There is a general perception that a rental property is a straight forward investment. Landlords seem to feel that it will always have tenants, that the tenants will always pay on time, and that the repair of any leaky faucet will be a minor matter. This is not always the case.
If you’re a landlord, this is what your tenant is saying to you at 9pm on a Friday night: “there’s a leak.” And more often than not, the reason for the leak is because the simple fix of replacing the dirty HVAC filter (which would have cost $80) was never addressed over the last 14 months. If you own only 1, 2 or 3 rental properties, the little things that have to take up your time can really destroy your return on investment.
Rental property investing sounds effortless, bringing in the rent, doing repairs and maintenance, and the admin work. Sounds easy? In reality, there are many traps that even savvy landlords fall into – unless you have a strong support structure.
Let’s look at the real causes of headaches with rental property management and then go on to examine some practical techniques for managing your rental properties.
The Myth of “Low Maintenance” Properties
It’s tempting for the small landlorder to wish for things like “an easier to maintain newer house” or “a good quality, trouble free tenant”. And yes, in an ideal world some of these would help. But the reality is that maintenance doesn’t work that way.
As an investor, you are working hard to increase the rental value of your property. Deferred maintenance can be a silent killer of rental income. Clogged gutters can cause water damage to your investment. A slow draining shower or sink can become a major emergency in no time. A cheap air filter or a non functioning fan can turn into a complete HVAC failure in the middle of summer. The quality and habitability of any housing, including your rental property, is a function of proper and consistent maintenance.
But neglect can cost you money. And as a rental property investor, you can’t afford repairs when they become emergencies. By having a quality handyman on call to do simple repairs, you can prevent costly maintenance crises.
A system of checks and balances – whether it is you managing your rental property or having a team like Earnest Homes manage for you – makes all the difference in the world to your bottom line. Taking a calendar approach when thinking about maintenance costs is eye opening for most real estate investors.
A basic framework that works:
- We should regularly inspect and monitor all buildings and equipment, walking through any property we are contracted to manage on a regular basis i.e. every few years, ideally more frequently, particularly around lease renewal time, and respond to any issues or maintenance requests that arise.
- Record results of checks in log. Record the date of checks.
- Set reminders for filter replacements, gutter cleaning and pest control inspections.
- Ask tenants to complete a simple condition checklist on departure (e.g. to support landlord’s empty property discount) every 6 months to make the process more real.
This is none too complicated, yet most small landlords never hear of these ideas and deal with maintenance issues on an “as needed” basis.
Communication is Where Things Fall Apart
Upon reflection, many of what people consider to be “landlord problems” are really nothing more than communication problems that have been disguised to look like property related problems.
The common perception of a neglectful tenant who ignores a leaky faucet or creaky stairs until the stairs collapse is not usually the case. Often tenants are reluctant to report maintenance issues because they do not know the proper channels or means of contact to report the issue. This is often due in part to past experiences where tenants report what they consider to be a minor issue that is subsequently ignored.
So too with the flow of information from landlord to tenant. If a landlord sends out rent reminders late, takes a week to fix a leaky faucet, loses important documents, it can cause a lot of friction which can lead to a lot of big problems – disputes, turnover, evictions and more.
It is always better to set out terms and conditions before the tenancy commences and argue afterwards if necessary.
- Have a written policy on communication in your lease: we check email and phone messages daily and expect to hear back from you within a 24-hour period.
- Rent is never late through timely reminders to tenants before payment is due.
- All (large and small) requests (and responses) should be documented.
Clear systems of how communication will take place and what action to take in certain situations are as important as a well-designed open plan space with good lighting.
Landlords often underestimate the importance of tenant communication, but it’s a key competency for property management.
The Coordination Problem Nobody Talks About
It’s common knowledge that even the most seasoned and competent property management teams can go wrong from time to time – not because of poor maintenance or lack of communication with tenants, but because of the difficulty of coordinating: contractor schedules, repair timeframes, tenant and owner schedules, and the Property Manager’s schedule.
The apparently minor details can soon add up to eat into your time, particularly across a series of individual repairs or across a portfolio of properties. And as a landlord, your time is money, especially when tenants are expecting properties to be maintained to a good standard, whilst having their own busy lives.
A few things that help:
- Keep a record of all written repair appointments including details of tenant contact and relevant contractor information.
- Turn whole days into hours. Instead of saying viewing is open daily, give a specific time slot.
- Ensure all repairs are completed to a satisfactory standard and a date of completion recorded.
Instead of just treating your rental as a side hobby that you mostly run out of your inbox, you should think of it as a small organization with processes for getting things done.
Small Landlords — What Can You Do?
You don’t have to use a property management company to run a great rental property, but you need to know where the gaps are. While larger property management companies focus on the needs of absentee owners and large investment portfolios, the majority of rental properties are owned by small landlords. Yet, it is the small landlords who have the largest challenges to overcome. These are not newbies entering the rental market. These are experienced investors who know how to get a property rented and then maintain that property year after year.
If you are a Landlord managing 1 to 3 properties then we recommend keeping matters simple.
- Carry out & keep up scheduled repair and maintenance works as required.
- Have a system for written communication before the next tenancy.
- Document everything, even small interactions
- Make your new house feel at home.
You can own property at a small scale. But property ownership is a system, not an intention. And the system has to be learned as quickly as possible – or you will loose money.
