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All About Property Management

    Building a successful rental portfolio with robust cash flow hinges on a key element: quality property management. As a local St. Louis area hard money lender for a lot of BRRRR deals, we’ve observed a common thread among successful landlords – a passion for implementing and adhering to clear, consistent processes.

     

    Some landlords love to manage their properties themselves and wear all the hats listed below. Others prefer to build a team they can trust to do it for them, especially once they own 10-15 properties or more. A local property management team for single-family rentals recently outlined for us how they have divided the tasks and organized their processes to achieve their consistently excellent results.

     

    The team should be made up of individuals whose skills align with the tasks they each perform. They should be passionate about providing a mutually great experience for both landlord and tenant. The roles below could be varied, combined, or further divided to manage a larger or smaller number of properties. An effective team might include the following:

     

    The Team’s Composition:

    Maintenance Coordinator: Oversees the entire tenant transition, from move-out to move-in.

    Property Manager 1: Handles marketing, tenant screening, utility management, and grounds maintenance (i.e. mowing, leaf removal, etc)

    Property Manager 2: Focuses on tenant relations and maintenance scheduling.

    Accounting: Responsible for rent collection, bill payments, and legal matters when necessary.

    Inspector: Conducts annual inspections for long-term tenants, documenting property conditions.

     

    The Property Management Process:

    About 90 days before the end of a lease, the property manager contacts the tenant, asking if they plan to renew their lease or move out. If moving out, tenants must give 30 days’ written notice. The property then gets listed on tracking boards for maintenance and marketing.

     

    About 1-2 weeks prior to a move-out, the maintenance coordinator reviews the previous inspection report and schedules a walk-through with the tenant. They walk the whole property together, looking for any damage that has happened while that tenant was there. Occasionally  tenants will bail and just leave the keys on the counter, but most will show up because they want their damage deposit back.

     

    The maintenance coordinator gives the tenant an estimate on what it will cost to repair the damage. There is a standard price for most things. For example, a new blind typically would cost $25. If a room needs to be painted it costs about $200. Once everything is added up, the tenant has a ballpark figure of what will come out of their damage deposit. 

     

    The most common– and expensive!– Things charged against the damage deposit are removing trash and personal belongings left behind and cleaning. There is always a cleaning charge for the appliances, the house, or both. The tenant is expected to have it completely cleared and at least broom-swept clean. It doesn’t have to be professionally cleaned by the tenant.

     

    Once the final walkthrough is done, the tenant signs paperwork to release possession of the house and keys back to the maintenance coordinator. A scan, using Z Inspector 360, or Rent Check software can be used to help record the final condition of the house after the tenant leaves. This is a good idea for both move-in and move-out.  The final inspection figures go to accounting. The owner has 30 days by law to return what’s left of the deposit, if any.

     

    Once that step is complete, the maintenance coordinator does another walkthrough to create a scope of work for any repair or renovation needed. The owner usually walks the property to decide whether there is any renovation he would like to do, and a final scope of work is agreed upon.

     

    Most turnovers cost under $5,000 unless a new HVAC or new siding or new roof is needed. Once the work is completed, occupancy inspections are scheduled. It is good to always meet the inspector at the property in order to pin them down on exactly what they want done. Never let them walk through by themselves.

     

    Once the first occupancy inspection is done, it is time to put the property on the market for rent. For a lower end house, pictures are taken by the owner or maintenance coordinator.  Professional pictures are used for higher-end rentals; they run about $200-300 and they are worth every penny!

     

    The details of the property and marketing description are entered into the marketing program. Tenant Turner software is a useful tool by which reports are generated to the owner once a week about how many views, how many showings, etc.  If the property is not being rented quickly enough, the owner can make adjustments or add incentives.

     

    All adult prospective tenants must submit their own application. Income and employment verification come next (PayScore software is helpful and also checks bank account balances). If income and account balances look good, the processing continues. A credit report is run. Typically the score must be above 650, with good payment history, and not a high number of credit inquiries. 

     

    The tenant screening also includes a criminal background check and a rental history from previous landlords. Tenants’  information is scored using a screening checklist. They receive certain points for each relevant factor. This is fair to the tenants, as it does not disqualify them just for one negative factor. The landlord sets the minimum score they are willing to work with. Anything above that score is approved. The move in date is chosen; the deposit and first month’s rent are collected.

     

    A second property manager and maintenance coordinator deals with the ongoing daily communications with tenants. PropertyMeld is a useful software for tenants to create a maintenance request themselves. The maintenance coordinator can create work orders in the same program.  Tenants are given a complete and detailed list of all their responsibilities for the property,  Tutorials and troubleshooting guides are available online to the tenants. These are also available on the FasterFunds Lending resources page. Periodic annual inspections help the property management team keep up on maintenance needs. A part-time inspector goes out to take pictures using Z Inspector 360 .

     

    For accounting, a part-time person usually suffices for collections and paying bills. It is helpful for the accountant to know the longer term tenants, observe their payment patterns, and watch for variance in those patterns before missed payments get out of control. Proper communication is key.  

     

    The accountant must stay on top of collecting payments. If the tenants use e-check they watch for bounced payments.  E-check privileges should be taken away. Firmer reminders go out after a few days, and an attorney may get  involved. One late fee waiver once in the life of the lease. Most tenants are unable to get out of a hole once they’re behind on payments. 

     

    Conclusion:

     

    Special thanks to Scott, Gen, Liz, Christy, and Don of Greater STL Rentals for the above overview of property management.  If you would like more detail, please watch the video  “All About Property Management.”

     
    Rachel Mendoza
    Author: Rachel Mendoza