Having done my fair share of property management over the years and have trained many others on the topic I’ve seen person after person get brain washed just by the wording of “Property Management”. This isn’t so much about Managing the property. The property is actually pretty easy to steer towards an outcome when you have systems, checks, maintenance and monitoring happening.
Like a coach of mine once said jokingly, “Property Management? Yup, I drove by the other day and the property is still there! We’re good!”
Think about it, if the house is vacant, you just need to make sure the roof is solid, the windows and doors work / lock, there is good water drainage and the HVAC systems work. Bonus item would be an alarm system if you are worried about security. Hire someone to cut the grass, do snow removal if you live in the great white north like me and you are already ahead of the game. But that’s just for a vacant property, for example when you are on vacation!
But HOLY HECK BALLS when you get human beings living or working in the properties that you are managing, you just opened up Pandora’s Box! Now you are dealing with a person’s belief system, all their habits, their hobbies, friends, family, pets, what they do for work, for fun, for boredom and the list goes on. Not just how they behave today, but the people they will meet who will influence them in the future too! I don’t know about you, but I don’t have a crystal ball to know how things will all work out.
Luckily when you look at the purpose AND ideal outcome of owning a cash flow property, you can put together a plan to get you from point A (where you are today) to point B (a time in the future) with as few bumps in the road as possible. Will there be surprises? Yes, always. Can you be proactive at every level of the game to minimize them or avoid them altogether? Absolutely. Do people always do a great job of blocking and tackling as landlords? Unfortunately NO – there are a lot of amateur investors out there. People who are very part-time, absentee owners with no systems or teams in place and have never had formal education in this space or hired a mentor to coach them. It is a jungle out there and to make profit, you don’t want to lose money on your experience.
So we had a few tips to newbies or seasoned vets here to help protect your bottom line:
- One of the biggest mistakes people make, other than buying in a rental property in a war zone of a neighbourhood (not for the faint of heart or low skilled investor) would be the eagerness to fill the unit and get it rented. Plain and simple – their love affair with money and the pain of not getting a cheque during one month of vacancy because they didn’t have a sure fire re-rental system can lead to putting the wrong tenants in the unit.
It’s simple psychology – we as humans are driven by pain and pleasure. In this case, the pain of not having the unit bringing in the all mighty dollar and the pleasure of knowing someone will take the unit so you can bring some funds to the bank. Landlords literally get high by cashing cheques off of endorphins and oxytocin! Make sure you or the property management team in place will not make sacrifices when it comes to picking the people who will live in your properties.
- Study and become an expert at identifying and working with different personalities. Know who you are looking for in a tenant and what you are looking to avoid. DISC is a great model to use. Over the years, I’ve found that S-type personalities are the easiest to work with and usually end up staying for longer than expected. They are real fruit of the earth type people and it is sad to see them move out when they do move on. But at the end of the day, you will need to know how to work with all different personality types.
- Have the unit Show Ready by coaching / incentivize the current tenant. If you are aiming for a low to no vacancy period you need to have a system in place for the current tenant to put their best foot forward for showings. You may literally need to spoon feed this to them by letting them know “In order to avoid dozens of showings which are just a huge hassle to your enjoyment time of your unit, we will need you to make sure it is show ready. This means relatively clean, clothes/dishes/clutter, etc. put away. If all else fails offer something like 1-2 hours with your go-to cleaner on the house. Or you may need to offer up some garage space at a different location for storage. Feel free to get creative with it and work towards having a good show ready unit for re-rental. This will also make taking pictures of the unit easier for marketing purposes!
- Don’t be afraid to pay for proper marketing or referrals – this will save you time and stress in the end. What’s the saying, “Penny wise, pound foolish” or don’t trip over pennies on the way to dollars. Too often people hesitate on spending money on marketing when it is one of the most important investments they can make. Over time your goal should be to decrease marketing costs per unit as your brand, reputation and referral leads really take off. We have a referral program where existing and past tenants have a chance to earn some good pocket change by bringing us tenants on a silver platter. Referrals are also great because people like to live close to other people that they know.
- Make sure there is a management presence at your properties. Whether it is you or a company that you hire, there needs to be internal and external checks of the property happening. Whether it’s for smoke detectors, preventative maintenance, or to do a regular walk around, tenants should have the sense that big brother knows what’s going on even though you aren’t always inside the unit. Eyes, Ears and boots on the ground are important and then detailed reports should be sent to you with pictures.
- Have good signage for literally everything. Don’t ever assume that tenants, or their friends and family members will know the house rules and preventative maintenance that was discussed on the first day of move in. Where to park, what lights to shut off, what not to flush, what they have access to, what they don’t, what the building’s quiet times are, and how to best report maintenance requests can all be communicated and reminded by signage.
- Create a culture of accountability and incentives for tenants. Bla bla bla (type about this or pick another point to list)
- One needs to have the Work, Assess, Change, Repeat attitude. If something isn’t working, try a new approach, join a forum, fire your contractor and hire a new one, network with other top level investors, get better educated where you are lacking, etc. – you get the idea. You will largely be on the right track but will you will need lots of small subtle changes on a daily basis to get you to where you want to be: Happy, profitable with low stress levels by following a system and replacing yourself as the landlord.
So if you have never invested before, don’t think real estate investing is for people who want to simply “give it a go”. Real Estate Investing is also not a totally Passive Activity, although you can manage it with very little of your own time once it is set up properly. Make sure you know what you want, that you have the ability to build and manage teams of the right people, reverse engineer outcomes, be proactive, seek out mentors and guides along the way, and WORK at it.
With the right systems and plans in place, you will sleep much better at night knowing that your properties actually are being managed through all the layers of onion skin you have been able to wrap them in with these strategies and the other tried and true ones in your back pocket!
It always sounds easy in theory, but implementing what matters the most is always the best use of your time as a property owner. Pick your properties, your power team, your tenants, and your approaches to issues wisely over time and you will grow your wealth more and more over time with less expenses and issues along the way!