Owning rental properties is a great way to generate cash flow and earn semi-passive income for years to come. However, if you aren’t prepared, it can also be quite stressful. Thankfully, there are ways to reduce the amount of stress you experience and have a more enjoyable and rewarding experience.
Get Organized
One of the key ways to reduce stress is to stay organized. This means keeping detailed records of all income and expenses, as well as maintaining organized files for each property and tenant. Thankfully, there are lots of digital tools and apps that make this possible.
The first step is to use property management software, which is designed to handle various aspects of property management. This includes things like tenant screening, rent collection, lease management, and maintenance requests. Good tools include AppFolio, Buildium, or Rent Manager, which each offer comprehensive solutions that can automate many tasks and keep critical information easily accessible.
You’ll want to develop a systematic approach to handling paperwork and digital records. For best results, create separate files for each property and tenant. These should include leases, tenant correspondence, maintenance records, invoices, insurance documents, and any legal paperwork. Use a consistent naming convention for all files to ensure you can easily locate specific documents when needed.
Do your best to digitize physical documents to reduce clutter and improve accessibility. Cloud storage services like Google Drive, Dropbox, or OneDrive can all easily be used to store documents securely online (usually at no cost), allowing you to access them from anywhere.
Hire a Property Manager
While property management software is great, you can take things a step further and reduce stress even more by hiring a local property manager – not just a generic nationwide company (If you’re in Houston, for example, you should hire a Houston property management service that has boots on the ground.)
A property manager takes on the responsibility of running your property day-to-day. This includes handling tenant inquiries, complaints, and requests for repairs and maintenance. They ensure that the property is well-maintained, liaising with contractors and service providers to address maintenance issues promptly. This level of oversight helps in preserving the condition of your property and can really do a lot to increase tenant satisfaction and retention.
While we’re going to discuss the process of screening tenants in the next section, it’s worth noting that a good property manager will streamline this entire process for you, from advertising the rental and conducting viewings to running background checks and verifying tenant references.
Property managers also manage the financial aspects of your rental properties. They collect rent, manage security deposits, and keep detailed financial records. They can also prepare monthly financial reports that provide insights into the profitability of your investments.
Screen Tenants Thoroughly
Much of the stress involved in owning rental properties comes from dealing with difficult tenants. You can significantly mitigate this risk by implementing a thorough screening process.
As part of your screening process, check credit scores, criminal background, rental history, and employment status. References from previous landlords can be incredibly insightful, as well, since they’ve had firsthand experience with the tenant in the past.
By taking the time to conduct these checks, you significantly increase your chances of finding reliable tenants who will pay on time, maintain the property, and cause fewer problems. And at the end of the day, that eliminates most of the stress that comes from owning rentals.
Understand the Laws
Take it from experience – knowing the local landlord-tenant laws can save you a lot of headaches. These laws govern everything from security deposits and lease requirements to tenant rights and eviction procedures. Being ignorant of these laws can lead to costly legal disputes.
If in doubt – or if you’re green to rental properties and related laws – consider consulting with a real estate attorney who can help you navigate these rules and ensure your lease agreements are legally sound.
Create a Financial Buffer
Unexpected expenses such as emergency repairs or legal fees can create financial pressure. To mitigate this, it’s wise to build a financial buffer. We recommend setting aside a portion of your rental income each month into a separate savings account designated for your rental properties. This fund can cover unexpected costs without impacting your personal finances.
While most real estate investors and landlords don’t have the resources to do this overnight, it’s helpful to shoot for having a minimum of three months’ worth of expenses saved up for each property you own. That means if it costs you $2,000 for the mortgage, insurance, taxes, and maintenance, you’ll want at least $6,000 tucked away in an emergency fund for that property. This ensures you can continue to stay afloat, even if you’re unable to find a tenant for an extended amount of time.
Schedule Regular Maintenance
Proactive maintenance can prevent emergencies that require urgent and stressful fixes. Schedule regular inspections and maintenance for major systems like heating, plumbing, and air conditioning. This not only helps in catching issues before they become serious but also demonstrates to tenants that you are committed to maintaining a quality living environment.
Be an Intentional Landlord
It’s one thing to own rental properties and generate a little cash flow. It’s another thing to intentionally create strategies and processes that streamline your management and allow you to increase cash flow over the long haul with minimal stress required.
By following some of the tips outlined in this article, you can do just that.
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