly going to get less-than-qualified tenants.
- Following up with references. Employers can verify applicants’ income and previous landlords can tell you everything about their rental history.
- Interview applicants. In many cases, this won’t be a formal interview. Showing the property and having a good conversation with them can reveal much about their personality. Also pay attention to how they communicate during the application and scheduling process. Communicative tenants are worth their weight in gold.
