Published
-
Written by
Written by Luke Babich
It’s a great time to be a landlord. Thanks to a strong market, home appreciation has been steady over the past decade, and rents are historically high, increasing by an average of 39% just in the past year, according to Business Insider.
A lot of this rental boom is due to high home prices. Many people who wanted to buy a home now find themselves priced out of the market, and have gone from looking for a real estate agent to looking for an apartment. That’s led to a gold rush for landlords.
The rise of remote work during the pandemic has also led to an explosion in remote landlords, who may not live in the same state or even the same country as the units they rent out. Being a remote landlord comes with some unique challenges, especially since tenants can be so demanding. One recent study from Porch found that 13% of tenants call their landlord just to have a lightbulb changed, and that the average tenant calls their landlord six times a year.
Remote landlords who don’t have a system in place to manage their investment properties can easily become overwhelmed — to the point that they may start thinking about unloading their investment rentals, maybe even to a lowball cash buyer.
Let’s go over some tried-and-true tips on remotely managing your investment properties!
1. There Are Over 10 Million Landlords in the U.S.
If you’re renting out a unit or two (or 10), you have a lot of company! A study by Fortune, using data from the Internal Revenue Service (IRS), found that there are over 10 million individual landlords in the U.S.
2. Most Landlords Only Own a Couple Units
On average, individual landlords own 1.9 units. For all the talk about corporations and hedge funds buying up rental units, most rentals are owned by small, mom-and-pop landlords.
3. Landlords Probably Make Less Money Than You Think
According to IRS data, the individual landlord reported an average of $34,217 in rental income in 2018, against deductible expenses of $23,679. That comes to a profit of less than $11,000. And remember — the average landlord is making that on 1.9 rental units!
4. The First Question for Remote Landlords: Will You Hire a Property Manager?
Managing properties can be difficult for any landlord, and it can be extra tough for remote landlords, who may not even live in the same country as their tenants. It’s not just the physical proximity that’s so challenging — there are also logistical challenges like different time zones and communication mediums.
Recent data suggests the majority of landlords use a property manager. Employing a professional property manager to handle tenant problems can be a huge time and energy saver — but it’s not cheap.
5. Property Management Companies Generally Take a Cut of Your Rents
Typically, property managers charge a percentage-based fee, similar to the fee charged by real estate agents. Normally, they take a cut of the rents they collect, usually between 8% to 12%. That may not seem like a very large percentage, but considering the IRS data we touched on earlier, many landlords are working with some pretty small profit margins.
However, you can negotiate your property management fees, just like you can negotiate real estate commission or any other financial charge!
6. Some Property Managers May Charge Hidden Fees
In addition to their cut of your rents, some property management companies may add fees on top of that. Some of the most common hidden property management fees include late fees (which the property manager charges to the tenant, but keeps for themselves), maintenance fees (this is in addition to the work and materials they expense to you when they perform repairs on your behalf), or leasing fees (which they charge for filling a unit, and can come to as much as half the first month’s rent).
If you do hire a property manager, make sure you get a complete accounting of their entire fee structure before you sign. Just remember that you don’t necessarily need one — you can manage your properties yourself, even remotely, just like you can sell a home without a real estate agent!
7. You’ll Probably Need a Leasing Agent, Too
Many remote landlords use a leasing agent to fill vacant units. This role can be filled by a good real estate agent or a broker, and on average they charge around half of one month’s rent. Some may charge additional fees on top of that, for services like credit checks.
Why would a remote landlord want to pay a leasing agent to fill their vacancies instead of letting their property manager do it? Well, the property manager is incentivized to fill the vacancy as fast as possible, since they’re paid with a percentage of the rent. This sometimes results in managers putting in unvetted tenants just to get rent coming in — and those tenants could become problems down the line. Leasing agents don’t have that same incentive, so they’re usually more careful about screening tenants.
8. Leasing Agents Do More Than Just Filling Vacancies
A leasing agent will also market your rental to attract high quality tenants, and work with outgoing tenants on tasks like cleaning, inspections, and coordinating move-outs.
9. You’ll Need Trusted Contractors on Your Team
Even if you hire a property manager, they won’t be able to handle every problem that comes up. You’ll need repair workers, plumbers, electricians, and other contractors to tackle emergencies that are more complex than a missing mailbox key or a burned-out front door light. Ask for references from other landlords or house flippers to find contractors who do good work at reasonable rates.
10. You’ll Need to Screen Tenants
If you don’t use a leasing agent, you or your property manager will need to screen tenants.
At a minimum, screening a tenant requires asking them to fill out a rental application, running a background and credit check, verifying their employment and income, talking to their past landlord references, and conducting a short interview touching on issues like pets or past evictions.
If you’re doing this remotely, you may want to use one of many landlord apps to screen prospective tenants, or entrust the process to your property manager.
11. Getting the Right Tenants Will Make Your Job Much Easier
Screening tenants properly and getting the right tenants into your rentals can radically increase the profitability of your properties. Getting good tenants in there will minimize tenant turnover — and the lost rents that come with it — and help you avoid the dreaded eviction, which can result in months of lost rent as your eviction case makes its way through the court system.
12. Look for Tenants With “House Pride”
One way that landlords find great tenants is to search for renters with “house pride.” These tenants take pride in their home, and are eager to make improvements and repairs on their own. This independence and care means fewer repair calls to you and your management team, and generally results in a property that’s kept in better shape than average. Some landlords even fund the home improvements, so the tenants feel appreciated!
13. Make Sure You Modernize Your Listings and Showings
Since you won’t be around to show your rentals to prospective tenants, and asking your property manager or leasing agent to do it will cost them valuable time, you want to make your listings as robust and comprehensive as possible. Get professional real estate photos taken, and get a video or 3D tour made, so renters can get a feel for the place before they pick up the phone.
14. You May Need an Eviction Agent
If you do need to evict a tenant, you’ll likely need an eviction specialist to help you navigate the process. Eviction and tenant law are constantly changing and vary widely between states. An eviction agent will know how to use the terms of your rental agreement to evict a tenant in the most efficient way possible, and will have experience in the local tenant court. You can find a good eviction agent through your property management company or through a local real estate attorney.
15. How Will You Communicate With Your Tenants and Your Team?
You’ll probably want to build in some layers of communication between you and your management team, and your tenants. After all, if your tenant’s toilet gets clogged at 4 a.m., and they can’t get in touch with your property manager, you probably don’t want them calling your personal cellphone when you may be a continent away.
Many landlords entrust their personal number to their core management team, and have another number through Skype or Google Voice that they give to their tenants. You should also consider setting up an email or WhatsApp account, so your tenants can get in touch with you that way.
16. You’ll Need a Rent Collection System
Most landlords, especially remote ones, have moved well past the era of paper rent checks. There are a lot of online rent collection systems to choose from. Typically, these charge a small monthly fee, and offer conveniences like tenant autopay, money transfers, comprehensive rent rolls, automated income and tax reports, and even property management services.
17. You’ll Need a P.O. Box or Private Mail Service
If you’re living overseas as a remote landlord, you’ll need a way to receive important tax or government documents related to your properties. You can use a simple mail forwarding service, but that could take a while, and you may receive some time-sensitive documents. A private mail service is a little pricier, but they can handle all your mail, and even open and scan it for you, and send you electronic copies.
18. You’ll Need to Set up a Financial System to Manage Your Finances Remotely
Your rents will be deposited into a U.S. bank account, but if you live outside the country, you’ll need a way to cheaply and consistently transfer money internationally. For expenses associated with your rentals, you may also need a stateside billpay service, as well as a credit card that’s linked to your U.S. bank account. Make sure you get a card with no foreign transaction fees!
19. You May Want a Stateside Accountant
It can be confusing to monitor all your income and expenses online, especially if you’re running them through different platforms. Employing an accountant to handle your bookkeeping can be a lifesaver, especially when you sell and have to manage your capital gains tax bill.
20. Electronic Document Signing Is Your Friend
As a remote landlord, your tenants and you will need to sign your leases electronically. There are many landlord apps that will help you set this up, or you can use a service like DocuSign or Adobe Reader.
21. A Good Security System Will Give You and Your Tenants Peace of Mind
A quality security system acts as a great deterrent to vandals and thieves, and gives your tenants and you a sense of protection. They’re also a great way to monitor vacant units, and to keep an electronic eye on your real estate investment from afar.
Home security systems are more than just cameras, too. They can include smart locks (which are great for independent showings), smart lights, and digital carbon monoxide detectors.
22. Consider Building a Tenant Portal (Or Using an App)
If you have a little web development expertise (or hire an expert), you can bundle a lot of these tasks — paying rent, vetting tenants, signing leases, requesting and tracking maintenance — onto a single site. There are also a lot of landlord apps that essentially do this for you, though you’ll have to pay for them.
23. You May Need an “On the Ground” Representative to Tie It All Together
If you don’t hire a property manager — or even if you do — you may need a local “point person” who can act as the nerve center between your various support staff and contractors. Your on-the-ground agent can make minor financial decisions that your contractors may not be authorized to make. They can also enable smooth communication with tenants, resolve conflicts, and act as your public agent in eviction proceedings.
24. Visit In Person When You Can
No matter how far away you live from your rentals, it’s wise to visit them in person at least once a year. This will allow you to inspect them yourself. Shady property managers have been known to give lazy or inaccurate property reports, so you want to check in when you can to see how things are running. Making an appearance will also reinforce your relationship with your tenants, making it more likely they’ll respect your property and your rules.
25. Constantly Optimize Your System
No matter how well your system is working, there’s always room for improvement. Look at responsibility overlap between support staff members, recurring problems with certain properties, or parts of your financial process that are consistent pain points, and eliminate as much waste and friction as possible.
Leave a Reply