Preparing the unit properly also often requires the use of outside vendors, suppliers, or contractors. What you don’t contract out — tasks such as basic cleaning, maintenance, and painting — you need to do yourself. You also need to know how to perform a careful inspection to make sure that the unit is ready to show. I give you details about how to accomplish all these tasks in Chapter 5.
Knowing how much to charge
Understanding what you can charge your tenants is far from arbitrary. Setting the rent in particular can be tricky — especially if you’ve just spent hours investing your time and sweat in renovating and scouring your rental unit to make it sparkle.
In such cases, you may overestimate the market value of your unit because you have so much personally invested. But your prospects aren’t likely to be impressed that you laid the tile; instead, they’ll quickly point out that the flooring color doesn’t match their furniture. But if you lower the rent $300 per month, they’ll consider taking the unit off your hands, almost as though they’re doing you a favor. You may be able to structure some mutually beneficial rental concessions, but don’t be a pushover.
Many rental property owners are simply too nice. Maybe you’re someone who has trouble bargaining and holding out for the top fair-value dollar. You may be kind of like my mother-in-law, who was a sweet but overly generous woman — especially when it came to yard sales. My wife and I are glad that no one ever offered Rita 50 cents for our car!
In addition to setting the rent, you need to make the following decisions before a tenant moves in:
The amount of the security deposit: Setting security deposits is a function not only of market conditions, but also limitations on the amount you can charge and whether that amount is fully refundable. These restrictions are set by state laws. Determining whether you want to pay your tenants interest on the deposits you hold is also subject to law, but certain advantages can warrant doing so even where not required (especially for long-term tenants). The best way to decide on all the details of the security deposit is to conduct market surveys to see what others are doing. If everyone else has security deposits set at approximately half of a month’s rent, requiring your new tenants to come up with a security deposit of two full months’ rent on move-in is difficult.
The type of rental contract: Another important decision that has lasting consequences is deciding whether a lease or month-to-month rental agreement is best for your property. Although the residential rental housing industry is trending away from leases because they tend to favor only the tenants, you should reach your conclusion after conducting a market survey and understanding the pros and cons of each type of contract.
Check out Chapter 6 for more info on determining how much to charge, setting deposits, and figuring out what type of rental contract to use.
Capturing prospects’ interest
A successful property manager needs to understand the role of marketing in creating demand and meeting the needs of local renters. Fortunately, your marketing and advertising possibilities have increased dramatically with the advent of the Internet and social media. You (or in my case, my grandchildren) can develop a fantastic website with digital photos, floor plans, and 3D tours. Just make sure that you follow all the fair-housing laws as you work to generate rental traffic.
In Chapter 8, I review various electronic and nonelectronic options for promoting your rental property and attracting prospective tenants.
Turning interest into property visits
The ways to attract potential tenants are endless, but the fundamentals of getting them to visit your property center on your ability to answer their questions — typically online at first, and later on the phone or in person. You also need to be sure that you understand fair-housing laws when you prescreen an interested party, as discussed in detail in Chapter 11. You need to understand how to qualify your prospects properly and legally, for both what you want in a stable, long-term resident and what they need to call your rental property their home for years.
Converting your texts, emails, or phone calls to actual property visits is the next essential step to creating maximum interest in your rental unit. Chapter 9 explains how to get prospective tenants to view your property.
The best result you can expect to achieve at the property-viewing stage is persuading the prospect to complete your rental application and put down a holding deposit. What the prospect can expect from you at this time is the receipt of all of the very important mandatory disclosures.
Picking your tenants and signing the deal
Property management isn’t exactly like an online dating game, but you do want to gather information (while following all fair-housing laws to the letter, as covered in Chapter 11) and select a tenant who meets or exceeds your minimum written rental qualification standards. Tenant selection is probably the single step in the rental process that can make or break you as a property manager, so I devote a lot of detail to this important topic in Chapter 11.
Getting Your Hands Dirty: Managing the Property
You never hear from your tenants, yet the check seems to come in the mail each month. Managing your rental unit seems easy — just like you pushed a button! But after a year of progressively bursting with pride at your exceptional property management skills, you decide to drive by the property, only to find that your retirement plans and financial nest egg are candidates for a remake of Animal House!
In the next sections, I present the practical, in-the-trenches part of property management that can help you get familiar with every day-to-day eventuality related to the operational side of property management and the life cycle of a tenancy.
Moving tenants in and out
Coordinating the move-in of a new tenant is one of your most pleasant tasks, because this time is your best opportunity to ensure that your tenant starts out on the