Managing Your Real Estate Investment – Part 3
In Part 1 & 2 we discussed how to get great tenants by renovating key areas of your rental property. In Part 3 we will discuss some landlord protocols in order to keep your tenants happy and renting long term.
When you feel you have adequately renovated your unit, it is crucial to do a walk-through of your unit and see it as the tenant would. If you feel there is anything that comes to your attention that would need repair or cleaning, the tenant will see this as well.
Let’s begin walking through your unit and seeing it as your potential tenant would, considering each step through the unit can secure or lose the tenant. Remember, you’ve done your best to screen only for the best candidates. If you can win them with a great unit, you could secure a long-term, interde-pendent tenant you can count on to give you years of uninterrupted rent with very little management/time needs from you.
You can see that if you take care of the small things, which by and large are very inexpensive, you can create a great looking unit that looks like you actually did spend a lot of money. This will go a long way in being able to substantiate asking the highest rental amount the market will bear for your unit.
Managing your tenant
For some landlords, managing tenants can be a full-time job. In part one of this series, we created an application process that managed to screen out any undesirables. This process was created to produce an interdependent ten¬ant that will require very little management.
Creating a friendly, but strictly professional tenant/landlord relationship is of the utmost importance. You have already begun to create this atmosphere through your screening and application process discussed in part one. It is a mistake to become “friends” with your tenant as you become victim of favours and allowances.
You must take every opportunity to con¬tinue to “groom” your interdependent tenant. There are a plethora of techniques to ensure success in this regard. I go through all of these techniques in my training sessions but will highlight a couple of good key points.
TIP 1: If your unit has a common area, I like to leave a broom and a dustpan available for any tenant to take it upon themselves to use. I also like to leave a shovel and a bag of road salt available for use in the winter. Although you can’t force any tenant to take it upon themselves to do this extra work, often the interdependent tenant will be happy to take it upon themselves to do it. This also goes for the grass cutting and garbage removal.
TIP 2: If you don’t have a volunteer tenant to accomplish these tasks, you may need to pay one of them to do the work. A common mistake among landlords is deducting the agreed upon remuneration from the tenant’s rent every month. This is effectively reduces the value of your property because the rent roll you would show a buyer must show the actual amount that you are receiving in rents. Also, if the tenant decides they don’t want to do the job anymore and the landlord notifies the tenant that the rent will go back up to the original amount, the tenant can go to their local landlord-tenant board and tell the judge they’ve been paying the reduced amount of rent for ”x” amount of months and the judge in most cases will side with the tenant because there has been precedent set.
The better way to approach this is to agree on a price for the work, then pay the tenant a monthly cheque. This way you have a legitimate taxable expense and you have the opportunity to approve the work before hand¬ing over the cheque. This also maintains the actual rent roll and ensures the value of your property is the highest it can be.
TIP 3: Another way to maintain a profes¬sional relationship and avoid any annoying phone calls in the middle of the night is to give the tenant a stack of “repair request” sheets. What this sheet includes will be the date and a description of the repair needed. This sheet must be submitted to you from the tenant, creating a paper trail if the matter ever comes up in landlord and tenant court.
I personally tell the tenant that the repair will be done within seven days or I will refund the tenant a prorated daily rent amount after the seven days until the repair is taking care of. This goes a long way in gaining the respect of the tenant and preventing any repair from getting worse and more expensive to fix.
Many people would prefer to hand over all these responsibilities to a property manage¬ment company. There are very few property management companies that will take the same care in managing your property as you will, however many property owners don’t have the time or inclination to do any of the property management and it is worth the expense to farm this out to a professional.
Here are some tips when looking to enlist a professional property manager:
TIP 1: UNDERSTAND WHAT SORT OF PROPERTIES THEY ARE CURRENTLY MANAGING.
You want someone that is established, expe-rienced and has your best interest at heart. There are many property management compa¬nies that deal with hundreds of doors. These companies probably are not your best bet as they are generally too big to care about a small property. It is better to find a moderately sized company that deals with property your size and works in your area. If the company has property on the south end of town and yours is in the north, you won’t get the service you expect…even if they tell you it’s no problem.
TIP 2: BE SURE TO UNDERSTAND THE SCREENING PROCESS USED BY THE COMPANY.
Don’t be afraid to go through each aspect of the process step by step with them and sug¬gest improvements you feel are necessary. Remember, this will ultimately be your ten¬ant, so you still want the best tenant possible.
Be aware that these companies get paid when they “place” a tenant and may “let their guard down” if the unit is taking too long to rent. It is in your best interest to let the unit go vacant until the best qual¬ity tenant comes along. There is nothing worse than panicking when the unit is sitting empty for a month or two and you let in anyone with an interest in the unit. This can create the biggest headaches and misery available to this business.
TIP 3: MANY COMPANIES OFFER A GUARANTEE OF AT LEAST SIX MONTHS OF TENANCY WHEN THEY APPROVE A TENANT.
Be sure to get this in writing. Often the company will charge a half or full month’s rent for placing a new tenant as well as a percentage of the rent every month. Any¬where from 8% to 12% is standard.
TIP 4: SET A BUDGETARY LIMIT ON REPAIRS THAT THE COMPANY CAN FACILITATE WITHOUT YOUR APPROVAL.
A repair for $100 is common. Any repair required above this amount will need your approval, however these bigger repairs you can usually see coming months in advance.
Getting the company to pay all the utility bills is a service some companies also pro¬vide. This service essentially provides you with a monthly statement and a monthly cheque. If you are looking to own a property as a “set it and forget it” operation, this is the type of service you should look for.
Even if you choose the property man-agement route, it is good to understand all aspects of self-management as you will know what services to expect when hiring a property management company.
In conclusion, owning property for the long term is a great strategy that has clearly made many people extremely wealthy. Utilizing a few key skills to make the job time-efficient allows for an enjoyable experi¬ence as you grow your portfolio.
If you’d like more info, to find out about training/coaching or to learn about how you can participate in cash flow real estate which provide above average returns, schedule a free 15 minute call by filling out the form below. And we assure you, no pressure or sales will accompany the call. Look forward to speaking with you!