7 Steps To Make Your Move From Part-Time To Full-Time Landlord
If you're a part-time landlord, you juggle many responsibilities. Most part-time landlords work a full-time job and manage their rental property on the side. If you're fortunate, you can balance these responsibilities most of the time. As you acquire more properties, however, that balance becomes harder to maintain.
When you reach a point where the demands of managing your rental properties take away too much time from the rest of your life, either professional or personal, you have two options:
- Hire a property management company to handle the daily management. Outsourcing your property management typically costs 8-10% of gross rents, a sizeable bite – but you regain the freedom to focus on your full-time job.
- Step away from your regular full-time job and become a full-time property manager. To do this, you need proper systems to operate smoothly and replace the income from your former job.
Do you dream about making the move to become a full-time landlord and property manager?
Let these 7 steps guide your transition.
1) Have a financial cushion.
A general rule is to save an amount that covers at least six months of your regular bills and expenses while you are still working your regular full-time job.
2) Make a business plan.
As a part-time landlord, you have regular employment income to pay the bills and most likely to direct much of your rental property income into reserve funds to maintain and upgrade the property and pay down the mortgage. In that case, a business plan isn't always necessary. When you transition to full-time property management and become wholly dependent on your rental property income, you need a business plan to scale up and ensure you run each property profitably. In short, it's time to treat your rental property as a business if you want to succeed.
Your basic business plan should include:
- Company description- what is the primary function of your business?
- Strategies and objectives- what are your goals and objectives for identifying, purchasing, and renting income properties?
- Finances- what type of reserves do you have to support property purchase and operations?
3) Get organized.
When you manage one or two properties on a part-time basis, it's a bit easier to get away with being disorganized. But if you intend to grow your property portfolio so you can transition to full-time, you need reliable systems in place for all of your operations.
Experts suggest that it's wise to keep both a physical (paper) and digital file of all of your standard documents and information. You may choose to organize the files by the tenant or by property.
- A property checklist will help you cover all the bases to ensure your property is ready to rent after a tenant moves out and before a new one moves in. The checklist could include paint, flooring, cleaning, landscaping, and items like smoke detector batteries. Have a move-in and move-out form to document the property's condition, and take pictures to support the forms.
- Make sure you set an appointment to explain the lease terms and responsibilities to the tenant. This small amount of time with your tenant at the outset will pay dividends because each party's responsibilities will be clear. Remind them when – and how – rent is due. Cover how you prefer to communicate, how to submit written requests for repairs, and when you are available to accept calls or messages. Explain your expectations about property upkeep and your repair process.
- Create calendar reminders for the duration of the lease. Enter the lease expiration, a lease renewal discussion at least 60-90 days prior, and perhaps tenant birthdays or holidays that fall within the lease terms (so you can send cards.) Enter periodic inspections – either quarterly or bi-annually.
Scan paper documents, and back up all digital files using an online storage service that you can easily access at any time.
4) Learn about your local real estate market.
Always keep your finger on the pulse of average rents in your local market, so you can take advantage of upward movement to raise rents when appropriate. Rentometeris a tool you can use to evaluate current market rent rates. Enter your property's address into Rentometer's search bar and plug in the number of bedrooms, bathrooms, and other property details to determine if your rent is in an appropriate range for the neighborhood.
As you scale your business, Rentometer lets you search property addresses in an unfamiliar neighborhood to learn about current rents in the area and help you decide if you'd like to buy a property there.
5) Learn how to market your rentals to minimize vacancies effectively.
At some point during your time as a landlord and property manager, you'll have a property you need to lease quickly. Get acquainted with sites like Rentometer and Craigslist, so you know what's happening in your marketplace and find ideas to "borrow" and apply to marketing your properties. Be sure to take advantage of social media channels like Facebook and NextDoor to get the word out to potential renters.
6) Implement a reliable tenant screening process.
You are well aware that the tenants you choose can make or break your rental property business. If a tenant refuses to pay rent or damages your property, it could cause financial trouble. Develop a comprehensive screening process – there are many models available online, so pick one that fits and customize it for your needs.
7) Build a team of contractors.
When you invest in several properties at once, you need easy access to reliable contractors to repair and service those properties as needed. Check Yelp or Angie's List reviews before you hire a contractor to see what previous customers report. Smart property managers keep at least two dependable names for each contractor type on speed dial:
- Make-ready helpers
- HVAC professional
- Cleaners and carpet cleaning service
You'll also want a referral for a real estate attorney if you need to proceed with evictions or other legal action.
Making the leap from part-time to full-time property management is an exciting – but daunting – proposition. You'll eliminate some of the anxiety when you've put easy-to-follow systems in place before taking the final big step. To learn more about setting appropriate rental rates for your properties and how to keep your rental listings in front of prospective tenants, visit rentometer.com. You'll find the tools you need to build a successful and profitable property management business.