Running Your Rental Business on Auto-Pilot

Posted on August 1, 2015 by

The rental business can be very lucrative for the real estate investor. It can also be a pain in the neck. The trick to an effective rental business is the management. We have many rentals as a part of our real estate investment business and we have always said that managing tenants is like raising another set of children unless you do it correctly.

The first thing you should do is to decide if you are going to manage your properties yourself or if you are going to have someone else do it for you. There are ways to automate these systems either way and I will discuss both. You just need to choose the system that works the best for your own needs.

You can use a property management company and run your rental business pretty much hands-off. Just remember that there are costs involved in doing it this way and you don’t have as much control. If you do choose to work with a property management company check references before doing so. In the beginning, keep a closer tab on what’s going on with your properties. Some property management companies are definitely better than others and some will take better care of your properties than others.

When using a property management company who is going to place tenants in your properties, make sure they are using a reputable tenant check company and make sure you look at the applications and tenant check reports of prospective tenants before they are placed in your property until you are sure that you and the management company are “on the same page” regarding the tenant requirements you want for your properties. Make sure your property management company understands your personal parameters when placing tenants in your properties.

For example, our business doesn’t allow anyone with a felony record in our properties or anyone who has been evicted in the last twelve months. We also have specific income parameters for our tenants. These are all perimeters you need to set up with the company you decide to work with.

Also, you want to make sure the management company doesn’t put a family in your property that has more people than your property can legally hold square footage and bedroom wise. This is a code violation that will get you into trouble. Make sure that the property management company you choose to work with follows all the laws applicable to your state. You also need to make specific decisions regarding pets in your properties. Remember that there are certain breeds that will cause you to lose your liability coverage if you put them in your properties. What size pets are you going to allow and how much additional security deposit do you want? We also require our tenants to provide photos of the animal and if we find any other type of animal on the property that is grounds for immediate eviction.

Make sure you set specific rules regarding lawn care, pest control and maintenance issues. Do you want to just let them handle everything or do you want to be notified first? This is all part of developing a relationship with the property management company you are going to work with.

There is another way to deal with tenants, and that is managing your properties yourself. If you have a system in place and you have your dream team in place, it is very easy to manage your own properties. We have been managing our own properties for many years.

The first thing you should do is decide which properties you want to rent. Then run an ad in the newspaper advertising the property with the basic information about the property in the ad, such as number of bedrooms and baths, garage or carport, amenities such as a pool or fireplace and the address of the property. I also list the amount of rent and security deposit required. For our craigslist ads we go through what our requirements are and we include good photos of all the rooms of the home. That’s all, do not list your phone number in the ad. The ad is meant to send the prospective tenant to the property address. If they can’t map the directions to the property on their own, you probably don’t want that person as a tenant.

Once they arrive at the property address, they will find two things. The first thing they will notice is that the drapes or curtains in the windows or on sliding glass doors are open, making it easy for them to look into the windows of your rental property. The second thing they will find is a take-one tube filled with flyers that have information about the property and a rental application. On the flyer that has the information about the property you should include the full property address, number of bedrooms and baths, garage or carport information, whether there is carpet or tile, appliance information and colors and square footage of each room.

I also include information like square footage of the house, the rental amount, the required security deposit and the required term of the lease. If I am allowing a pet, I also explain in the information that there is a separate pet lease and what that entails, including the maximum number, size and types of pets we allow. I also let them know the amount of additional pet rent and security deposit we require.

I also explain the application process on the flyer; that they must fill the application out completely, how much the application fee is, how it must be paid and where to mail the rental application. We do not meet prospective tenants at a property until they are ready to move in. At this point we also include our phone number if they have any other questions. If they do call, we will have a conversation with them. If they lead us to believe they are qualified and truly interested in our property, we may also give them the lockbox code so they can look at the interior of the property. Usually though, we don’t do this until we have their application and fee in hand.

When the application arrives, it is faxed to our tenant check company. Make sure you find a reputable one to work with. Our tenant check company bills us once a month for all applications that are submitted within the month. If the application comes back and it is not satisfactory, the prospective tenant is sent a letter which is required by law. Your tenant check company can provide these for you. If you receive a satisfactory report, you can then contact the prospective tenant and let them know that their application has been accepted. Let them know how much money is required for move-in and set a date and time to meet with them to sign leases and collect payments. This is actually the first time you will meet your tenant. First payments for security deposit and rent are always required to be cash or money order. We do not accept personal checks upon move-in. After that we do accept personal checks, but only until one comes back for insufficient funds. Then all payments after that must be made by money order.

Our lease is pretty strict and requires the tenant to mail checks to us each month by a specific date. If the rent is not received in the post office box by 5:00 pm on the date due, we have someone who delivers the three day notice to them the following morning, as required by Florida law. We have someone who works part time for us who takes any calls from tenants with regard to repairs needed. Tenants are required within the lease parameters to pay up to a certain amount for all repairs. If we have to have someone go out to a property to do a repair, we have the tenant contact our vendor directly and set the time to go out to do the repair. This keeps us out of the middle. Our vendor will then call us for the okay to do the work and let us know what the problem is. This is just another way to automate your business and let others do the work for you.

So what happens when we need to evict? Once again, here is where some good screening will be required on your part. You will need to find a good attorney to handle evictions for you. DO NOT try to do them yourself! This is time consuming, and can be expensive and emotionally draining.

We have an excellent attorney who handles all of these matters for us. We fax a copy of the lease and the three day notice to her, and she handles everything else for us. We just wait until the sheriff’s department calls us to let us know it’s time to remove the tenant if they haven’t already left. This is usually within a fairly short time after we send all the paperwork to the attorney who bills us monthly for her services. This is the reason it will be important for you to have a good real estate attorney on your team.

We found an attorney early on in our business that specializes in evictions and she is very good at what she does. She has it down to a “system” that works very well for her and us, so we have never had a problem with evicting a tenant even if they protest the eviction. She handles these matters for us as well. She also discounts her fees for us because she has been a member of our dream team for a long time and we have referred other customers to her as well.

We also have a handyman who will handle clean up, painting, pest control or whatever else might be needed to get a rental unit ready to go on the market. If you put your systems in place, it is very easy to manage your own rental properties. This is just another way to automate your business so it runs on auto-pilot. For more information on systems for running your rental business and finding even more properties, visit my website at

Kathy KennebrookKathy Kennebrook is a speaker, author and has been actively investing in real estate since 1999, Kathy currently resides in Bradenton, FL and is known as the “Marketing Magic Lady” because she is the country’s leading real estate marketing expert on finding motivated sellers using direct mail.

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