Do you own a rental property either in the same town or city as you live? Or maybe own something a bit further away?
Recently we have been asked a lot about our rental properties, and how we avoid certain issues that may come up. So our goal is to get into those questions a bit in this blog. Eventually we will go into more detail, but for now we will hit several aspects of rental property management, shallowly. Then, we will write more on each topic in the future.
Section 8 and Govt Programs
As we have navigated the rental markets in new locations, working with different government subsidized housing programs (that's a mouthful) has become a new facet of our business. In Fairfield County CT, where we own multiple investment properties, we generally interact with the type of tenant that did not require any government help, due to the nature of the price, location, etc (of our properties). We do understand that these programs have somewhat of a guarantee on receiving your rent check; the most obvious benefit. But now that we are straying into new markets, we have come to realize additional benefits to allowing rental assistance programs.
If we are talking about government programs, these might include: RSS (exclusive to NY), DSS (multiple states have this program), Section 8 (likely the most common; a federal program), Social Security, and other state and federally funded programs. There are also other assistance programs, generally local programs that are state-to-state, run as non-profit organizations. I can count these among the same category, since their purpose is to assist someone with low income, a disability, a recovering addiction, or some other type of troubled situation, get a home.
I want to mention a tip, something that gets lost when landlords think about these programs - in addition to the guaranteed rent check every month, tenants in these programs are afraid to lose the assistance. In other words, many of these tenants will keep the place in good shape, and respect the property - the fear of losing the assistance makes satisfying the landlord a top priority. Needless to say, this cannot be counted on in all scenarios. However, it's a good way to think about it, to make you more comfortable in taking these programs. Even better, some of these programs have oversight, or a case manager that might visit the property, or generally be held accountable; where with a regular tenant, you are on your own.
Worth mentioning, denying someone because they are using a government-funded program might be considered discrimination, so tread lightly here. You are better off denying because of credit, but if the tenant is a solid candidate, there should be no reason you don't accept whatever payment they come to the table with.
In most cases, hiring a management company is necessary or recommended if you live far from the property you own. Through our long-distance investing, we have come to learn many lessons about management companies that are important to shine some light on:
If you are hiring a management company, ask for a list of fees upfront before you sign a contract - this will lead to many less headaches and allow you to plan accordingly;
When looking over the fees for the company, make sure to ask about how they handle house calls and emergencies - the last thing you want is a bill for $50 every time they show up to the home for a broken light bulb;
Having a handyman on call might save you money if it is excessively expensive to have a management company come out - just make sure to let the management company know that you have someone for maintenance.
Management companies are a convenience, and a necessary system for multiple properties. But tread lightly as these companies tend to have so many fees associated with their service, it might be worth finding alternate solutions. Factor 10-15% of monthly rent, assuming nothing goes wrong; costing you extra in fees. Work to achieve lower than 10% through negotiations when you are vetting companies. But, just be wary of scams and companies that take advantage of your situation.
Upkeep and Maintenance
In our experience in the real estate world, we have seen homeowners/investors lose money and time because of poor maintenance and upkeep. There are some inexpensive, and useful actions you can take to ensure your hardware functions correctly for decades past their useful lives.
The simple proactive action you take includes regular servicing on all of your mechanicals, including the furnace/boiler, the hot water heater, the air condenser for air conditioning, and any other mechanical systems in the home. In other words, for $100 per year, you can save yourself from replacing the boiler every 20 years. Instead increasing the life of this costly piece of equipment by quite a bit.
There are other hidden benefits to this: Your tenants will save money on utilities by having a heating unit that functions more efficiently; each time a service-person comes to the home, they are able to anticipate issues, saving frustrations down the road. Less surprises=more control.
Also worth noting: if you limit heat loss in the winter, you save energy, especially when you have a vacancy. Just because it doesn't directly benefit you (i.e. it may help your tenant's utility bills), doesn't mean it won't indirectly benefit you (e.g. happier tenants, cheaper utilities during winter for you).
It's an unexpected road when dealing with rental properties; from all aspects of the deal to managing the property from a far. We offer these tips to ensure you have less stress and liability, but if you are tired of it, we are also here to provide assistance. Buying your property off of you is part of how we are here to help, so keep us in mind when you become tired of dealing with the headaches of your rental property! Don't be afraid to reach out if you have a question or need a second opinion either.
Chris and Joe have years of knowledge, stories, and experience to share with you. This is where you can access their minds, to learn about what they do and how homeowners can be more effective when in tough situations.