Diana’s Top Five list for Managing Rental Units
|The other day, while having a conversation with a dear friend, I was asked – ‘Diana, what are the most important things you do on a regular basis to protect and maximize your rental properties?’ That got me thinking, maybe I could come up with my own Top Five List for Managing Property.
I’ve owned rental property for over three decades and during that time I’ve learned my fair share of lessons. Some of those lessons were learned directly, while others have been from observing others. All lessons have been valuable and allowed me to create good systems for managing my properties.
Diana’s Top Five List for Managing Rental Properties
Property Condition:
Rental property should be looked upon as not only an income producing business, but as an asset which needs to be maintained to retain its value. There are routine items which should be done yearly (such as pressure washing the building or cleaning the gutters). Your list of items will vary depending on the location of the property, condition and if it’s an A, B or C property. On top of these maintenance items, we also have a schedule of major or capital improvements to be made over the next five years. This schedule includes things like flooring, exterior and interior paint, to name a few.
Tenant Screening:
Because my experience of owning rental property started in CA (even though I now own property in several states with a variety of tenant/landlord laws) I’ve always been hyper vigilant on-screening tenants. I know how difficult it can be to remove a tenant, so I’ve made it a mission to get the right tenants and that comes down to screening. I use a service that runs the following searches for me: National Eviction Search, Sex Offender, America’s Most Wanted, Terrorist Search, Narcotics Traffickers, Credit Bureau, FICO Score, Public Records, Civil Judgments, Collections, Payment History, Payment Obligation, Experian Social Security and Number Trace. These give me a very clear picture of the tenant pool.
Tenant Expectations:
Once a tenant is accepted we sign a lease and a behavior agreement. I use a standard lease, like the ones found in our Deal Board. The agreement is like a code of conduct which clearly sets expectations for tenants’ behavior, including things such as quite time hours and expectations of how any public area will be treated.
Managing the P&L:
Often, we say, ‘In commercial real estate we made money with a spreadsheet as opposed to a hammer’. Which means that managing Income and Expenses is how equity is created. One example of how this is done is by increasing rents on a yearly basis if the market allows.
Review Insurance:
Make sure the property is correctly covered to include things such as fire, flood, sewer, loss of rental income due to a disaster and physical liability. Remember, landlord insurance covers you, not the tenant’s property, even if the tenant is negligent. The way to protect the interior of the unit and the tenant’s property is by requiring renter’s insurance as a term of the lease. This is an easy way to ensure adequate coverage for both tenant and landlord.
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