The Book on Managing Rental Properties

1. Treat landlording as a serious business, not a hobby

Landlording is the business of protecting and growing a real estate investment through the careful placement and oversight of tenants.

Commit to success. Landlording requires dedication, hard work, and a willingness to take on various responsibilities. Approach it with a business mindset, focusing on:

• Protecting your investment
• Growing property value
• Maximizing cash flow
• Providing quality housing for tenants

Successful landlords set themselves apart by:

• Creating systems and repeatable processes
• Continuously improving their operations
• Maintaining strict financial control
• Focusing on customer service
• Understanding relevant laws and regulations
• Seeking help and education when needed

2. Create systems and processes for efficient property management

In the world of landlording, this can be applied to mean that 80 percent of your problems (or stress) comes from 20 percent of your tenants.

Streamline operations. Develop standardized procedures for various aspects of property management to increase efficiency and reduce stress. Key areas to systematize include:

• Tenant screening and selection
• Rent collection and late payment handling
• Maintenance requests and repairs
• Move-in and move-out processes
• Financial record-keeping

Implement tools and technologies to support your systems, such as:

• Property management software
• Online rent payment platforms
• Digital document storage and organization
• Automated communication systems for tenants

By creating effective systems, you can minimize the impact of problematic tenants and focus on growing your business.

3. Prepare thoroughly before signing your first lease

Before you sign your first lease, you must build a solid foundation for your landlording business.

Lay the groundwork. Take essential steps to protect your investment and set yourself up for success before accepting your first tenant:

1. Consider asset protection strategies (e.g., forming an LLC)
2. Obtain proper insurance coverage
3. Set up separate bank accounts for your rental business
4. Prepare necessary documents and forms
5. Create a policy binder outlining your procedures
6. Get to know the property's neighbors
7. Establish a bookkeeping system

Additionally:

• Ensure the property is in rentable condition
• Determine appropriate rent based on market research
• Familiarize yourself with local laws and regulations

Proper preparation will help you avoid common pitfalls and start your landlording journey on the right foot.

4. Understand and comply with Fair Housing laws

Please, please, please don't go vigilante and take the eviction process into your own hands. Just don't.

Avoid discrimination. Fair Housing laws protect tenants from discrimination based on protected classes such as race, color, religion, sex, national origin, familial status, and disability. To stay compliant:

• Familiarize yourself with federal, state, and local Fair Housing laws
• Use consistent screening criteria for all applicants
• Avoid discriminatory language in advertising and communications
• Document all interactions and decisions regarding tenants
• Be prepared to make reasonable accommodations for disabled tenants

Key areas to be cautious about:

• Advertising language
• Pre-screening questions
• Application process
• Tenant selection criteria
• Lease terms and enforcement

Violating Fair Housing laws can result in severe penalties, so it's crucial to educate yourself and stay vigilant in your practices.

5. Market effectively to attract high-quality tenants

Marketing your property is essential for reaching and appealing to the most people qualified to rent your property.

Cast a wide net. Utilize various marketing channels to reach potential tenants while highlighting your property's best features:

1. Online listings (e.g., Craigslist, Zillow, Facebook Marketplace)
2. Yard signs and flyers
3. Local newspapers and publications
4. Referrals from existing tenants
5. Social media marketing

When creating your listings:

• Use high-quality photos and videos
• Highlight key features and amenities
• Clearly state rent, deposit, and qualification requirements
• Emphasize location benefits (e.g., nearby schools, shopping, transportation)
• Use descriptive language to paint a picture of life in the property

Track the effectiveness of your marketing efforts to optimize your strategy and focus on the channels that bring in the best tenants.

6. Screen tenants rigorously to minimize risks

Training begins with the first interaction your tenant has with your company and continues until the day they hand over the keys on their move-out day.

Be thorough and consistent. Implement a comprehensive screening process to identify responsible tenants who are likely to pay rent on time and take care of your property:

1. Pre-screen applicants over the phone or email
2. Require a detailed rental application
3. Run credit and background checks
4. Verify employment and income
5. Contact previous landlords for references

Establish clear qualification criteria, such as:

• Minimum income requirements (e.g., 3x monthly rent)
• Minimum credit score
• No prior evictions or serious criminal history
• Positive rental history

Document your screening process and apply it consistently to all applicants to avoid potential discrimination claims. Remember that thorough screening can save you significant time, money, and stress in the long run.

7. Use a comprehensive lease agreement and train tenants from day one

The lease will become incredibly important should the business relationship between you and your tenant go south, which it may.

Set clear expectations. A well-crafted lease agreement is your first line of defense against potential issues. Ensure your lease covers:

• Rent amount, due date, and payment methods
• Security deposit details
• Tenant responsibilities and prohibited activities
• Maintenance and repair procedures
• Grounds for eviction
• Move-out requirements

Train your tenants by:

• Conducting a thorough move-in orientation
• Providing a tenant handbook or welcome packet
• Clearly communicating policies and procedures
• Setting the tone for a professional landlord-tenant relationship

Regularly reinforce expectations throughout the tenancy to maintain a positive and productive relationship with your tenants.

8. Handle problems and maintenance issues promptly and professionally

When you don't have the money to outsource tasks, we offer two suggestions: 1. Ask yourself: "By outsourcing certain tasks, could I achieve more money doing other tasks?" 2. Cultivate an attitude of delegation even if you can't delegate yet.

Be responsive and proactive. Address tenant concerns and maintenance issues quickly to maintain property value and tenant satisfaction:

1. Establish a clear system for receiving and tracking maintenance requests
2. Respond to all requests promptly, even if just to acknowledge receipt
3. Prioritize urgent issues that affect habitability or safety
4. Develop relationships with reliable contractors for various repair needs
5. Follow up with tenants after repairs to ensure satisfaction

Consider preventive maintenance to reduce long-term costs:

• Regular property inspections
• Seasonal maintenance tasks (e.g., HVAC servicing, gutter cleaning)
• Addressing small issues before they become major problems

By handling problems efficiently, you'll build trust with your tenants and protect your investment.

9. Build and maintain relationships with reliable contractors

To find a good attorney, ask for references from other landlords.

Cultivate a network. Develop relationships with skilled, reliable contractors to ensure quality work and timely repairs:

1. Seek recommendations from other landlords or property managers
2. Research online reviews and ratings
3. Interview potential contractors and request references
4. Start with small jobs to test their work quality and reliability
5. Maintain a list of go-to contractors for various needs

Tips for managing contractor relationships:

• Clearly communicate expectations and project details
• Get multiple bids for larger jobs
• Use written contracts for significant projects
• Pay promptly for satisfactory work
• Provide feedback and maintain open communication

Having a trusted network of contractors will help you address maintenance issues efficiently and keep your properties in good condition.

10. Stay organized and keep accurate financial records

Bookkeeping is somewhat of a "game" or a "puzzle." To win the game, your books should match perfectly with what your bank account shows for that property.

Maintain financial clarity. Implement systems to track income and expenses accurately:

1. Use separate bank accounts for your rental business
2. Keep detailed records of all transactions
3. Categorize expenses according to IRS guidelines
4. Reconcile your books regularly with bank statements
5. Generate and review financial reports to assess property performance

Consider using:

• Accounting software (e.g., QuickBooks, Xero)
• Digital receipt tracking apps
• Cloud-based document storage

Accurate financial records will help you:

• Make informed business decisions
• Identify areas for cost reduction or revenue improvement
• Simplify tax preparation
• Demonstrate profitability for financing purposes

11. Manage tenant turnover effectively to minimize vacancy and costs

Cash for Keys is simply the practice of paying your tenant to move out, knowing that the cost of paying a tenant is cheaper and easier than trying to evict.

Streamline the process. Develop an efficient system for handling tenant move-outs and preparing units for new occupants:

1. Provide clear move-out instructions to departing tenants
2. Conduct thorough move-out inspections
3. Act quickly to clean and repair the unit
4. Market the property as soon as possible
5. Consider offering incentives for lease renewals to reduce turnover

Strategies to minimize vacancy:

• Stagger lease end dates to avoid multiple turnovers at once
• Begin marketing before the current tenant moves out
• Offer short-term lease extensions if needed
• Consider "Cash for Keys" for problematic tenants to avoid lengthy evictions

By managing turnover efficiently, you can reduce lost rent and maintain a steady cash flow from your properties.

Last updated: September 18, 2024