Managing Rental Properties Effectively #269

the hard way managing rental properties. But yeah, there's a lot to share because I think that is one of the reasons people avoid getting into rental properties is the managing game. They're like, oh, it's gonna be it's gonna be a big pain and tenant nightmare, tenant horror stories. Those are the kind of things that make people say that that's not for me. And so I think that being able to manage a property effectively is so key.

It's so clutch to making it actually not a breeze necessarily, but very very manageable, very very much more yeah, much more approachable and a lot easier than people think it is. And our goal is that with this episode, a lot of individuals might consider real estate and even managing it themselves based on what we have to say today. So on that real estate and housing kind of conversation, let's talk about neighbor dot com. Oh yeah, so this recently.

I don't know where it's been hiding or how I haven't seen it before, but it's this really interesting website where people can rent out a space in their home or like a driveway or a garage or a shed anything. Um, you can rent out just a portion of your home for storage, not like Airbnb for someone to come and like sleep there, but for someone to store their possessions or a car or something like that. Right. Yeah, well

you said Airbnb. It really is like Airbnb, except for for self storage, not for individuals looking for a little getaway for the weekend. Right. Yeah, you don't want to stay in my shed for the weekend, but you might want to pack your stuff there. It just depends on

how nice your shed is. Man. I had a nice shed after college when I was living up in North Carolina, when I was living in the woods chopping my own wood for heat, We had this little shed and we got a couple of couches from the local good Will put them in there, and we would sit out there and smoke our pipes and cigars. It was a very rustic and of the earth period of time for me. I feel like when I saw this about neighbor dot com, I was like a man for for our our audience.

There's like a twofold potential benefit. One is if you have an extra room or spacing your attic or spacing your shed whatever whatever that may be, or like your basement or your driveway. Yeah, like I saw that you could just run out space on your driveway. So if you have an extra large driveway where and maybe you've downsized cars recently, somebody can pay you to park their own car in your drive or something, yeah, which is crazy. Yeah. So so like there's that potential to make some money

off of extra space you have hanging out in your life. Um, and then also there's the potential for storing own stuff in a much cheaper way than then you would be able to with like a self storage unit, by going directly to to a neighbor, to someone around the corner and using their space for for a fraction of the price. So yeah, it could be a win win either way you're looking at it. Yeah, this is another one of those kind of fun gig economy ways that you can

make money. I mean, that's the end of it. That I like is the the idea of individuals out there thinking, Okay, what spaces can I right out? Like you can also list a unpaved lot, which is basically like your backyard. So I'm like, man, folks are going to get on there and think through, like what am I not using? What do I already have? You know, folks have resources that they have at their disposal that aren't necessarily making money.

And that's one of the cool things about all these apps and technologies is that they're able to shut down these inefficiencies that exist. Why not use these resources that you have and put them to work. I love that. Yeah, you can make an extra fifty two hundred bucks a month by running out something that you're you're not even really using. So obviously on the on the home page, there's like a lady and she's like, I make over ten thousand dollars every single year. Maybe in her case,

she has like acres of parking lot. Maybe we're folks gonna just rent that out from her forty two atticts like a right, lady, good job. Yeah, So that's You're probably not gonna get that rich doing it, but it is a potential way to make some extra extra money. Yeah, super cool, and we will link to that in our show notes for folks who are interested. All right, Matt, let's get to the beer we're having on this episode. We're drinking today, we're drinking beer called pog Basement i

p A by scoff Law Brewing. They're just around the corner from us in Atlanta. I love the name. I've always loved that name, Scofflaw. They don't care exactly about anything. They're gonna do whatever it is that they want to do, including brewing a delicious I PA like this. So yeah, looking forward to having this one on the show. Yeah, it was actually super I looked at our our beer backlog and all surprised to see we've never had a scoff Law beer on the show. So it's time. It's

it is time. We're overdue, man. Yeah, alright, So we'll give our thoughts on that one at the end of the episode, but but for now, let's get onto the topic at hand. We're talking about managing rental properties effectively. And Matt, we have talked about rental properties a decent bit. On this podcast, we've answered listener questions about buying rental properties.

We've talked about how to find the right rental property, how to screen tenants, how to invest in real estate when you don't want to physically own a single family or multifamily home where you live, and more like we we've earned the gam it in a lot of ways. But what we haven't talked about, uh, is the day to day of rental property management. So we're gonna tackle that scintillating topic on today's episode. Everybody's been waiting, like

with bated breath for this episode, I think. But like we said, if you are somebody who's thought they will never own rental properties because they sound like too much work, listen to this episode. There's a reasonable chance at least it will change your mind. I can't promise you that it will. But and then for other people, for current landlords, I think there are a lot of ways that you can change the way you're managing something, make it a little bit of a lighter load and a little more

enjoyable at the same time. Yeah, and another reason too that we want to pull our listeners into this conversation, man is that, like you and I, we have seen the impact of smart real estate investing in our own lives, right in our own ability to have a little bit more freedom when it comes to, you know, our our day jobs and being able to earn a little bit of passive income quote unquote, passive income is not truly passive,

but it's a big deal in our lives. So we want our listeners to to at least hear us talk about this a little bit because it's something that they can implement in their own lives. And managing specifically is the thing that people push back on, right it seems like something that they don't want to do. I think most people avoid rental properties in large part because they've heard tenant horror stories, and that's something that most people don't want to put up with. Right. I totally get it.

I understand that aversion, but it doesn't have to be like that. There are systems that that you can put in place to make it far more likely that you'll have a positive experience with your tenants while simultaneously making money every single month and building wealth. So we'll talk about property managers, and you know, even when hiring one might make sense for you, you don't even necessarily have to manage our rental property yourself, even though that's going

to be the direction that we're gonna steer folks towards. Uh. And we'll get to those reasons why later in this episode. Yeah, so before we get to kind of managing a rental property, map that there are a few things that change the dynamics of managing and rental property. And and the biggest one is getting good at finding great tenants. That's half the battle. Really, when it kept one great tenants exactly, that that's going to solve almost all of your problems. Exactly.

It really, it really is huge. And you know, we we covered that a while back in episode forty four. Let's quickly discussed again, because getting stellar tenants into your property will make all the difference when it comes to managing that property. Uh. Let's talk about listings and showings. That's a huge part of whether people are or are

going to respond or not. I mean, just like if you list a used item for sale on Facebook, Marketplace or Craigslist, good pictures in a decent listing go a long way towards whether people are actually going to reach out to you or not. Uh, and be interested in what you're selling and whether or not they're gonna be willing to pay full price. I recently discussed the difference between listing on Facebook Marketplace, which is free, and then

listing on Zillo, which costs ten dollars a week. And I had plenty of times was like, all, I'm gonna try this the free out and and go with Facebook. But Zillo kicked its butt, Like I got zero replies from Facebook and I got like thirty replies from Zillo within a week. And so yeah, Facebook Marketplace is great for unloading a fridge for a hundred bucks, right right,

Maybe not the best place to uh list rental. Yeah, so yeah, put a sign in your your yard listed everywhere, take good picks, give solid info about the property, and make it professional and friendly while selling the features of the home in the neighborhood. I think sometimes if you skip that step or you you're like, oh yeah, to one available next week, you have to like sell the neighborhood a little bit, sell the home and and let people know what a great place it is to live. Yeah,

you're talking about the neighborhood. Essentially, you want to paint a picture of what it's like to live there. Uh. In both of our cases, we've had properties that we've moved out of that we then listed, and it's really easy to get behind that property right because there's reasons that you bought it in the first place. And so explaining how close it is to say, like restaurants, you know, like I mean, I've got a property nearby that's about

five blocks from some really great restaurants in Atlanta. That's something that you want to include in the listing. So it takes a little bit of creativity to to help folks to understand what it's gonna be like and how wonderful it truly is gonna be to to live in a property like that. And another important step to finding a great tenant is is making sure that you properly run a background check. You want to check their credit

and their criminal history. My smart move dot com or cozy dot ceo cozy co Uh, these are the websites that we think are best for screening a potential tenant, and that part of the process is crucial. You know, it's really hard to to get to know someone in five minutes when they swing by and take a look at the place and they say, hey, I want to apply for the place, right, and so make sure you can find out more about them based on their background check.

And you also want to to call previous landlords and verify their their income and their employment. You know, I even call a couple of personal contacts as well. Uh, if they include those, or better yet, if they include like a little letter of recommendation maybe from the previous

landlord that always tells yeah, but always call. I feel like this is an easy step that a lot of individuals can overlook because, like, you meet somebody who starts talking, even these days, even wearing a mask, it can be awkward, but you start talking to him and you think, oh, man, this is they seem so great. They're really friendly. They mentioned the company where they work. It sounds like they

make enough and they qualify. However, just because they're friendly do a good job socially doesn't mean they do a good job financially, right, So you want to make sure that you thoroughly vet your applicants. Yeah, really, it doesn't take that much time, you know, running running these histories and then making four or five phone calls. Um, It's there's not a whole lot involved, and yet what it can save you from the pain on the back end of having someone who who doesn't pay rent on time

or or gets months behind. Even like those are the kind of things that are gonna make you wish you never took on managing our rental property in the first place. And so we have we want to make sure you don't get into that spot. So do the easy stuff on the front end that takes a little bit of time in order to ensure that you're getting a great tenant. And also another important thing to consider is the lease agreement.

Getting a thorough lease agreement is incredibly important. You can look to get one from a fellow real estate investor. That's actually what I did when I got started out. A friend across the street who had a few rental properties was like, all right, hey, you know I've been talking to you about this. Let me give you my lease. And I looked it over and it was great. But I would say for most people it makes sense to actually pay for one that you can use over and over.

That works for the ways that the laws are set up in your state, because sometimes you might get a lease from a friend and you don't realize that it's missing some important components that you need to have in their bigger pockets. Sell state specific leases for nine no low allows you to make unlimited leases for thirty nine dollars a year. You can also check out other online legal sites like legal Zoom. Be wary of going for

the freeforms though. You don't want to cheap out on the lease because, like I said, you want to make sure it's a state specific, thorough legal document and and that's just really important also on the front end, and it's worth that extra money in order to make sure that your your legal obligations are are taken care of. Yeah, this is definitely an instance where you'd want to be frugal, but but not cheap because it can come back to

bite you. Man. This makes me think too of like, have you had any horror stories when it's come to your different properties As you're talking about Lisa's, I was kind of thinking through maybe I wasn't listening to you, and I was thinking through different instances, different occasions that have arisen, and I can honestly say, man, we've I've never really had a full on horror story where something terrible has happened at a property like where I needed

to get up in the middle of the night. You know, you hear these different stories neither Yeah, really so so the worst thing I can think of, maybe as you think of something to share, but at one of our properties, we had a giant tree branch fall in. It landed on the cartlanted on the tenant's car, but like, this was a healthy tree and this was back I forget what hurricane it was, but a few years ago. It was a big hurricane in the fall. But it rocks you know, the Atlanta area and a lot of trees

went down. And luckily our our tenants had comprehensive coverage. You know, it covered those acts of god, uh, you know, weather things that you can't really plan for. But you know, that was something where I was just like, oh no, what's gonna happen. But it's like, know, that's something that that their insurance completely covers and it's not something that that I need to worry about, you know. Um, but yeah, that's the closest I feel like that we came to

kind of freaking out thinking. You know, when they send us that picture of the tree like smashed into their car, I was like, oh no, we're done. Or sunk. That's how your emotions can kind of get the best of you in the moment. Yeah, yeah, yeah, No, I've never When I look back over nine years of managing properties that I own and and you know, having tenants, I

don't have any major horror stories. I do remember, like there's this one time where a couple wanted to get out of at lease early and I remember them, and you know, I'm typically completely willing to talk about that, and I don't want to be punitive when when someone wants to to leave and and and move somewhere else, and the way they went about it was just was just really difficult, uh. And it was a little combative, um and and that's not my personality at all, to

to get combative. And so that was hard emotionally for me. And I think, um, sometimes that can be at least for my personality, and that that's like the hardest part is just like the yeah, the interpersonal side of you is really struggling in the moment. But you're totally fine, yeah exactly, legally, you're totally good. But it was the and there was a different expectation of what, uh, the

laws should look like. They were international and so where they came from, UH, tenants had a whole lot more leeway to essentially break leases whenever they wanted and and here in the state that we live and that's just not the case. So they just assumed some things that weren't quite accurate. Right. Yeah, Well that's a great segue, man, because after the break, we're gonna talk about UH state specific laws and how important it is to know those as well as other steps that we need to take

when it comes to managing rental properties effectively. And so we'll get to all of that right after the break. Art we're back from the break, We're talking about managing rental properties, and there is a whole lot that goes

into managing a rental property. Well, sometimes you gotta like step up your emotional fortitude game, like I had to back in the day, and I just had to like, all right, no, I'm sticking to my guns, and and you know, I'm I'm I'm not going to be rude or unkind, but I'm gonna have to be okay with these people being mad at me, not liking me. And that was hard, man, that was hard. I don't like him,

people don't like me. But another really important thing though, when you're listening your property and you're talking to tenants is that you need to make sure you're in compliance with the law. So let's talk about that. In particular, you need to make sure you're obeying the Fair Housing Administrations rules. Don't ask questions that will get you into

potential legal trouble. Specifically, under the Act, landlords cannot discriminate against tenants or potential tenants on the basis of race, gender, religion, familial status, disability, or ethnicity. So no, this you've got to obey the law, and violating these rules could could

get too in big, big trouble. Yeah, not only do you not want to ask those questions when maybe either ahead of time when you're kind of communicating with them, but where you've met with them, or or even after you've met them, right, but you want to not uh listen any of those protected classes in the listing for the property. Right can't be like nobody is allowed. Yeah, yeah, well,

in particular familiar status. I feel like that's one of the more honest ones, one of the more honest mistakes that we can make, because it's not good if you put in your listing this is a property that's great for families, or this property is is perfect for you know, a single professional, like that kind of thing. You have to stay away from family status because that's that's a

protected class. Things like race and religion or are obvious, right, Like you're not gonna say, hey, this is a great property for a Roman Catholic or the or this is a great Muslim neighborhood, Like no, you can't, that's obvious. You can't do those sort of things. But you gotta watch out too when it comes to you know, what you know. Earlier we talked about painting a picture for what it might look like for someone to live in

your house. But you do want to make sure you avoid language that that makes it seem like you're trying to steer the listing towards or away from one of those protected classes. For sure. Yeah, yeah, totally. And so Matt. On the note of knowing your state's laws and rules, I mean, they're they're obviously federal rules too, all right, it's important to familiarize yourself with the nuances of your

state's landlord tenant laws. There are all sorts of little things that can trip you up, but it really depends on what state you live in, so you know whichever of the fifty states you live in. It's going to determine, um, some of the ways that you handle that rental property. And there are third party sites like landlord ology dot com.

Will put a link to that in our show notes, but they've got comprehensive guides for every state that can be really helpful so that you can know the laws and some of the specifics that need to be in your lease and some of the specific things that you need to communicate to tenants. And at the same time, a lot of states have put together a landlord Tenant handbook, like our state of Georgia has a great one, is

like eighty pages long or something like that. I've read the whole thing because there's just so much you need to know as you're getting up to speed, um, and then I like go back to it as like some light toilet reading write exactly, Yeah, just to brush up every once in a while, like pull it up up and while I'm going number two Chicken Suit for the Soul and Georgia Landlordian Book exactly. They're both just true

joys to read. But yeah, I mean they're really that that's something that you do need to bone up on, and it's something that's important to read because it is going to help you be a good landlord. You're gonna know some of the rules that you have to abide by, um, and you want to make sure you're doing everything by the letter of the law. In addition to to your own standards of wanting to manage and run a great rental property, you want to also make sure you're in

compliance with the law to right. Yeah, so that's those are the kind of like the first steps for managing well, right, making sure that you're in compliance with the law of whether it be federal or state. Let's kind of dive into what it looks like, you know, more on the day to day basis and and do like the best thing that I feel like that we can say when it comes to managing well is just to treat managing these properties or you know, your property like a business,

you know, not a hobby. You definitely want to make sure that you're you're being professional. That doesn't mean you have to wear a suit and tie. You know, you don't have to dress up or anything but tuxedo personally, but if you did that, it probably weird people out what is going on. But I think there are certain expectations that tenants do want to see, you know, like communicating clearly and effectively, and so make sure that you

are doing those kind of things. And one of the other things that's important as well as having like a schedule of maintenance for the house, right we feel it's important for you personally to check in on that property at least once every single quarter. You know. Uh, this is why, like early on, why insisted on mowing my own lawns my rental properties. Uh, it was just a default way for me to have eyes on what was going on there. Obviously I was cutting the grass more

than once a quarter. But uh, you know, this is why having some of these properties close by is also really helpful. Those you know, part of my strategy, as part of your strategy as well, Jill. I know it's not out of my way, you know to drive by and see how things are looking. But either way, you know, have at least four days a year that you schedule for you know, maintenance, you know, filter changes, checking out

the interior, things like that. And on that note too, it's good to maybe compile a list of contractors professional contractors right who can do some work for you when there there's a need that comes up that's something maybe beyond you know, tightening a little pipe under the sink or changing a light bulb, like things that I can do.

Uh So having that list even before you need it is so helpful because when you find yourself in a situation where something needs to be fixed quickly, a lot of times it's easy to cut corners and you just kind of take the first number that someoney gives you, or the first number maybe even find online. But if you know that like, oh, I've heard so and so has used this guy before, or oh, I've heard that this H Fact lady is just amazing by the way you and I both use the same H Fact lady

and she is amazing. But having these names and numbers and what they do on your phone and easily accessible is is so important as well. Yeah, and Matt two, to your point, it's important to have friends or at least have you know, contacts in the space who also

managed properties so that you can share that kind of information. Oh, you've got a great handy person, I've got a great H Fact lady, and you can swap contacts and um, you know it's not always full proof, but it's really helpful to know people who know people and to have that ability to share, especially when you need somebody last minute and your person is busy and you gotta find somebody else on the fly. Yeah, you don't have to start from scratch, right, you don't have to reinvent the wheel.

It's just I can quickly check in with you and say, Hey, who's that yard guy that you've used before. I've heard you talk about before. I need to finally get his name in my phone and give him a call. Yes, it makes it so easy, it does, all right. Another really important thing when you're treating your your rental properties like a business is that you you have to have a system, a clear system for tenant communication, and you have to set clear guidelines as to how your tenants

should notify you of any problems with the property. Matt, I made this mistake a big mistake early on when I was managing rental properties. I gave them my my cell phone number, uh, my email address. It was like, just they can contact me anyway they wanted, whenever they wanted, and it wasn't clear how I preferred to be contacted, and I would respond almost at any point in time if they texted me, like nine o'clock at night, Hey, Joel, can you take a look at this really minor problem

sometime in the next couple of weeks. And I'm responding and like, I'm about to go to bed, Man, I don't want that. I'm placing you out if on your mind you're dreaming about it exactly exactly, and that wasn't good, So I would suggest picking one Personally. I'm email only at this point. It sucks to get that text message that something's broken in the evening, but I don't mind it nearly as much when it comes across an email form.

I feel like I can dismiss that for twenty four hours if need be, and create that system and stick to it in order to avoid having to respond in ways that you don't love or that do stress you out. I think at the same time, it's just helpful for your tenants to know, all right, this is the method how I contact my landlord when something arises. If there's

a few different methods, it can get confusing. Yeah, And over the years, Man, I found that what's been really helpful for me is I've set up separate email addresses per property, and I've got this Google Voice number as well that I typically field those initial showings and you

know when when those listings are alive. And that's because I found that, just like that showing in listing time period, right, that it can be so overwhelming because people, I mean they're emailing you and calling and you know, trying to call you in text, like I've turned off call forwarding,

you know, from the Google Voice number. I'm I'm like only text, but folks are going to reach out to you at all hours of the day and night to to try to make sure that they're able to see that property asap we want to move in, and then you never hear from those people. And so having some of those those barriers between you, uh and getting in a good night's sleep is important in particular during those kind of higher stress periods where you're doing a lot

of communicating, you're fielding a lot of inquiries. Um. But you know what I found though, for me personally, is that after that, like once I actually get a tenant in there, I'm very comfortable giving them my you know, my cell number for them to have my personal email address. And again, in the past seven years, I've never had a call or a text in the middle of the

night where something you know, where something was wrong. And that's because I too, have also commune dedicated to them how I prefer to be contacted about things that are non emergencies. Uh. But you know, granted, if there's something going on that's an emergency, I want them to call me. But that being said, knock on the wood, that's not something that, uh, that I've had to deal with, and it sounds like you haven't either. Yeah, yeah, I mean

I think those those stories are are overblown. And usually if you have a lot of tenant horror stories in particular, like everybody's bound to get something here, they're right, for sure. But but oftentimes that is because there wasn't enough due diligence done on the front end. I think that's almost always where people make the mistake and then they pay

for it later on. Yeah, and real quick too. You know, while we're talking about communication here, I think it's really important to communicate about how rent is to be collected and when it's to be collected. Right, And obviously this is you talked about the least earlier. This is something that should be very clearly spelled up in the lease.

But if your tennants know how it is that they're supposed to pay rents, I feel like that's another one of those points of tension that that folks are like, Oh, I've heard horror stories about you know, having to collect rent and what happens if you don't. But again, if that's something that you've clearly communicated with them and that's spilled out in the least, that's that's a headache that you can avoid. Yeah, and make it easy on them, don't don't make them drop a check in your mailbox.

How about make it easy for us for yourself, the easiest thing to do is really the easiest thing for both parties. We all have smartphones and venomouh cash app. It is so easy and it's so easy to set calendar reminders. Can you even set up automatic payments with venmo or or cash app? Not that I know of, but I don't know if you can either. But it's so easy to set up a recurring calendar reminder and just with a few clicks, few slipes with the thumb

and man, you've got that rent paid. It's true. Well on the note of getting paid, we need to talk about assessing your property performance every year. Are you making money right? And and that is an important question to

ask if you're managing a rental property. You know, if you had to replace a roof or an h VAC unit this year, maybe your cash flow is down, but hopefully you're sending aside money every month for maintenance anyways, Right, if you're regularly going over your budge it did maintenance amount, then it might be time to be a little more realistic with how much you're you're truly gonna make with

that property. And there is a chance that if you keep overshooting on maintenance by a good bit that the the actual property just has too many issues and it's not going to be a money maker for you. And if that's the case, then it might mean it's time to sell. But there is something about being able to assess every single year, like how is this property doing

for me? And you know, Emily and I we get jazzed at the end of the year to talk about, well, how well have these properties performed, how are they doing for their for our family? Are they still worth the time and energy that we're putting into them? For what we're getting out of them, um and and so that

that's always a good discussion. Having that performance assessment is crucial I think to managing properties well and it gets me excited to continue managing knowing that they are actually doing what I I've set out for them to achieve, like that they're actually helping our family build wealth and create an alternate income stream exactly. Yeah, that's the primary goal, right, But also let's let's talk about software and some of

these different platforms out there. You can use these to help you just to stay organized and communicate well if you feel that you need to kind of operate within a system, you know, if if those boundaries around communication, you know, if you found that those are harder to set, uh, then it might be worth checking out Cozy dot c O cozy co We We mentioned them earlier, but they are the like the best all in one software that

we know of. It is free for landlords and tenants, but they make their money in other ways, you know, like if the tenant chooses to pay rent via credit card, they can do that, but it also charges them a small fee. And they also make their money to on screenings that you would perform through that platform, but you know, they offer an awesome platform to help you to manage those properties and to communicate with your tenants, um, you know,

take maintenance request organized forms just overall stay organized. And rent Ready is another platform that's worth looking at. It's that one costs actually nine dollars a month if you pay a year at a time, and I feel like that was a little more set up for if you have just a whole massive portfolio of properties. I saw. One of the cool things that outrun ready is that tenants can upload videos to it, you know, and so there's a maintenance request, they can accompany that request with

a video. But again, if you're more of a mom and pop landlord like Joel and I are, and you just have a handful of properties, and you've communicated well with your tendants and they understand you and you understand them, uh, sometimes you can kind of sidestep some of those larger platforms and software as long as you have set those clear communication boundaries with your tenants. Yeah, and I love that these that these platforms can offer just like a

whole range of help. Right like your your tenant can not only just pay digitally there, which makes it easy for you and for them. They can also submit a maintenance request. You guys, communicate solely through that platform, if that's what you want. It's just kind of nice. You just log into the site and like everything that you need to do in order to deal with me and issues with the home is right here, right, And so yeah, I think it's it's nice to be able to to

have that as a system. Really to help you create that system, it's important to be firm but fair with your tenants, right, stick to the stuff you've put in the least. Being fair general is a good rule to a bye bye in life, right, Yeah, totally. I think like that is one thing though, Matt, that that tripped me up early on, is if something is in the least, you need to stick to it, and when it comes

to like a late payment or something like that. In the beginning, I was like, I was pretty mushy about those. You want to be cool about it. You're like, oh, don't worry about it, you know you want to be you want to be likable, right exactly. And then I found out that that that just kind of led to more issues down the road. And so yeah, that being firm upfront is important. Obviously, COVID has made interactions with tenants. Tenants um really different these days, right, late fees are

way less rigid right now, considering the circumstances. Uh, We've talked about that on the show. How I've changed the way that I'm interacting with with my tenants, the concessions that we've made to try to to help them out and keep them um in in the place that they've been for quite a long time, and help keep some stability for them at the same time. But in typical times, sticking to what has been written in your lease is

is crucial. I think for a la lord, and the more you deviate away from what you've have in writing and you've both acknowledged um and and signed your name to, the more likely you are to run into other issues. Yeah. I mean it's just not fair to your tenants as well, Right Like if if one month you're like, oh no, don't worry about the late fee, but then the next month, the very next day after when rent was due, you're

you're kind of hounding them saying, hey, where's rent. I mean, that's not fair, that's not what you're looking for out of the landlord, right like you, As a lay lord, I want to make sure that my tenants feel like they have somebody who they can count on to provide them safe and clean housing, you know that at a price that we've agreed to. And so communicating and sticking

with those terms, I think is is really important. I like what you said, how how those terms are not only for the tenant, but they're also for us as well, to make sure that, like, well, even though we don't want to abide by these things and everybody in the short term would might benefit a little bit by kind of fudging it, it's it is really important to kind of stick with it because having those clear expectations is pretty vital. Yeah, I agree, And Matt, we've talked a

lot about finding the right tenant. We've talked a lot about it stabbor good systems to manage a rental property effectively. But when is it time to hire a property manager to do a lot of that managing for you? Well, we'll answer that question right after this break. All right, man, we are back from the break, and we just spent a chunk of time talking about managing properties ourselves. So let's talk. You know, you hinted at this but let's talk about when it makes sense to hire a manager,

and that is never just kidding. Um. We believe that you should at least try to self manage before you look to hire someone to manage them for you. Like we feel it's just such a good learning experience that is worth having. Uh. And it will also help you to learn what questions to ask if you are looking at a potential property manager as well. Yeah, if you've never managed a property, you're going in the dark when

you're interviewing property managers. You don't really know what to ask them, and and so it's just much harder to assess whether you're hiring someone who's going to do a good um or not. Yeah, exactly. I kind of liken this to at least being willing to like pick up a paint brush, like when you first buy a property. You know, Uh, if you're willing to maybe put in a little bit of elbow grease at the beginning, then maybe rental property ownership and management, you know, it may

not be for you. Matt. So, my mom, she really likes h G TV. I've heard and I remember watching this one episode one time with her, uh, and it was like this this this couple who who wanted to flip a home. Um, and there was like this expert who was helping them along the way, but they didn't want to get their hands dirty at all. They didn't even want to go down in the basement they and see some of the issues that existed with the property.

They just showed up with a bunch of money. Basically, yeah, exactly, let's be on this show like you're just gonna do it for us, right, and we're gonna make money in the end. That's just a terrible approach when it comes to buying a rental property, Like you you have to be willing to one look at the whole house, but then yeah, I get your get your hands dirty, um. And I think the same is true when it comes

to managing. You have to at least be willing to try it, and you'll learn a lot in those first six months. You'll you'll maybe learned that you really want a property manager, or you might learn that it's actually easier than you thought it was. Um. But how do you know when you are ready to get a pro and what they normally charge. Well, if you just don't want managing to be a part of your life, you're one of those people who says, I like real estate, but I don't want to manage it. I think that's

an okay way to approach it. But just know that you're not going to find anyone else who will care for your property as much as you do. The little things that I see that I can improve on the properties that I own. Well, somebody who's managing the property, someone who's just getting paid to to essentially fix things when they break, isn't necessarily looking for those cool, inexpensive improvements that you can do along the way that will make tenants happier or potentially even be able to get

you more rent. That's what I mean by by you essentially being the one who's going to care about that property the most. But if you are one of those people who knows you want to invest in real estate, but you also want to have a property manager, make sure to factor in those costs when running the numbers on a property. Matt and I were fans of people factoring in the potential costs of a property manager into

the numbers just in case, no matter what. But if it's a non negotiable, then then you have to have it in there and and it will cost you eat into some of those profits by you paying someone else to take on the role of managing the property. It's it's gonna cost you money. Yeah, and you know costs. It truly is like the biggest consideration. Uh. And that's something that we're gonna we will get to but we'll

get to that here in a little bit. Joe. I'm thinking through how even though I've purposely purchased properties you know, nearby and created systems that make them easier to manage, like, I've still considered hiring a property manager recently, life and having a bunch of kids, like, life gets busy, and so I want to continue to own these homes. But I you know, I get less excited by the management aspects,

you know, over time. I think that's a large part of why I haven't necessarily looked to expanding the number of properties I have, because I'm like, you know what, like the ones I have right now are manageable, and I like the level of my involvement. But I know that like man if I'm if I'm gonna get a bunch of more properties, I don't want to say it's a full time job, but it's going to certainly require a lot more of your time, and that's something I'm

kind of short on at the moment. And I'm also stuck in this hard place there too because I'm also not quite yet willing to pay for someone to management properties. And so that's why at the moment, Yeah, I'm not looking to expand that real estate portfolio. Yeah I understand. Yeah, if I got a couple more, I definitely gotta find

find somehow I can't do it myself anymore. But I think another another reason that people turn to property managers that makes sense is if they're considering long distance ownership of a property, Because managing a physical property from hundreds and hundreds or thousands of miles away just it makes

it incredibly hard. So if you're moving but you still want to own that property that you that you own that's nearby, hiring a manager makes a whole lot of sense unless the person renting your property is someone you know closely. Having a local property manager I think becomes essential when you're not living close by um in order to be able to manage personally. And even if it is some when you know, you still have to manage it and that's just hard. To do from from far

away right. I mean, I'm thinking too of maybe another reason why I might be going to have a manager. I'm thinking I think it was five Am Joel, remember our interview with him, uh, and I think it was him.

He shared the story about how he had gone in to talk you know, with his tenants that he has had about you know, the next year, and he kind of like showed up with the lease and how you know, and Rent was also going to be going up, but he left that conversation with a signed lease, but Rent went down, and he readily admitted that you know what, I am a terrible landlord. This is yeah, this isn't something that I'm good at. And so I think it's

important too to know your strengths. If you know that even though you know the least spells out these certain things, it still comes down to you as an individual to enforce it. And if you know that that's not something that you want to spend your time doing, or maybe it's something that you're not that great at, I think having a manager to kind of you know, be your go between and to enforce those policies and those rules for you, that might be something that's worth the money

as well. Yeah, or if managing that property is going to get you emotionally tied up into knots consistently every time a problem comes up, which is something that I struggle with, to be honest, um, and it's something that I've gotten better with over time. Uh, but for me, that would be one of the reasons to potentially consider a property manager as supposed to doing it myself. But that's also what makes you a decent human being jeweled. Yeah,

maybe so, some might, some might disagree. Not everybody can be cold hearted robots like I. All right, well, let's talk about how to find a decent human being rental profit for for a rental property manager, and like, if you do want to hire a service to manage those properties for you, there's a good way to go about it, and the best way, I think are one of the best ways is to hire a company that investor friends

have had positive experiences with over the years. Again, it's another reason why it's crucial to have a network of investor friends right at. Joining a local real estate group in your community can help connect you to lots of people that can help you in your investing endeavors, including potential property managers. Matt one of my investor friends. He also manages properly, who's not you? And I know him incredibly well now and I understand how he manages his properties.

So if I do get to the point, um, and you know, I get closer and closer every year where I want to hire someone to manage the properties for me, He's going to be the first place I've turned because you know, I know him well, I know how he manages his properties, and I feel comfortable. I would feel totally comfortable having him manage mine. Um. But those are the kind of things you learn through a network of

people over over time. Right. Yeah, But if you happen to to not know somebody who is, you know, also a property manager, you can definitely check online and read reviews, just like we do for anything else we do it in our life. Right. You can go to All Property Managements. That's a great site to find local property managers, uh, and you can request a quote for their services online.

It's super easy. But then beyond that, make sure that you actually interview a few different property managers to get a feel for for you know, what it is they offered and how they differentiate themselves from any old standard property manager. Like we're saying earlier, you want to be firm, but at the same time you do want to be fair, and that's kind of the it's it can be a

difficult balance to to strike as individuals. It's something that we can do ourselves, but finding someone else who can do a good job taking care of your tenants like that, it can be a little more difficult. So make sure that you don't just go with the first quote that you receive back in your inbox, you know, yeah, yeah, And then ask the right questions right of the companies that you're talking to, Uh, interview three or four potential

property management companies. Ask questions like where do you advertise for potential tenants? If they say, oh, just Craigslist or just a sign in the yard, I mean that might have been cool, worst, but it doesn't. That doesn't cut in anymore. Also ask stuff like what your overall vacancy rate. You'll you'll realize too that that's an important question because if they're not keeping tenants happy, tenants are gonna move

out a whole lot more quickly. Or if they're not doing a good job filling a vacant apartment, their their vacancy rates are going to be higher. That means they're not doing a good job listing the property and finding qualified people to live in it. And you can even ask to speak to tenants that they manage and ask that tenant about how they respond to maintenance requests and

what their communications style is like. Those are the kind of things they're going to help you determine whether or not a rental property manager is going to be a good fit for you or not. And then lastly, as you are searching for a manager, make sure that you read through whatever agreement that they send your way, that you read through that pretty thoroughly. You know, you want to make sure that you know the scope of the services that they're gonna provide you. You don't want to

just focus on on going with the lowest price. You get what you pay for. And so, Joel, while we're talking about price and cost, right, let's talk about what most property managers charge and what they typically do is they charge half or a full first month's rent when a new tenant moves in, and then in addition to that, typically they will charge anywhere between seven and twelve percent of the monthly rent you know, they might even charge a setup fee upfront. Some property managers opt for a

flat fee instead of a percentage of the rent. So often times though these fees are they're not set in stone. Uh, these are things that you can negotiate some Yeah, I think those are some good ballpark numbers, and those are the kind of things. Yeah, you can push back on and say, well, your competitor charges this, Well, why why do you charge this much? And they might say, our services are better. Here's what we're doing. Um, here's additionally what you're getting if you hire us instead of the

other guy. This is a place though, where when we're talking about frugal or cheap, Matt, you don't want to go cheap when you're talking about someone who's taken care of, in all likelihood one of the biggest investments that you've ever made in your life having a rental property. You want someone who is going to care for it the

way you do. And if that means an extra one or two percent of the rent every single month is going towards someone who is going to do just a fantastic job and manage your place the way you would, then I think it's worth it. Don't cheap out when you're hiring a rental property manager and kind of know the ballpark, know when you can push back and no

one you can negotiate. But ultimately you want to find someone who is going to do a killer job, not someone who's just gonna do like an average job, right, right. But here here's the thing though, in the end, the cost of property managers, like that is what is keeping you and I from you know, jumping on the property manager train, you know, Like, I mean that's for you, I'm guessing that's probably your biggest consideration. Like, that's the

biggest thing that you have issue with? Is that so free? I do it tomorrow? Yeah? Why not? Exactly if you had somebody who's gonna do a great job for you and it's going to be completely free pro bono, why not. But when it costs you ten percent of your rents,

that could easily be of your profit. Right, So, say you know you've got a mortgage that's a thousand bucks and it's a property that you can rent out for maybe two thousand dollars if they're collecting two dollars every single month and in your profits are one tho dollars and you're only left with eight hundred bucks I mean, is a huge stinking fee, you know, and often the numbers are are worse than that for most Yeah, and

that's that's the generous picture I just painted. It could of the profits um are getting it eaten into by by hiring someone to manage for you. So you have to know here's what the typical costs are. I agree. And then also, well is it worth it or not? Because it completely changes the dynamics of how profitable that rental property is. Yeah, And here's the other thing too.

I think a lot of times folks will think that if I have a property manager, it alleviates some of the stress of when things are coming out prepares that need to be made, But you're still on the hook for those repairs, right. You're just not necessarily the one who's choosing the maybe even the best vendor that you know, the best company to do the job. Instead, you're just

told that this is how much it costs. And so I know, at least for me personally, I could see myself getting frustrated because I'm like, well, did they go with like someone who's doing really good work or somebody who just advertises a lot in their name is around town.

I think this is an instance where maybe being a slightly more proactive landlord, how that can eliminate a lot of headaches, right if you're kind of leaning into problems before they even become problems, right, instead of just ignoring them and sweeping them under the rug, because you know what, eventually you're going to have to deal with those issues. You're going to have to deal with as maintenance requests. You're going to have to make those repairs, and it's

good to handle those right away. And don't think that just having a property manager takes you off the hook, because guess what, you are still responsible for those repairs. It's just that now there's a lot of other things that aren't in your control. Yeah, man, Matt. Another factor when you're talking about whether a property manager is worth

the cost or not. The most recent rental property that I purchased a couple of years back, well, the rent that the property management agency was asking was was way under the market value, and so they didn't think the home was worth as much as it was. I got a pretty decent deal and ultimately, over the years have been able to raise the rent to market rate. And if I had a property manager who was like, no, we're only going to ask this much for your place

and they're undervaluing it. That's that's how our vacancy rates so low, because our rents are exactly because that's another thing you have to watch out for us that there are all these little things that can eat into the profits. Um. And again not denigrating property managers. There are some great ones out there, and at some point I might go with in that direction. Um, But for the diligent landlord who is managing rental properties effectively, we think most of

the time they don't need a property manager. They're gonna be more profitable, their home is going to be kept in an even better condition. Um. And it really won't be all that draining being a landlord if you're managing the properties you own effectively. That's right, man. Yeah, I could not agree anymore. Let's go ahead, No, get back to the beer this episode and I were drinking uh basement Pog I p a. This is by a scoff

Law brewing company here in Atlanta. Actually, we recently had a pog beer on the episode where it's an I p A with passion fruit orange and guava. Oh yeah, man, what were your thoughts on this beer? Again? Do this is a tropical punch beer? Man? This had all of this like Island caribbeans sort of uh fruit flavor going on, and it was like abrasive in the best way. I

thought it was like a West Coast style pog. I thought it had like some of the bitterness from the hops along with the juiciness from from the fruits that were that were in the beer. Yeah, I felt this one was pretty heavy on the po and less on the g I felt like it had a little bit less of that guava, but I felt like I was tasting a lot of the passion fruit, a lot of

the orange, lot of orange. I felt like it almost seemed like there was a layer of like orange essential oils like floating on the top of the beer, like as you were to kind of sip it back. But yeah, man, I am glad that you and I got to enjoy this one. This is kind of nice too, for a nice fall day like today. It's been a while since I've had a scofflaw beer, but I'm glad they're back on my radar now. And it's maybe a brewery that. Yeah, you and I need to hit up soon, dude. Well cool, buddy,

that's gonna be it for this episode. Listeners can find our show notes up on our website at how to money dot com. We'll be sure to link to any of the different resources for you if you do happen to start managing property yourself, which we would encourage you to do. Yeah, yeah, we think for for so many people, investing in a rental property can be just a fantastic vehicle to long term wealth building. And also, Matt, I just want to say thanks to everybody who listens consistently

to the show. We really appreciate it. If you get the chance, If you haven't left a review, we'd appreciate that too, especially at Apple Podcasts. It just goes a long way to helping other people find the show find information that they can use to help them in their everyday lives when it comes to money. All right, Matt, that's gonna do it for this episode. Until next time. Best Friends Out, Best Friends Out.