INVEST IN RESIDENTIAL INCOME PROPERTY
INVEST IN RESIDENTIAL INCOME PROPERTY
PROPERTY MANAGEMENT COMPANIES
Should you use a Property Management company? That's a matter of personal preference. There are pros and cons:
PRO
They'll find a renter, take an application, run their credit, and write up a lease.
They'll list the house in the local MLS (if necessary). The charge to list it in the MLS is usually 6% of the first year of rent.
They collect rents each month and send you a check for your portion.
They show no mercy to tenants who pay their rent late.
They'll send out a handyman or plumber when there's an issue with the house.
CON
(Note: take my advice with a grain of salt - I'm a
control freak with my properties. I want to know what's going on at
all times, and if there's an issue with the house - I WANT TO KNOW ABOUT IT
- not hear about it when I get a reduced check from the management company.
I want to run their credit report and talk to the potential
tenant. I want to have a personal relationship with the people who are
living in my house.)
Property Management companies generally charge 6-10% of the total monthly rent. They can nickel and dime you to death with fees and charges for advertising, MLS fees, posting a sign in the yard fee, lease fee, paperwork fee, etc.
Once your house has a steady renter in it, the Property Manager keeps their percentage off the top and sends you the remainder. They can go months and months without ever checking on your property. As long as the checks keep coming in, they take their $ off the top and send you the rest. (Personally, I just LOVE my money, and don't like giving any of it away.)
IF YOU DECIDE TO MANAGE IT YOURSELF - HERE ARE SOME SUGGESTIONS
Buy a padlock at Home Depot that holds a key. Lock a door key on the gas meter. Then, as you choose, you can release the padlock code to potential tenants and/or service people.
Leave all of the manuals to the appliances, plus a copy of the homeowners association CC&R's, in the cupboard over the fridge. That's a good place to put the garage door openers and extra keys.
Advertise in whatever the local small paper is... here in
Orange County, California, the Pennysaver (bi-weekly mailer) seems to be the
best rental tool. In Phoenix, we use the Daily News (delivered
bi-weekly to houses in West Phoenix), plus, we'll advertise in the
Thunderbird, which is a newspaper for Luke Airforce Base. In Texas we
advertise in The Green Sheet at
www.thegreensheet.com. Every community will have different
advertising options.
www.RentClicks.com will list your
rental for 30 days for $39, and it's a VERY popular site. I absolutely
recommend listing your rental on RentClicks.
If you can't find a renter directly, then you can shop around on-line and find a Realtor who will list the house in the local MLS as a For Lease listing for a flat fee. However, you'll still have to pay the Realtor who brings you a tenant.
Get a blank rental application and lease agreement from your Realtor (whoever helped you buy the house).
You can run the applicants credit on-line. There are web-sites dedicated to landlords. Do a google search on the words "landlord tenant screening application credit check" and you'll find a lot of sites.
Tell your tenant, "This is my house. I love this house. This house is my retirement account. Will you please, please take good care of it?"
You can give your tenant guidelines about repairs and routine maintenance. For example, you can tell your tenants that they are free to paint the interior, and they can deduct the cost of paint (but not labor) from their rent payment. Or, if the toilet needs a plumber, they can call a plumber directly, pay the plumber, and deduct the charge from their rent payment (include the receipt with their rent). Whatever works for you!
Write late fees into the lease agreement. If our tenants haven't postmarked their rent check by the 5th of the month, we're very firm about collecting the $50 late fee. If you give them an inch, they'll walk all over you!
Don't listen to ANY sob stories about why it's hard to make the rent payment this month. If they can't pay their rent (which should come BEFORE they pay their other bills), then they have to get out.
Personally, I choose to allow tenants to break their
lease. I'd rather get them out of my property and move on, then force
disgruntled tenants to continue making rent payments.
Funny story... I had a tenant who had just had a baby call me to break her
lease. She said she was having post partum depression and she heard
voices telling her to kill herself AND her baby. I let her move out
that very day! She moved back in with her mom and dad, and hopefully
they're all doing fine. (If she was spinning a story, it was a good
one!)
f I recommend buying Property Management for
Dummies. Read it BEFORE you rent out your income property.
The author knows what he's talking about.
Where to invest
- Right now, we HIGHLY recommend Austin, Texas
(not Dallas, not Houston...)
Buying a new home from the builder
Tenants
Property Management
Never pay capital gains tax - 1031 Exchanges
Depreciation is your friend
Leveraging your money (it's a beautiful
thing!)
Tenants in common -
TIC Investments
Excel Spreadsheet
Investment Property Analysis worksheet
(note: you must have Excel on your computer to open this)
When To Sell
Miscellaneous - And
recent remarks by Suze Orman