It's not easy, but can be made a lot easier if you know what to do - what you can do and what you cannot do. Once the rental agreement has been signed, you are now on a formal footing with your tenants, where they are relatives, friends or strangers, and the relationship must be maintained as a formal relationship.
You will find that most tenants are easy to get along with and generally maintain their rental payments, but you will come across those that are awkward and may take up a great deal of your time - if you let them. All landlords and property managers can learn more about managing their rented real estate, and here are some suggestions on how to manage your rental property and also keep your hair where it should be.
Collecting and Keeping Track of Rent
You can arrange rent payments either the traditional way, of knocking on the door and collecting the cash, or electronically by direct debit or manual online payments. Much depends on what is suitable for your tenants, and you should discuss this with them before the rental agreement is signed. Once that agreement is signed and witnessed you are both bound by it, and you cannot enforce another payment method on your tenant.
Some options are:
- Door collection
- Payment by check
- Direct debit from the tenant's bank account
- Online payment by the tenant from his/her account to yours
- Online payment processor such as PayPal
It would benefit you to choose a standard method for all your tenants. Although rent collection at the door is the safest way for landlords to be sure of payment, it is very time-consuming, particularly if you have a large number of tenants.
The problem with direct debit payments is that they are not paid unless the tenant's bank account has sufficient credit: checks and other forms of bank payment are the same of course. Most people do not use PayPal unless they have an online business, in which case it might be their preferred method of payment.
Using Third Party Contractors
Using a third party to manage your rental property, such as property management firm, can take a lot of the work away from you and free up your time for more important work - such as finding new properties. If all you are seeking is a firm to look after rent collection for you, then you won't have to budget for a full-service management service - nor will you have to worry about the payment method! The tenant pays the management firm who then pays you after deducting their fee.
If you do want a third party to manage everything connected with your rented properties, then this will cost more. You must also make sure that they offer the services you need. For example, in addition to rent collection, you might want the property maintenance and repairs taken off your hands, and for them to handle property damage, anti-social behavior and non-payment.
Make sure you use a reputable company with good references from other landlords in your area. Keep in mind that representatives of this firm might be the main contact your tenants have with you, and that they will therefore be representing you. It's you who will get the bad name if they are undiplomatic in their approach.
Keeping track of rent should be easy, but is frequently not, and a good financial package designed for this purpose will certainly help. You must maintain accurate records of rental payments for a number of reasons, including for tax purposes and to prove non-payment should you seek an eviction order.
In addition to maintain accurate records of payments and non-payments of rent, you must also keep records of purchases and other expenditure made in relation to the rented property. While a property management company can also do this for you, it is an expensive solution to what should be a simple task.
A simple rental software package designed for maintaining records relating to property rental will do most of the work for you - all you need do is enter the data. You could use this for expenditure you incurred personally, and then combine that with the financial report from your management company or you could go the whole way and look after it all yourself.
There are many options open to you, than, are to manually maintain your own records. Use software designed for the purpose or use a third party to collect your rent and maintain payment records. Alternatively, use a combination of each. Your chosen option may generally be dependent on how many properties you have, and whether or not maintaining rental properties is your business or just a sideline.
Whichever it is, choose wisely, because there are potential problems associated with each. Generally, however, responsible property management companies are good to work with and are effective at managing your rental properties. By outsourcing your property management you are free to focus your energy on tasks more suited to your expertise. Win-win all round!
Theresa Todman, Managing Partner of B & M Financial Management Services, a full service accounting and financial firm, specializing business consulting, accounting services and financial solutions.