By managing your rental yourself, instead of paying a property manager, you can retain more of your profits and grow your wealth faster. Seems like a no-brainer then to go down the self-management route – after all, how hard can it be?
Well, there is more to property management than you might initially think. You’ll need to arm yourself with knowledge about marketing, leasing, home safety, landlord law, and accounting. Skills wise, it pays to be a jack-of-all-trades and a people person too.
In this article, find out some of the main steps involved to manage your own rental, including what you need to do to before your tenant moves in and while they’re living in your property. Not forgetting what’s expected of you at the end of the lease.
Get your property ready for renting
So you’ve purchased a rental property. Now you’ll need to make sure it’s safe, warm, clean and tidy. Ensure that smoke and carbon monoxide detectors are installed and are fully operational and that there are suitable exits that can be used for fire escapes.
If the building was constructed before 1978, you’ll need to check whether lead-based paints were used. The federal government banned consumer use of lead-containing paints in 1978 because of its direct link to lead poisoning.
If lead-based paint has been used in the property, you must inform your tenant in writing with a Lead Based Paint Disclosure Form and provide them with relevant reading material issued by the US Environmental Protection Agency (EPA). This must be done before lease-signing.
As a landlord, it’s your responsibility to repair chipped or peeling paint surfaces. The EPA stipulates contractors used to perform this work must be certified in EPA Renovation, Repair and Painting (RRP).
Mold is also a health hazard and should be removed prior to renting the property out. Tenants must be informed if mold is present in the property, before the lease is signed. It’s best to consult a trained professional, rather than removing the mold yourself.
If mold occurs while the tenant is living in the property, it’s a bit of a gray area as to who is responsible for cleaning it up. It depends on whether the tenant’s behavior has caused the problem, or whether it’s because of a fault with the property (like a leak). It’s still your responsibility to remove the mold, even if you go on to charge your tenant for the work. .
Bringing the property up to standard
You’ll also need to make sure that the property is secure with working locks on doors and windows. Any damage, such as holes in the walls, or broken fixtures and fittings, should be repaired to good order.
Some of these jobs may be more problematic than others or may take a while to fix, so it’s best to get your rental in tip-top condition before you think about advertising for a tenant. Check your state’s laws for details of legal compliance you need to adhere to. You may be required to have an inspection to ensure that your rental is habitable.
Price your property for rent
Do plenty of research before setting your rental rates. There are tools you can use to check how the rental market is performing in different states, as a starting point. Speaking to local real estate agents to get some insider knowledge on the economics of the local area will also prove helpful.
If the area is up and coming, with plenty of amenities and excellent transport links, you may be able to charge a higher rent.
Look at properties that are similar to yours, that have the same number of bedrooms and bathrooms. This will give you an idea of comparable rents. Strategies that you may want to consider when setting your rental rates are:
- Price higher than average – a tenant who is willing to pay a premium is more likely to treat your property with care and respect. Your property must have plenty of appeal to attract top-notch tenants who are happy to pay more.
- Price just under the market value – this strategy will result in more applications from a more diverse range of tenants, which is helpful if you need to fill the property quickly.
Advertise for tenants
When you’ve decided what to charge for rent, it’s time to advertise for a tenant. To show your rental off in the best light possible, take high-quality photos of all of the rooms, and the property’s exterior.
If you have a smartphone with a superior camera, you could use this (otherwise try to borrow a digital SLR from someone). Make sure to take photos in natural light and that each image is sharp and clear. Use props for staging to help renters visualize your property as their home.
Put together the particulars about your property, focusing on the highlights. Your mission is to SELL your property. While you can’t lie about your property’s features to make them sound better, you can undoubtedly highlight all the great things your rental has to offer.
Where should you advertise?
When you’re self-managing your rental, you’ll want to advertise as cheaply as possible. Ask among your friends and family to see if they know of any prospective tenants. Alternatively, turn to the power of Facebook to spread the word.
You might be able to join a Facebook group in your area that’s dedicated to promoting rental accommodation. Failing that, try Craigslist, as it’s free to advertise on there. You can also put a “For Rent” board up outside the property to attract locals who are looking for somewhere to rent.
The tenant selection process
A thorough screening process is a must to ensure you get yourself a good tenant. You’ll need to check out your prospective tenant’s financial situation, employment details and obtain character references. The best way to compile this information is to get the tenant to fill in an application form.
Be mindful that you don’t unwittingly violate your local fair housing laws. Landlords aren’t allowed to discriminate by race, age, gender or religion, so be careful of what questions you ask, in writing and in person. You must treat all applicants equally.
- Ask for pay stubs – so you can verify the tenant’s income and to check affordability. Ideally, you’ll want a tenant who earns three times as much as the monthly rent charge.
- Run a credit check – someone who is up to their eyeballs in debt is a high risk – they may be more likely to run into financial problems later down the line. It’s best to choose a tenant with a low debt-to-income ratio and a good credit score.
- Verify employment details – call the tenant’s employer to make sure they’re in long-term employment and are likely to be for the foreseeable future.
- Check public records – criminal records are usually in the public domain. You can search for government-related online databases for this information.
- Ask for references – contact previous landlords to make sure they’ve had no issues with the tenant, such as late or missed rent payments, or property damage. As well as an employer’s reference, get a character reference too from someone who knows the tenant well, but isn’t related to them.
Note that you’ll need the tenant’s permission to run these checks – get it in writing as part of the application form. Credit checks typically cost around $30, although Experian offers a tenants’ credit check for landlords free of charge – learn more.
Writing the rental agreement
Once you’ve picked the right tenant, you’ll need to put together the lease agreement. This should set out your obligations as a landlord and the obligations of your tenant. To be confident your lease is watertight, get a legal professional to write one for you. This will cost you, but for peace of mind, it’s worth it.
If budget is an issue, you can write one yourself. There are plenty of free templates on the internet you can use as a guide. Check out Law Depot for starters. As a bare minimum, make sure the following information is included:
- Tenant’s full name and the address of the rental.
- Start and end date of the lease.
- The exact amount of rent and on what date each month it’s due.
- Details of the security deposit; the amount, where it’s being held and in what situations it may be retained at the end of the lease.
- Any extra fees that may apply, e.g., for late rental payments or property damage.
- What bills the tenant is responsible for.
- Any stipulations about what the tenant can and can’t do in the property, e.g., whether they’re allowed to decorate, sublet, smoke or have pets.
- Notice period requirements.
- Tenant’s rights to privacy.
- Landlord’s rights to access the property for inspections, providing adequate notice is given.
There is much more you can include, which is why it’s a good idea to get a professional to help you with this. In addition to the lease, you’ll need to prepare documents to capture an inventory of all the fixtures and fittings in the property and record what condition they’re in at the start of the lease.
This is also known as a move-in checklist – your tenant will need to sign this before moving in. It will help you spot any property damage at the end of the lease.
Collecting the tenant’s security deposit and rent
To make sure you’re not left out of pocket in the event that a tenant damages your rental property, it’s wise to take a security deposit upfront, as well as the first months’ rent. Each state has its own laws about the practice of security deposit collection. These may include a maximum amount you can charge, what to do with the interest accrued and how the deposit should be held (for example, in a federally-insured separate bank account).
Automating the rent collection process will save you heaps of time and hassle. If your tenant agrees, you may be able to set up an ACH debit to withdraw the rent from your tenant’s bank account. Failing that, you can ask your tenant to set up recurring payments to your account using Online Bill Pay.
Don’t deal in cash and do enforce late payment fees from the start, so that you don’t end up being in a position where your tenant thinks they can pay late, and get away with it. It happens! If your tenant runs into real difficulties financially, that’s a different story. But start as you mean to go on.
Repairs, maintenance, and inspections
Once your tenant has moved in, you’ll be required to maintain the property and fix repairs quickly, when the need arises. Minor repairs should usually be resolved within 30 days, but you must act urgently if there’s a fault with heating, lighting, or water to the property. Again, state laws come into play as to how much time you have to handle repairs, so do check these out in advance.
Brushing up on your DIY skills so that you can fix some issues yourself will save you money. With that said, you will need to rely on a small team of contractors from time to time to deal with more serious problems. Do some research and find reliable, reasonably priced tradespeople that you can call on when you need to.
You should inspect the property every six months, or at least once a year, to check that your tenant is looking after it. You can’t just turn up; you must give notice as per your agreement (usually 24-48 hours). There are no hard and fast rules about how often you can drive by the property to make sure everything looks good from the outside though.
What to do at the end of your tenant’s lease
When you or your tenant is ready to terminate the tenancy, either one of you must issue notice in writing, according to the terms of the agreement (this is usually 30 days). On move-out day, you’ll need to do a final inspection, while your tenant is present, to check the property is clean and there is no damage. Expect to see some level of wear and tear.
If there is damage, you’re within your rights to make a deduction from the tenant’s security deposit to pay for repairs. Bring the move-in checklist with you so you can compare the original state of various fixtures and fittings.
Managing rental properties – a summary
There’s much to know if you want to manage your own rental. The information above is just the tip of the iceberg. Hopefully, your tenancy will run smoothly. If not, you may have to deal with late payments or go through an eviction process to remove your tenant from the property – and that’s a whole other article!
Remember to check your state’s laws about renting. You should familiarize yourself with those before you rent out your property. Here’s a compilation of relevant laws for most states to guide you.
Lastly, be sure to keep a detailed trail of documentation and communication, so you and your tenant know precisely where you stand.
To make this process hassle-free, consider using RentSweet. It’s an innovative property management app that allows you to speedily connect with your tenant about their lease, repairs, complaints, rental payments, and more – all in one unique system.