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How to Manage Your Rental Property Yourself?

One of the major decisions that an investor has to make after closing the deal on a rental property is how to manage your rental property on your own. Some property owners opt for completely outsourcing their property management, meanwhile, others opt for becoming DIY (do-it-yourself) landlords. It might seem overwhelming to do the management of a home, but it is also possible to do it yourself. In this article, we are going to take a look at the major responsibilities of being a DIY landlord along with six steps involved in the self-management of a rental property.

Key Takeaways

● The three major responsibilities of self-management of a rental property are property management, tenant management, and financial management.
● Six steps involved in DIY property management comprise setting the right rent, screening tenants & marketing, enforcing terms and conditions of the lease agreement, and routinely inspecting the property.
● Options that are included in the management of a rental property are being a DIY landlord, hiring a full-time property manager, and paying for a la carte property management services.

Major Responsibilities of a DIY Landlord There are some landlords who can and do the management of their own rental property. Before you opt for choosing to go it alone, here you can find the three general areas of responsibility for DIY landlords to be aware of:

Tenant Management

There is a requirement for a very high level of people skills for successfully managing tenants. Naturally, tenants are desired to feel as if they are obtaining what they pay. Landlords must be aware of how to handle the complaints of tenants diplomatically. On the other hand, they must know how they should deny or bind them when it comes to their unreasonable demands such as paying the rent past the due date without any late fee. Sometimes, it might be a balancing act between keeping the turnover of tenants low and cash flow strong. In addition to this, three legal areas come with managing tenants such as having awareness of how much notice is needed before getting entered into the property, knowing about the laws related to state landlord-tenant, & following the Fair Housing Act. If they break any law the outcome of it would be significant fines or even a lawsuit from the tenant.

Property Management

All the landlords are necessitated to keep their rental property in a very safe and habitable condition for both the neighborhood and the tenant. Proactively performing property inspections would transform into a good way for catching small complications before they get transformed into large & costly repairs. For instance, cleaning out gutters before the beginning of rain and snow, and seasonal service of the cooling and heating system might aid in avoiding thousands of dollars in repairs. Completion of a move-in and move-out checklist with the tenant is another major responsibility involved in the self-management of a rental property. Documentation of the condition of the home before taking possession by the tenant and when the rental lease would come to an end assists in the separation of normal wear and tear from abnormal damage. There are a plethora of states that facilitates a landlord for holding back part of all the tenant security deposit to pay for damage that is caused by the tenant.

Financial Management

Real estate investors buy a rental property for generating a profit, ideally every month. It is a responsibility of a DIY landlord to manage the finances by keeping track of each penny received and spent. Rent payments, security deposits, and late fees must be recorded accurately and these should also be credited to the correct line item on the chart of accounts. A similar thing is true with operating expenses, for instance, insurance, repairs & maintenance, utilities, and property taxes that are paid by the landlord. Even it might prove to be far too easy with one rental property to underreport income or overstate expenses. If there is always an audit and an error discovered, then a landlord might be charged with penalties, fees, and interest even for an innocent mistake.

How to Manage Your Rental Property Yourself

Now, let's opt for taking a closer look at how landlords can do the management of their own rental property. After buying a home and making it ready for rent, given below are six steps that you are required to follow to manage your rental property on your own:

Determination of the Fair Market Rent

An excessive hike in rental price will demotivate qualified tenants from opting for the possession of your rental property. Meanwhile, a below-market rent price might decrease potential returns.

Given below are factors that you must consider while setting the rent included:

● Per capita income and median household for the area
● Prospective tenant demographics, for instance, families or singles
● Median rent that is being charged by the competition
● Property amenities that are justifying a higher rent, for instance, a community swimming pool or large garage

Marketing of the Vacant Home for Rent

There are several investors and property managers who make use of online rental listing and tenant screening services that are particularly designed for DIY landlords for finding qualified tenants. Sites such as Avail and Rentec Direct let landlords:

● Create a rental listing
● Syndicate listings automatically to the top online rental listing services
● Send leads directly from forthcoming tenants to the landlord
● Provide online applications and screening services for tenants
● Request for evictions, credit, and criminal background while charging the applicant for the service
● Create & sign a customized lease for that particular state in which the rental property is established

After the selection of a tenant and when the lease has got signed, the next step that comes in the process is the collection of the security deposit and initial rent and meeting the tenant at the property for the completion of a move-in checklist.

Inspection and Maintenance of the Property

The responsibilities of a landlord are just getting started once the tenant moves in. There will be an occurrence of repair and maintenance issues and the sooner these issues are addressed the happier your tenants will be and the chances of the tenant renewing the lease will also be higher. It might prove to be a good way to find out exterior damage by driving by the property now and then without creating any disturbance for the tenant. Conducting routine inspections of the exterior and interior of the property after giving the tenant necessary notice aids in catching small issues before they become big and expensive. Finally, performing seasonal maintenance on the roof, water heater, cooling, heating system, and appliances might aid in extending their useful lives and keeping capital expenses within budget.

For assistance in streamlining repairs and for responding to tenant maintenance requests more quickly, several DIY landlords:

● Create a list of items that could be fixed by a landlord or inexpensive handyman
● Develop a list of insured and licensed contractors to service the cooling and heating, electrical systems, and plumbing
● Ask local fellow landlords to refer to trusted vendors and contractors
● Contribute regularly to an emergency fund or CapEx (Capital Expense) account for avoiding having to go out of pocket for major repairs

Collect the Rent and Enforce the Lease

Investors usually buy any rental property for making money or generating revenue, and turning a profit starts with the collection of the rent in full and on time. Rather than waiting for the check in the mail, there are a plethora of DIY landlords who make use of online rent payment systems such as TenantCloud and Cozy for same-day rent payment collection with any kind of processing fees that are paid by the tenant. There is also another good reason why landlords collect rent online which is to boost rent collections. According to an analysis, tenants give preference to paying rent online and they are more likely to pay the rent. However, if any tenant doesn't pay on time, DIY landlords must get prepared for charging any late fee that is allowed in the lease. The reason behind this is that once it becomes the habit of a tenant to pay late without having any requirement to pay a penalty, they will more likely do it again and again. A tenant that pays late consistently can create cash flow problems for a landlord, and it might also get ended up having to be evicted.

Evict Tenants who don't Pay the Rent

Now and then a landlord will be required to evict even with the best tenant screening process in place. The cost of a residential eviction might vary which is dependent on the circumstances, state, and the city in which it is situated and take four weeks or more time from beginning to end. During that period, there is no rental money coming to the landlord and they might also be required to fix major damage caused by the tenant after they leave the premise finally. Some landlords take a pragmatic approach and facilitate a tenant with cash in exchange for serving back the keys and for vacating the property rather than putting good money after bad. While it might appear counterintuitive to pay cash to a tenant for leaving keys and property, it is a strategy that is employed for avoiding a costly eviction and for obtaining the rental property quickly cash flowing again.

Make Use of a Good Rental Property Accounting System

The best accounting system for rental property will facilitate a system for the storage of receipts and documents for a paper trail, and for generating accurate financial reports such as net cash flow reports and income statements. Prestige Park Grove

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