Most people avoid rental real estate because they think it is a lot of work. It definitely is more work than mutual fund investing but you have more control and much better returns (in most cases). Like anything real estate is about systems and once you have those systems in place your business can be run from anywhere and EASILY!
The Systems I Use to Run My Business:
Let's Start at the beginning so you just bought your first property and need to rent it out now what? You need to find a tenant how do you do that? You can use a Realtor aka me or you can do it yourself.
When I Rent My Property Out Here's What I Do:
Put it on Zillow Rental Manager (this is a free service) it will populate it out to Trulia and Hotpads. I also have a lot of luck on Craigslist and Facebook Marketplace. You can join community groups ie: Philadelphia Housing, Manayunk rentals, insert your area....
So now you have 20 leads great do you do 20 separate showings? NO. Hold the house open for an hour or two and let all of them come through at one time. This does two things. It saves your time from running around and creates a vibe that there is a ton of interest in the property and they should get their paper work in to beat out the others.
What is your application process? Where do you start and how do you make sure you are getting a great tenant?
This is a two step process:
Get a standard paper application that states their job, income history, and past landlords (2 back or more).
For screening my potential tenants I use a site called Cozy.com. They make it super easy to screen tenants. You set up a listing in Cozy for free and request credit and background checks for that listing. You put in the clients first/last name and email then it sends them a link to apply. It is a $40.00 fee to the applicant which is pretty standard everywhere. This is also great because you do not see the clients personal info like SSN so it removes some liability off your shoulders.
You Have Got A Tenant!
You have to have a lease for them to sign, pet addendum if they need it, other docs.. Where do you get these docs, do you have them sign them in person, where do you store these documents?
I bought this package from BiggerPockets.com (click bigger pockets for the package). The package was $100.00 included :
So now you have your lease you are ready to sign! What I do is Electronically sign all of my documents this way I don't have to chase down the tenant again to sign in person. Any friction that you have in your business gives your potential tenant time to think about backing out. Everything should be immediately done if possible.
Esign Softwares I Use:
Free Service: dochub.com the free service allows you up to 5 signatures a month I believe.
Docusign: I use this one now because I am a Realtor and have to pay for it. I actually prefer using Docusign it's a lot easier than Dochub. For a decent Docusign package you are probably going to pay $25 a month. So I would start with Dochub and if you grow to a lot of units use Docusign.
Where to store your documents:
You can create a folder on your computer or you can use Google Drive. It is a free service and is super easy to use.
Do you pick up cash, do you get sent a check in the mail, carrier pigeon? Like I said before any friction in your business is a chance for things to go wrong. IE: You are not getting rent checks and your tenant tells you it was sent but "must have got lost in the mail". Now you have to conduct an investigation. Avoid the hassle and set up electronic payments. I use Venmo and when someone signs the lease it states that "Rent will be paid via Venmo". It is not an option. I have some landlords I work with who use Google Pay or Cashapp. I just use Venmo because I know it and it is a free service. I have never had a problem with this service.
This is crucial I truly believe if you are running any business you should have a book keeping service and an accountant. For my book keeping I use Quickbooks. I recommend the starter one it's 25$ per month. Which may seem like a lot but if your hourly rate is $25/hr and you waste an hr tracking expenses in excel or looking for receipts than you already paid for it.
How it Works:
-Have a bank account just for your rental
-Get a debit card
-Link the bank account to your Quickbooks
-Anytime your write a check or swipe your debit card it will populate in Quickbooks ie: "$20.00 spent at Home Depot on this date" then you just mark it as job supplies.
Your accountant can login at the end of the year and do all the accounting work for you! Also they can write off your depreciation for you which is a large write off!
Maintenance and Repairs:
Things break and go wrong in houses all the time. The first year I owned a rental it was very emotional everything that went wrong was a big deal and I tried to fix it all myself to save money. I would spend money, buy the wrong supplies, and then call someone anyway (and I am very handy). I now have a list of contractors I call when anything goes wrong. If your tenants call you and say "hey the washer broke" you should respond: "ok here is my maintenance persons number set up the appointment and I'll pay the bill". This just took you out of the equation between mediating when someone will be home and your contractors availability.
Get an electronic lock:
I heard a horror story my one friend drove two hrs away for vacation and got a call from the downstairs tenant: "Water is leaking through the ceiling into my unit". The property was built below the road and it was sewage back flow. The upstairs tenant was on vacation so he had to come all the way back to unlock the door for the maintenance person. If he had an electronic keypad he could have given the code to the maintenance person and let him in.
Also I would find an emergency service that operates all hrs in addition to your maintenance person. Most of them are really expensive but if you are on vacation and you get that call at 11pm your maintenance guy isn't getting there until tomorrow. Have these systems in place before they happen!
Last Two Tips:
-Automate your bill pay
-Decide on a Standard rent increase every year and have it in the lease at signing. IE: Hey John so your lease is a year long and if you want to review in a year there will be a 3% increase. This incentivizes long leases and is not a surprise if you raise the rent at the end of the year.
If you have any other tricks you like to use please comment below! The more systems you have in place the easier your life is. Which is what financial freedom is about FREEDOM getting your life back from your job! Don't take on another job automate your business!
Matt Tallent is a Realtor with The How Group. His passions include rental property investing and helping others achieve their real estate goals.
Real Estate Investing
Buy and Hold