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In this often litigious and incompetence and dishonesty in our society, it’s increasingly difficult to manage a rental property and to avoid poor-quality tenants.
Complete documentation is of paramount importance in renting property – whether you do-it-yourself or you hire a property manager.
You have to protect yourself from a myriad of threats. You need a lot of patience in performing due diligence.
Do a SWOT Analysis – your strengths, weaknesses, opportunities and threats — as a landlord.
If you hire a property management firm, don’t assume it’s 100 percent competent and ethical.
The firm can be an opportunity for your growth but it can also fail to perform in protecting real-estate assets.
(Scroll down for strategies in hiring a property manager.)
Hold the firm to the same high standards you would set for yourself to ensure success.
Here’s a checklist:
1. Brace yourself. Prepare for disappointments and roller-coaster rides. Keep your wits. Stay calm, no matter what.
You’ll encounter unforeseen soap operas and challenges. So treat all problems as opportunities for growth – as stepping stones not as dead-end obstacles.
2. Know all applicable landlord and tenant laws. You’ll have to know what you can do and not do as a landlord. That certainly includes credit checks.
Again, be aware of all legal factors even if you hire a property manager.
3. Use best business practices. Like any successful manager, create processes to remind you so you don’t forget critical steps and take shortcuts. Make it a comprehensive list of operations on how you do things.
Fine-tune your processes as laws and conditions change. Remember an operations checklist will enable you to prevent or manage potential stress factors.
4. Before hiring a property manager, referrals or testimonials are not enough for proper due diligence. Ask trusted confidantes to mystery shop the property-management firm as a tenant. Use a secret-shopping process as a landlord.
If you decide to consider hiring the firm, further use a screening mechanism to perform a background check. Look for red flags. Check with your state’s regulators, the Better Business Bureau, references, and online reviews.
5. Before obligating yourself in renting your property, make certain the tenant has a positive credit history. Charge an application fee to and do a credit check. The tenant must be able to give you a security deposit and timely rent.
Use an online tenant-screening firm (even if you have a property manager).
Additionally, get verifiable credit references.
“Asking questions will get you the performance you are after far more than dictating demands.”
-Dan James
6. For your region, check to see if your rental application can ask for the following. Until you’re confident, double check everything the property manager does in the recruiting and screening of tenants.
— Names, addresses and telephone numbers of current and past employers. (Check out the employer online to ensure you get honest answers. If you have a valuable piece of property, you don’t want a tenant who has a dubious employment.)
— Names, addresses and telephone numbers of current and past landlords. (Check out the past landlords online to verify you’re getting accurate information about the tenant.)
— Names, addresses and telephone numbers of personal references. (Remember birds of a feather, flock together. Research or at least Google the names of references to make sure of the persons’ veracity.)
— Social security numbers
— Drivers’ license numbers
— Their bank account numbers
— Credit references (Make sure they’re of quality, credible sources of information.)
— Ask for authorization to do a credit check.
7. Use a fool-proof agreement. Because rental agreements and leases help produce your income, understand the financial strength of the agreement so it’s for your benefit.
More tips on dealing with property managers:
1. Get a written agreement on any fees. Know what you’ll be getting. Don’t allow negative surprises.
Elite firms will not just collect rent, provide documentation in financials, or economically organize repairs, they’ll make you aware of depreciation schedules, and/or recommend investments for high returns and insurance options.
2. Negotiate when you can. If you anticipate placing a big portfolio of properties with the firm, know that you probably have leverage to negotiate fees.
3. Check the caliber of the firm’s staff. Determine whether the person which whom you make an agreement will personally manage your property. Otherwise, try to find out its personnel turnover history.
You don’t want to deal with an unorganized company resulting in your property being trashed.
4. Learn how many properties each person in the firm manages. You’ll want to make sure the person has a manageable workload. Get a commitment on how long it takes the firm to return telephone calls.
5. Check out the firm’s recruiting process. Review the quality of the firm’s tenant-recruiting — including its Web site, its ads and photography.
In marketing terms, assess the property manager’s ability to recruit the best tenants by using strong value propositions in promoting your property.
6. Verify screening procedures. Ask for examples on how the firm screens prospective tenants. Don’t settle. Make sure you get multiple tenants to consider.
You’ll also want to be given copies of tenant-related information. Again, make sure you double check the screening process by using an online tenant-screening firm.
7. The firm’s follow-up. Ask how the firm monitors or inspects your property after renting to a tenant.
8. Look for other professionalism traits. The firm must negotiate well with you and tenants. You might be paying the property manager, but remember the firm has legal and professional standards it must uphold for tenants. Don’t take it personally if you’re told you personally can’t make complex repairs.
8. Anticipate repairs. Don’t assume the firm has a network of quality, reliable repair people. Make sure you inquire about it. (Check out those repair people online and look for reviews.)
9. Set aside profits. Budget for contingencies such as paying for repairs.
10. Track results. Closely monitor the firm’s performance, especially the financial reports it gives you. Don’t hesitate to ask questions. If you aren’t satisfied with its performance, find another one.
From the Coach’s Corner, suggested reading:
6 Values for Financial Protection — Part two of the two-part series: “Solutions for a Roller Coaster Marketplace” Debt is the catalyst for all financial woes – for individuals and the aggregate economy in the United States and globally, esteemed associate Joey Tamer astutely reminds us.
10 Tips for Hiring the Right Attorney for Your Business — In running a successful business, you typically need the services of three professionals — a good tax accountant or CPA, insurance agent and an attorney. Know that talent and skill levels are crucial for your success.
5 Marketing Tips for Non Pros to Make Extra Money in Real Estate –Are you looking for an additional source of income? Boost your retirement assets? Soft economy or not, the buying and selling of real estate is still a viable option for nonprofessionals to make extra money.
4 Tax Tips for Your Home Office Write Offs –The best tip I ever got from a CPA was to move my firm from a rented office space to my home. But it was important to understand the tax code for qualified write offs. Following are some tips, but it’d be best to double-check with your tax specialist.
“Asking questions will get you the performance you are after far more than dictating demands.”
-Dan James
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