How to Manage Rental Properties

Property owners are always plagued by the question, "How to manage rental properties?" Successful management of rental properties requires a combination of strong organizational skills, effective communication, attention to detail, and a good understanding of the local real estate market. One key aspect is finding suitable tenants through screening processes to minimize the risks of late payments or property damage. Another important aspect is staying on top of maintenance and repairs.

Proper financial management is also crucial, including setting competitive rental rates, collecting rent on time, and keeping track of expenses to maximize the property's profitability. Additionally, staying updated on local rental laws and regulations is important to avoid legal issues and protect both the owner and tenants. By implementing these strategies, property owners can maximize their investment returns and provide a positive renting experience for tenants.

Steps Required to Manage a Rental Property Successfully

Here are the steps you need to know to manage your rental property successfully.

Determine the Fair Market Rent

Determining the fair market rent for a rental property requires you to understand realistic rental values for the location, property condition, amenities and market trends. You’ll want to look at comparable properties, also called comps, in the same area and see what they are renting for. This offers a base guideline for current market rental rates.

In addition, conduct market research, consider online listing sites and physically drive around a neighborhood to check comparable listings. Zillow, RentRedi and other sites offer current rental income information for a comparison search to establish an appropriate rental price.

Market the Vacant Home for Rent

Marketing a vacant home for rent is crucial to attracting potential tenants and minimizing vacancy periods. With a strategic approach, you can effectively showcase the property’s features, reach a wider audience and secure quality tenants. First, you’ll want professional photographs showcasing the property's features. Then, create a compelling property description. Finally, consider staging the property to attract potential tenants.

Effective strategies for marketing a vacant rental property include:

• Using online platforms and property management sites
• Spreading the word on social media
• Engaging with local real estate agents
• Creating a virtual tour and video
• Posting yard signs and flyers
• Distributing flyers at local community centers, coffee shops and other high-traffic areas
• Networking with local businesses, including real estate agencies, relocation companies or the human resources (HR) departments of corporations
• Hosting open houses and showings
• Offer finder’s fees or incentives for potential clients, including discounted first month’s rent, flexible lease terms or added amenities

Inspect and Maintain the Property

Regular property inspections and maintenance are essential. Key areas to inspect include structural elements, electrical systems, plumbing, roofing, doors and windows, and appliances. Create a maintenance schedule and ensure that nothing falls through the cracks. Address repairs promptly and maintain regular upkeep to ensure tenant satisfaction and property value preservation.

Collect the Rent and Enforce the Lease

Consistent and timely rent collection is vital for the financial stability of your rental property. Clearly communicate to tenants the rent payment schedule and methods of payment. Offer convenient options such as online payment platforms or automatic deductions. Enforce lease agreements regarding late fees and follow up promptly with tenants who fail to pay on time.

Include in the contract fees or penalties in case of lease violations, and follow up by issuing appropriate notices and enforcing rules and regulations.

Evict Tenants Who Don’t Pay the Rent

Consult a local lawyer for the legal procedures for evicting tenants who fail to pay rent. Generally, you will need to file a complaint with the court. This complaint will initiate the court proceedings. You must send the tenant a copy of the formal complaints, generally through certified mail.

Consider a settlement agreement, a payment plan or mediation with the tenant to settle eviction proceedings and minimize potential conflicts quickly.

Use a Good Rental Property Accounting System

A reliable rental property accounting system will simplify tax reporting. The benefits of accurate financial record-keeping and tracking income and expenses will simplify the tax preparation process. It can also help in managing rentals’ security deposits on multiple properties. Popular accounting software suitable for rental property management includes AppFolio, Rentec Direct, Buildium and Property Matrix.

Property Maintenance Obligations

Landlords have significant responsibility for property maintenance from routine maintenance tasks to the supervision of hired personnel to emergency maintenance. Scheduling common maintenance tasks ensures the property remains in good condition.

Perform Routine Maintenance

Essential routine maintenance tasks that landlords should undertake regularly include:

• Landscaping
• Cleaning common areas, especially in apartments or commercial properties
• HVAC maintenance
• Pest control
• Appliance inspections

Creating a maintenance checklist and establishing a preventive maintenance schedule can include:

• Scheduling regular yard maintenance
• Performing annual equipment checkups and necessary property repairs, including sealing doors and windows and checking for cracks

Handle Emergency Maintenance Promptly

It’s important to address emergency maintenance issues promptly. Common emergencies include:

• Plumbing leaks
• Electrical problems
• HVAC failures
• Problems with locks
• Water pressure or drainage issues
• Appliance malfunctions

For a good tenant experience, it’s important to handle all emergencies on the same day. Maintaining a network of reliable contractors or establishing emergency contact protocols can ensure that any issues that arise are handled efficiently.

Supervise All Hired Personnel

Of course, hired help is only as good as their focus and work. Especially when starting out, it’s essential to supervise any personnel hired for property maintenance tasks. Clear communication and setting expectations can go a long way in ensuring hired contractors or maintenance staff perform their duties effectively.

When communicating requested activities, maintaining proper documentation of personnel agreements will ensure that if anything goes wrong, you’ll have backup information.

Tenant Management Obligations

Responsibilities of landlords in managing tenants effectively include regular communication, prompt response to repair requests, rent reminders and ensuring tenant safety. This includes:

Communicating with Tenants Regularly

Maintain regular communication with tenants, including through email, phone or online platforms to address concerns promptly and provide relevant updates or notices. Maintaining a positive relationship with tenants will benefit both parties and establish better communication if any issues arise.

Responding Promptly to Repair Requests

Nothing will annoy tenants as much as ignoring necessary repairs. Reply promptly to all repair requests from tenants. Establish a repair request process, prioritize urgent repairs and maintain clear communication throughout the repair process, including updates on any scheduled tradespeople who need to enter the property. Again, maintaining relationships with reliable contractors can help to expedite repairs and ensure better service for clients.

Sending Rent Reminders

Sending rent reminders to tenants is one of your fundamental responsibilities as a landlord. Set up automated reminders through email or text, and establish a consistent rent payment schedule. Handle late payment notices clearly and professionally. You can also consider incentivizing on-time rent payments with additional amenities, annual rent reductions or other financial bonuses.

Ensuring Proper Safety Measures Are Taken

The landlord’s responsibility to ensure tenant safety includes installing essential safety measures, such as functioning smoke and CO2 detectors. You’ll also need to maintain secure locks, address potential hazards or dangers like loose railings, and comply with local safety regulations. Conduct periodic safety inspections to ensure everything is up to standards and inform tenants about emergency procedures.

Rental Property Accounting

Rental property accounting practices include clear records of rent collection, security deposits, reporting expenses related to rental properties and filing taxes.

Collecting Rent

The best practice for collecting rent from tenants is to make it easy to pay. Offer different payment methods, such as online platforms or direct deposits, as well as cash and check payments. Tips for tracking rent payments efficiently include using a dedicated rental expense tracking app and putting all expenses on one business debit or credit card to make tracking easier.

Address late or missed payments professionally with a reminder. Communicate with the tenants to work out a payment schedule, and as a last resort, submit an eviction notice.

Managing Security Deposits

You’ll need to manage multiple security deposits if you have multiple properties. Adhere to local laws regarding security deposits, including their collection, storage, and return. Establish clear procedures for handling security deposits and resolving disputes, including when the security deposit will be returned and under what conditions. Have the contract with details signed by both parties.

Filing Taxes and Reporting Expenses

You’ll need to file taxes to report the rental income and expenses on tax form Schedule E (Form 1040) for supplemental income. Consider possible deductible expenses, such as maintenance costs or property management fees, with interest payments and depreciation. Consulting a tax professional for accurate tax reporting and to maximize deductions.

Final Tips to Manage Rental Properties

If this list is overwhelming, don’t worry. Managing rentals, as with so many investment opportunities, requires that you take it one step at a time. You can hire a property manager to help smooth out management costs, usually at a flat percentage of rental income. Marketing firms and local realtors will be happy to help find good tenants. Sometimes, the best way to manage rental properties is to build a team of specialized professionals to ensure the process goes smoothly.

Alternatives to Owning and Managing Rental Properties

While rental properties can be a great investment, it's not the best option for everybody. Real estate crowdfunding has made it possible for individual investors to add real estate to their portfolios without taking on any of the headaches that go along with being a landlord. Below is a list of Benzinga's top real estate crowdfunding options as an alternative to managing rental properties.

Frequently Asked Questions