There is a reason why HGTV doesn’t have a show on property management. People would prefer to talk about marketing, negotiating deals, raising money, and rehabbing properties. Albeit not the sexiest topic, I do believe it is the most important. 90% of the battle for real estate investment is in property management in my book and it can make or break your returns. That is why I wanted to the have the expert from Mynd to come speak on the subject at our October Meetup.
If you are interested in real estate, whether you’re a newbie or seasoned investor, come to our monthly Meetup to learn and network. We cover important and interesting topics like this and many others.
Not knowing Fair Housing Laws
Not knowing the law is not a defense. First of all, you are not allowed to discriminate or not rent out your property to someone based on their race, color, national origin, religion, sex, familial status, or disability. There are in fact officials playing mystery shopper applying to rent units waiting to see if someone slips up. Those pesky fines or lawsuits is going to wipe out whatever returns you had projected in your pro forma.
Keep all your documentations and letters. Save all your receipts and bills. There are professional tenants who know all the in’s and out’s of the local ordinance better than you do. You will need to understand how to handle evictions, security deposits (sometimes you need to pay interest on it when they move out and you return the deposit), and other legal related matters.
Losing Money on Leasing
Vacancy kills. When you get the notice to vacate from a current tenant, you need to start right away the motion to re-lease the unit. There are tools to utilize to cut down on the leasing friction. Invest in some good photos. You can even consider getting a 3D tour for prospective tenants to rule themselves out maybe because the floor plan is not to their liking or it doesn’t have the amenities they want. You might not want to spend the money, but think of the time you’ll save not having to coordinate a showing and actually making the trip and showing the property for someone who’s not actually a customer.
Mynd goes even a step further. With their in house team and technology, they can validate and schedule a showing remotely through their smart locks so the property manager doesn’t even have to make the trip out to the property.
For advertising the unit, I like to use RentLinx and I’m glad to hear Mynd uses that as well. It’s a syndication platform that you enter the info about your unit once, and it automatically blasts out to all the rental sites like Zillow, Trulia, Apartments.com, Padmapper, etc etc. I think it’s about $15/mo for the basic tier but my goodness it probably saves me at least an hour or two. It doesn’t work with Craigslist though, kind of a bummer.
As for screening, I use SmartMove by TransUnion. It used to be $25/application and I just checked it’s $38 now for the middle tier for eviction, criminal, and credit report. I actually just screened a tenant recently and he had some student loan payments that fell behind which he claims was from years ago but I can clearly see in the report this happened 3 months ago, which lead to some pretty interesting conversations.
Repairs and Maintenance
In California, you’re allowed to inspect the rental unit once a year. This is a good opportunity to do a thorough walk through and do some preventative maintenance. Is there a water leak? Running toilet? AC unit acting kind of funny? Taking care of these kind of work early could avoid costly repairs later down the road.
Speaking of repairs, sometimes it’s cheaper to replace the item than to incur repeat repair bills. I remember once I had a range that keeps giving me trouble when I could’ve just replaced it for a used one for $250.
Also consider the quality of your contractor. It might make sense to go with a better contractor who charges more but does the work in less time instead of a cheap one that takes 3x the time or have to come back multiple trips to essentially fix what they fixed last time.
Hidden Fees
While we’re on the topic of repairs, be on the look out for markups from your property management company. Some companies will mark up the cost of repairs. Depending on the structure of your agreement, in general I don’t agree with this practice. Unless they’re managing a big remodel or construction job, paying a mark up on top of the regular management fees is egregious.
There are many other ways the property management company might try to nickel and dime you through fees. There is lease up fee, advertising, inspections, or even the payment processing that they try to pass on the costs to the landlord. Again, I would be more in favor of a flat fee or transparent pricing that I pay for what is needed to get the job done. If you have one proposal for say 10% fee vs another at 5%, I’d look very closely at the fine print what that 5% actually gets you.
Another thing to watch out for in your agreement is if the property management fees is based on rental value, rent due, or rent collected. You’ll want to have the compensation be aligned with what’s important to you. If the property manager is paid based on the rental value they’re not incentivized to fill the vacancy or collect the rent, which is what you as the landlord care about. In essence, what you pay for should align with the property’s success. Observe closely if your property manager has your best interest in mind or if they can think like an investor.
I also don’t like it when property manager charges you for cancellation. They might be trying to protect their interest of someone trying to skip out on paying the fees for a few months after they got a good tenant in place, but in the case where they’re not doing a good job essentially I need to pay more money to fire them. Double check as well if the property manager charges you a vacancy fee or a lease renewal fee. I’d strike both of those out if they’re in the proposal.
Bonus Tips
- Try to rehab units to have in unit washer/dryer. Yes, often the complex will have a laundry room but tenants do pay a high premium for this amenity so they don’t have to wait around for their laundry to be done or worry about items getting stolen.
- Do a pre-move out inspection. If you already know what might need repairs, you can go ahead and schedule the contractors since many of the good ones are busy instead of wait until 30 days later.
- Instead of doing a 12 month lease when the renewal comes up in say December, do 6 months or some time period to where if the tenant moves out next time you’re in hot rental season in June.
Did you find this helpful? Do you have any other property management tips you’d like to share? Comment below and share with a friend who could benefit from tips like this! I hope to see you at one of our future meetups =)
