Assume you have just purchased your investment property. It does not matter whether it is a 10--unit apartment building, a small office building or a single--family home. It is an attractive rental property and you are asking a fair market value rent.
You should have no problem attracting tenants and maintaining a high level of occupancy. What happens with the tenants once they move in is going to depend on you.
The problems with property management are not caused by the business itself, as much as by a lack of education. The property management is the most misunderstood parts of real estate investing. If you do not have good property management, then you will have high management costs, bad tenant relationships, high vacancies and that will be the end of your business.
You would consider these ideas in making your managing investment decision; I did it when I started:
- The money you save, by doing property management, may mean the difference between a positive or a negative cash flow for your rental business.
- Managing your own properties, at least in the beginning and learning the management business is something to consider. After you become familiar with the manager responsibilities and acquire more properties, you will be able to do a better job of managing professional managers.
- More management and investment resources are available at my website.
How I start my property management? I went to school to gain my knowledge before facing the real life competition. I start my property management from the bottom up. My previous experience with real estate renting was being a good tenant for about five years in two different places.
Eight years ago I passed the real estate agent state examination and I worked for two brokers and managed properties on the side to build experience. I got my associate broker license in real estate about four years ago.
We resettled in the U. S. A. coming from communist collapsing East Europe, in 1990. Our assets at that time were intangible, mechanical engineering education and big hopes.
We did not have this game of "getting rich with properties" in the socialist economies. Actually, it was forbidden to even think about owning properties. It took me five years to comprehend there is a less risky way of investing by using real estate properties and rentals.
For $50 and about one hour conversation with our previous property manager -- a very nice lady -- I was in business. The management forms I received helped me to build my forms and gave me enough confidence before the closing on my first apartment building. I was on my way, investing in real estate and managing my own properties for profit. This is how I started my property management career. Now, I appreciate a property management career or a job in property management a lot more.
I am not preaching here to manage your rentals yourself forever. For us, property management is part of getting the necessary life experience to succeed in this new country.
Dealing with people and their needs gets messy if you do not use a system. Qualifying the potential applicant over the telephone saves time and money. Renting real estate is the toughest part of the property management job. Here is how my qualifying filter system is working:
The local newspaper classified ads bring most of my renting real estate applicants. I call them Potential Applicants (PA) before submitting the rental application. I give to potential applicants enough info in the newspaper, so they may drive by and talk with our tenants. The prospect applicant should come ready, wanting to rent the apartments from us, because we take good care of the tenants and the apartments.
This is what I want with my ads.
"My town, clean 1 bedroom apt. $500 plus deposit, utilities included, A/C, coin laundry available, 123 Main Street, (222) 333-4444"
They have the address for the location, that the utilities are free and my cell phone number. Here are examples of first conversations over the phone with the potential applicants (PA).
PA: Hello, is the apartment available? Me: Yes, when you want to move in? My name is Ernest. PA: Thanks, my name is Mary. It is for my son John; He is planning to move soon. Me: Sorry, is it a strong reason way your son can't call himself?
(My experience tells me I may stop here and deal with the real party later, the relatives or friends have a different agenda sometime. In reality, I continue giving information about renting.)
The son is calling me later.
PA: Where is this apartment located?
Me: At the corner of Main and Grand, next to the gas station, across the Seven Eleven. Look for apartment no.30. You can drive by and get from "Take One" box, an application with info printed the other side. PA: Do you accept pets?
Me: What do you have in mind as pet? (Reptiles, rodents, dangerous dogs, etc are not on my list, I ask because the applicant will talk and I can mind his/her personality).
PA: It was my aunt' cat and she is 10 years old, etc. Me: Yes, we accept a qualified cat with a "Pet agreement". The no refundable fee is $175. Do you have some pay stubs from your job? That will help us to check your employment; or
PA: No, I receive social security checks, I am on disability.
(To assume when renting real estate that all tenants on assistance or seniors will be bad is wrong. Some may get a co-signer.)
Me: Sorry we only take applications if the total monthly documented net income is 3 times the rent. The no refundable application fee is only $20 and we do a credit report request and pay a different company for that service. (Some applicants just gives up after this phrase.); or
PA: Yes I work two jobs: manager at Mac Donald and telephone marketing at night. My girlfriend is working as telephone marketer. Together we make $1400 a month.
(This is a border line situation, they may pay for a few months and something is happening and girl/boy friend is gone. He/she no longer qualifies by income requirements. In this cases if the vacancy is hurting me and I cannot wait for a better applicant, I might take them, but the lease will have a clause: "If he or she intends to leave any time, they both must leave at the same time"); or:
PA: Yes, I work part-time at "Printing Nice" and I am full-time student. It is my fist time out of home; my mom may co-sign the lease.
Me: OK, bring your mom when you want to see the apartment.
PA: We want to see it, Saturday morning at 12 noon, it is our time to look for apartments.(PA may put some pressure on you)
Me: OK, see you then, at apartment no.30 second floor, a sign "For Rent" is in the window/door.
The potential applicant interview is very important. You have to see face to face the potential applicant and their pet. Watch their car how clean is outside and inside and get an idea about how much that person care about personal staff.
My "good tenant" definition is: A good tenant is paying always on time, takes care of apartment, is friendly and comprehends "quiet enjoyment" words.
It is better for me to wait for the right applicant and do not rush to make a buck. Also, I discovered that the service to society, the humanity we share is coming after you take care of our business. Otherwise you will not be in this business for very long time.