Property Management Kit For Dummies,^® 3rd Edition with CD

Introduction

Welcome to Property Management Kit For Dummies, 3rd Edition. You can discover many of life’s lessons by doing some on-the-job trial and error. But that doesn’t apply to property management — the mistakes are too costly, and the legal ramifications too severe. This book gives you proven strategies to make rental property ownership and management both profitable and pleasant.

About This Book

Many landlord-tenant relationships are strained, but they don’t have to be. A rental property owner who knows how to properly manage his property and responds promptly to the legitimate concerns of his tenants will be rewarded with good people who stick around. The key is properly maintaining your property and constantly investing in upgrades and improvements. By doing this, you can be successful in meeting your long-term financial goals and realize that being a landlord is an excellent primary or secondary source of income.

This book is based on hands-on experience and lessons from my own real-life examples. Unlike many landlords and property managers, I believe that your tenants are your customers, not your enemies, and as such, you should treat them with respect. You may find investing in rental real estate to be a key piece of your overall investment strategy, but not everyone is cut out to be a property manager. I want to make sure you understand not only the basics of the rental housing business but also some of the tricks that can make you glad you’re a real estate investor.

Although this book is overflowing with useful advice and information, it’s presented in a light, easy-to-access format. It explains how to wear many hats in the property management business: advertiser/promoter (in seeking tenants), host (in showing the property), handyman (in keeping up with and arranging for repairs), bookkeeper (in maintaining records), and even counselor (in dealing with tenants and their problems). Just as important, this book helps you maintain your sense of humor — and your sanity — as you deal with these challenges and more.

I wrote this book in essentially chronological order — from your first entry into the world of rental property ownership and the corresponding steps to prepare and promote your property to showing your rental and selecting the right tenants. As a result, reading the book cover to cover makes sense, but feel free to read the sections that are most relevant to you at any given time. Skip around and read about those areas that are giving you problems, and I’m confident that you’ll find some new solutions to try.

To make your life easier, I’ve included many of the forms you need to be successful in managing your rental — whether you’re just starting out with a single-family rental home or condo, you have a handful of rental units, or you possess a whole portfolio of rental properties. If you’re reading this book in print, these forms are available on the accompanying CD; if you’re reading a digital version of this book, simply click the link in the table of contents to access the forms. Either way, feel free to print them out, have your local legal counsel review them, and start putting them to use.

Conventions Used in This Book

The Institute of Real Estate Management (IREM) and the National Apartment Association (NAA) are invaluable resources for rental property managers and owners. Because I mention them often, I refer to them by their acronyms.

I also employ the following conventions to help you navigate the text:

Italics highlight new, somewhat technical terms and emphasize words when I’m making a point.

Boldface indicates key words in bulleted lists and the action steps in numbered lists.

Monofont highlights websites and e-mail addresses.

What You’re Not to Read

Managing rental property takes time, so you may want to read just the essential information to help you find success. In that case, feel free to skip the following:

Sidebars: These gray-shaded boxes are full of fun bits or humorous stories that are quite interesting (if I do say so myself), but they’re not essential for you to understand the topic at hand.

Text with True Story icons: These passages contain some of my real-life experiences to help keep you from making my mistakes.

Foolish Assumptions

When writing this book, I assumed that you’re likely reading this book because you’re one of the following:

An unintentional property owner — someone who, through a series of circumstances, suddenly and unexpectedly came upon an opportunity to own property. Perhaps you inherited a house from a relative and, not wanting it to sit idle, you decided to rent it out. Or maybe you transferred to a job in another city and because you’ve been unable to sell your home, you’ve been forced to rent the property to help cover the mortgage and operating expenses. Many property owners find themselves in the rental housing business almost by accident, so if you count yourself in this group, you’re not alone.

One of those people who has made a conscious decision to become a rental property owner. Perhaps, like many rental owners with a plan, you needed to buy a new, larger home and decided to keep your existing home as a rental property. Or maybe while you were looking to own your own place, you found a great duplex and decided to live in one unit and rent out the other. In a world where people seem to have more and more demands on their time, many aspects of rental property ownership are very appealing, like the capacity to supplement a retirement plan with additional income or the proven opportunity to build wealth. The key to achieving this success is finding a way to make money while still retaining control over your life.

Someone who already works in the rental housing industry. Maybe you’re just starting out or maybe you’ve been in the field for some time. Either way, you want to find out more about your chosen profession. Good for you. The rental housing industry has so much variety that you’ll always be discovering new things and appreciating that every day is a new challenge. Yes, there is some repetition (you must collect the rent every month), but unlike many jobs, no two days ever seem to be the same. That’s what attracts so many professionals to the field of property management (and keeps them there).

As an owner, real estate offers one of the best opportunities to develop a steady stream of residual income that you earn whether you’re sleeping, participating in your favorite leisure activity, enjoying your retirement, or relaxing on vacation. Whatever the circumstances, the bottom line is the same: You hope to generate sufficient income from the property to cover the debt service, pay for all operating expenses, and possibly provide some cash flow, along with tax benefits, appreciation, and equity buildup. The key to your success is knowing how to manage people and time. And this book has plenty to offer you on that front.

How This Book Is Organized

I’ve divided this book into six parts. The chapters within each part cover specific topic areas in more detail, so you can easily and quickly skim a topic of interest or troubleshoot the source of your latest headache! Each part addresses a major area of rental housing management. Following is a brief summary of what I cover.

Part I: So You Want to Be a Landlord?

Managing rental property isn’t everyone’s cup of tea. The chapters in this part assist you in evaluating your skills and personality to see whether you have what it takes to manage rental units — or whether you should call in the property management cavalry. If a management company is the answer to your prayers, I show you how to select one, what to expect, and how much it’ll cost. Finally, when the day of your escrow closing arrives and the ink is dry, flip here to find out what your immediate priorities are as you take over your new rental property.

Part II: Renting Your Property

The most important aspect of rental housing is keeping the unit occupied with paying tenants who don’t destroy it or terrorize the neighbors. In this part, you figure out how to prepare the property for rent, set the rents and security deposits, develop a comprehensive (yet cost-effective) marketing and advertising campaign, and show your rental unit to prospective tenants. Because all tenants look great on paper, I also fill you in on some tricks and techniques for establishing good tenant selection criteria.

Part III: The Brass Tacks of Managing Rentals

This part takes you from moving in your new tenants to moving them out — and everything in between. You get some strategies for collecting and increasing rent, retaining tenants, and dealing with those few tenants who give you a headache whenever your paths cross. Minimizing vacancies and retaining tenants is the key to success as a rental owner. But when your tenants complain incessantly, decide to repaint in nontraditional colors, or stop paying the rent, the real challenge of managing rental housing begins. In this part, you discover techniques for dealing with these issues and more.

Part IV: Techniques and Tools for Managing the Property

Assembling the right team of professionals — from employees to contractors — is one of the main ways to find success as a landlord. Another way involves maintenance, which can be one of the largest controllable expenses most rental owners face. In this part, I also shed light on how to meet the minimum standards required for your property to be habitable and the pros and cons of different alternatives for handling maintenance.

Last but most certainly not least, because landlords and property managers are sued more than any other business entity, you definitely want to review the issues of crime, fire protection, environmental hazards, and the safety and security of your rentals — and I help you do that here, too.

Part V: Money, Money, Money!

Having the proper insurance for your properties and property management activities can be a complex topic, so in this part, I guide you through the ins and outs of insurance. Taxes are another inevitability of life in the rental property business, so here’s where you find basic info on property taxes, the way rental property income is taxed, and some of the tax advantages of owning rental property. With all that money going out for insurance and taxes, you also want to know just how much cash flow your rental empire is generating, so I provide you with some basics on rental accounting and record-keeping.

Every seasoned rental owner should look for additional sources of income beyond rent, including the opportunities of lease options, which I cover in this part. The effect of government-subsidized housing programs continues to play an important role in many communities, so here you find info on the advantages and disadvantages of working with public rental assistance programs. Niche rental markets — like those catering to students and pet owners — are also worthy of your consideration, and I let you know how you can use them to your advantage.

Part VI: The Part of Tens

Here, in a concise and lively set of condensed chapters, are the tips to make the difference between success and foreclosure. In this part, I address the benefits of owning rental properties and provide tips to rent your vacancy today. I also suggest you check out the CD for a bonus Part of Tens chapter on ten common management mistakes and how to avoid them.

Property management and rental housing laws are dynamic, with something new arising every day. So because I’m just that nice of a guy, I also offer an appendix to help you navigate them. Count on the invaluable resources in this appendix to keep you current and improve your management skills.

Icons Used in This Book

Scattered throughout the book are icons to guide you along your way and highlight some of the suggestions, solutions, and cautions of property management.

This icon points your page-turnin’ fingers to files or forms you can use in your day-to-day property management.

Remember these important points of information, and you’ll have great success as a rental property owner.

Keep your sights on the bull’s-eye for important advice and critical insight into the best practices in property management.

Focus on this icon for real-life anecdotes from my many years of experience and mistakes. When you’ve managed more than 50,000 rental units in 30 years, you see some interesting situations. Now, I share them with you.

This icon highlights the land mines that both novice and experienced rental property owners need to avoid.

Where to Go from Here

Like any great resource book, you must read it! This book is designed for experienced or seasoned landlords, as well as rookies who still think all tenants are nice and prompt with rent payments and should be invited over for Thanksgiving supper.

Whether you’re contemplating rental real estate, looking to fine-tune your proven landlord secrets, or facing total financial ruin at the hands of the Tenant from Hell, this book offers chapter after chapter of solid rental property management advice, especially for the small rental property owner. It explains how to attract qualified prospects; select and screen tenants; maintain the rental rate; handle security deposits, rental contracts, broken water pipes, late rents, tenants who overstay (and don’t pay), and more. Find the topic you want to know more about and start reading right there. Remember: Everything is manageable and workable — if you know what you’re doing!

Property Management Kit For Dummies, 3rd Edition, helps you protect your investment and maintain your sense of humor, as well as your sanity, as you deal with one of the most unpredictable professions in life — property management. Consider this book your Property Management Bible, written just for you.