The one task that you do which will ether make an investment property run like a smooth business, or it can crash in flames and burn a hole in your pocket is your tenant selection process.
When selecting a tenant, I would recommend allowing for a longer vacancy period, and keeping the asking rent $10 below what you think your property could get. This will give you the most level of interest from the limited number of people looking to rent that size house, in that location at that point in time. It will cost you a lot more if you have a tenant who doesn’t pay rent and damages the house.
The vetting process starts on the phone when interested applicants call in. They are asked a few questions to qualify them for a viewing. Then at the viewing they are sized up, do they look like they will fit into the neighborhood. Are they well mannered, who have they come to the viewing with, will they look you in the eye and prove to be trustworthy? Property managers develop a good gut feeling about people over time.
Once the applicants pass the screening process, they will then be checked out on paper. Rules need to be set as standard policies, like a minimum credit score, landlord references need to be current, if they are on Social Welfare then a redirection of they rental needs to be part of the criteria. Also don’t be afraid to look them up on Facebook.
If your applicant still looks good by this stage, but you still have an unsure feeling about them. Then fix the tenancy to 6 months, and get the full move in costs before pulling your add down. If they turn out to be poor tenants, don’t renew their tenancy, and start over in 6 months time.
The money an investor saves through buying in rough areas, should be put to the best property management teams in that area, and set aside a budget for high wear and tear. Also keep your landlord insurance policy current, and all terms and conditions met.
Seth Godin said in an interview with Marie Forleo, that this whole life calling, passion thing is complete nonsense. Life is not about waiting for the right answer, or the right time before we do anything, because there is no right answer. This is a way to hide from doing your work.
What there are, are challenges and work that needs to be done. If we suit a certain kind of work, than do any variation of that kind of work. If we wait for the right horse on that carousel to come round, we have missed several opportunities to ride and experience it. The experience is the same, no matter which horse you are on.
Here is a link to that interview: http://www.marieforleo.com/2016/10/seth-godin/
So you own a rental property, and you want to manage it yourself. This seems like a great idea! You will save money on fees, and honestly, how hard can it be?? You can take it on as your hobby, while you work full time and save for the next house, right? Great, lets look into this in more detail.
These are some of the hats you will need to wear. You will need to be an accounts admin, tracking rental paid-to dates and invoicing water bills each month. You’ll need to be on call 7 days a week, for so-called emergencies. You will need to be a letting specialist, and market the property with good photos on the right media channels, and deal with vetting tenants, taking in-going and out-going inspections and negotiating bond and rent to be paid before keys are released. You will also need to be a tough credit controller, and have a good understanding of the law around tenants and landlords. Sounds fairly straight forward right?
How about the systems and procedures you will need? Tenancy agreements, bond lodgment forms for in going tenants. You will also need the right written notices required for rental arrears, rent increases, access for maintenance and inspections. Also, what will you do when you need to evict the tenant? How will the bond be refunded? What kind of damages can you legally charge the tenant for, and what if they don’t want to pay? Will your insurance cover you… have you met all their terms and conditions?
Now you have a better idea of what managing a rental property is like.You can’t do it as a hobby, it needs to be done professionally. A property management company will have the right people, in the right positions and have strict business policies to professionally manage rentals. Hobbies are things that allow you to make mistakes, and learn at a low risk. Managing your rental income of around $500 per week, and looking after your $800,000 property should not be left to a hobbyist.
Look for a good property manager in your area, and find out more about what they can do for you. I’m running a few promotions at the moment, and I love coffee, and talking to landlords about property. So don’t hesitate to contact me.
I’ve worked in three different property management offices, and found that the number one issue property managers complain about is landlords not doing general, and much needed, maintenance. One recent example was an owner not wanting to water-blast a deck, which was a health and safety issue. The owner wanted the tenant to do it.
The case above is an example of an owner trying to save $100, at the risk of being fined $4000 for breaching his landlord obligations. The key to this is communication. Most landlords don’t understand they have such obligations, and what the implications of breaching them are.
A lot of property managers will become fed-up with this type of owner behavior, and arrange the maintenance without the owners approval, as they have a tenant at their necks about it, and the owners contract will allow a small budget to be spent at the property managers discretion. This is where the relationship can deteriorate between all involved.
This is actually a simple issue to resolve. Firstly, is to make it clear to the owner that they have landlord obligations, and refusing to do the work is an unlawful act. This is why they pay for professional property management. Then once that is communicated, get the work done. In that order.
From the moment we wake up in the morning we battle our own resistance. It’s the voice that allows us to snooze a few more minutes. The resistance is the part of us that wants to make the easy choices in life. If I followed my resistance I would live on the couch playing playstation and eating hot dogs all day!
The other side of the resistance is the worrier within you. It’s the potential you have and the worrier is pushing you to fulfill your potential. Every day the worrier and the dragon of resistance wage battle. The first battle of the day is getting out of bed. If you get up early and go for a run, or meditate or do what the worrier inside you wants to do, the worrier wins the first battle. Each battle after that gets easier for the worrier to win. Give one chance to the Dragon, and your on a slippery slope.
There will be times when people give you criticism, which may fuel the dragon of resistance, which then takes over. When this happens, be aware of it, gather your strength and unleash that worrier again.
Steven Pressfield wrote the book “The War of Art”, and “Doing The Work” I couldn’t recommend these books more. These books outline the resistance and the worrier within all of us.
When prospecting a new client, or at a social event meeting new people. Knowing you’re good at something is difficult to convey, unless you have practised and refined your conversation – I dislike the word “pitch”. You will fail at it the first few times, so start failing now and get over that stage, so you can be more effective when people ask you what you do for a living.
As a property manager with Barfoot & Thompson, I have a wealth of expert knowledge in the Auckland market at my disposal. As Auckland specialists we have our finger on the pulse of both property management and the sales industry. Because we specialize, we have a vast network of support people including professional photographers, tradesmen, I T and other industry leaders we trust and work with to provide “you” the best service on the market. Why would you go to the next best heart surgeon, when you can go to the best and most trusted one?
Thats just touching on the brand and reputation of the company I represent. I can also touch on my personal experience which includes dealing with gang affiliated tenants, meth labs and abandoned tenancies in South and West Auckland. The real hard stuff, which makes great conversation.
I trust myself to manage anyones house. If I trust myself, then others can trust me also. Do you trust yourself to deliver? This shows in your presentation, you can choose to convey it in your firm hand shake, and in your warm smile.
The more you prospect the better you will be at overcoming objections and trusting yourself.
Im constantly dealing with meth contaminated homes. Costing landlords tens of thousands of dollars to clean before they can rent out their houses again. Part of the issue starts due to the owner or the owners agent doing a poor job vetting their tenants. Then when things go bad, they find a professional property manager to sort out the issue.
If they had spent the time and money at the start on a professional property manager, they would have reduced the chances of this becoming an issue. Here are some guidelines around deciding on a property manager.
A good Property Manager:
- Will not negotiate her fee, because she know’s her value and the work involved in providing the job expected of them. If you prefer premium products, then pay for a professional property manager.
- Has a professional office and gets audited at least once a year. This means they properly manage your rental income.
- Will ask you about landlord insurance, smoke alarms and insulation. Thats the basic set of things landlords need to have for a rental house.
I work in West Auckland and am open to meet landlords to discuss what you need from a property manager.