Buy, Fix & Stay (Part 3): Essential Landlord Docs & How I Manage My Rentals
Hey guys, Cody here…
One of the most frequent questions you guys ask me is:
Should I manage my own rental properties or should I hire a professional property manager to do it for me?
But first, if you missed the first two parts in our Buy, Fix and Stay series, How to Create Long-term Wealth and Analyzing and Funding Your Investment Property, then you might want to check those out and head back over here.
Property Management: DIY or Outsource?
My suggestion is to outsource the property management work to a trained professional so you can free up your time to focus on finding your next deal. Fixing toilets or dealing with nonpaying tenants does not produce you any money.
Professional managers only charge around 7% to 10% of the monthly rents, plus they typically charge a marketing fee for finding you a qualified tenant, so it’s really worth it. They handle all the marketing, screening, paperwork, and evictions, and even the repairs allowing you to have a stress-free landlording experience.
Landlord Docs: What Paperwork will you Need to Succeed as a Landlord?
If you list your rental on the MLS with the real estate agent or if you hire a professional property management company to find you a tenant, it’s common practice that they’re going to provide and fill out all the necessary paperwork involved in any of your transactions.
When it comes to landlord documents, there are really only four documents that you must become intimately familiar with:
(DISCLAIMER: I'm providing my contracts to you so you can see what I use - Before using these documents you must have your local real estate attorney review and approve prior to use.)
If you’re managing your own rentals, then you’re going to need to connect with a local real estate attorney and get some custom contracts and forms created that are designed for investors and abide by your local state laws. It’s my recommendation that if you download some documents off the internet and you plan on using them, at least have a local real estate attorney check them out before you use them.
Part of the application process is doing background and credit checks to prescreen any potential tenants. I use ACSDataSearch.com , ERenter.com or LandlordStation.com and they pretty much all cost around $25 to $30 per application to check their credit reports, criminal records, any previous bankruptcy judgments or evictions filed against any of your potential tenants.
These services pretty much uncover anything that I need to know to make an informed decision.
Always, always, always (have I said always?) run a background check even if you don’t care about the person’s credit.
Also check for proof of job/income and previous rental experience by calling an older landlord. Keep in mind that the most recent landlord might tell you they are great, even when they’re not, to try to get rid of a problem tenant – go back a landlord or 2 if you can.
I work with a lot of homeowners who previously went through foreclosure. They make great tenants, but I still always run a background and credit check on them. Ask them during the interview process if there’s anything that they need to disclose to you before you run the check.
Allow them to come forward and volunteer any information and let them know that communication is the most important part of the tenant-landlord relationship. Now is their time to open up because if they lie to you and you uncover anything during the background check, then they’re definitely not going to get the house.
So my Overall Advice…
Outsource the property management work to a trained professional so you can free up your time to focus on finding your next deal.
Become familiar with these 4 documents that your property management company will use:
- Rental application
- Lease agreement
- New tenant checklist
- Option agreement
When managing your own rentals, go to your local attorney to acquire customized contracts made for investors.
Always perform tenant background checks, including proof of job and income. Ask tenants to volunteer any information you may find.
Okay gang, tis time for me to go. Keep an eye out for part 3 in this series, 7 Tips to Killing Common Landlord Headaches.
Until next time…
Keep it Classy,