An EzineArticle by Dave Schneider.
Many real estate investors become frustrated with the tenants and the toilets. And when you look at the way they manage, it’s no surprise.
The most important part of investing in rental real estate is to have a good property management system. In any successful management system there are the five P’s. They are Property, People, Paperwork, Policies and Procedures. Lets look at each of these P’s individually.
The Property must be managed. You need to have a plan to make repairs and do maintenance. This should be something that is automatically done throughout the year and include such things as checking for leaky pipes, checking smoke and fire detectors, caulking and painting or any other maintenance items.
The People. This is the most difficult part of the management process. You need to put in place specific systems to deal with all the people that effect your rental business. This not only includes your customers (tenants), it also includes all the other people that help you in your business including caretakers, plumbers, carpenters, electricians, handyman or anyone else you have involved in running your rental business.
The Paperwork. This part involves all the record keeping, tax issues, bank issues, leases, tenants letters and legal issues. You also need to consider how to set up your business. This should be discussed with an attorney. You should sit down with a good tax accountant and address the tax issues and what records should be kept. Using simple programs like Microsoft Money or Quicken can be set-up to run the financial part of your business. These simple programs can track your income, expenses, who has paid rent and who hasn’t. With programs like this, you can create and print reports for individual properties and know exactly which properties are performing the way you want them to.
Policies. In order to control the first three P’s you should have a specific policy regarding everything. For example: You should have a policy regarding what to say and do if a tenant calls and requests a repair. You should have a policy of what is a violation of the rental agreement. By having a policy for everything it makes it easy to determine what has to be done.
Procedures This goes right along with your policies. You should put in place automatic procedures for everything. For example: If a tenant doesn’t pay rent by the 5th of the month (your policy) you will automatically start the eviction procedure. Your procedure might be, you send them a written notice on the 6th, if no response your start the court process on the 10th (if law allows). You then continue with the entire process that you set-up until the tenant moves out. Then you start a new procedure to rent the property. Every policy should have a procedure.
Taking the time up front to plan the five P’s is the key to a successful management systems.
Remember that the name of the game is to create more cash flow and work less. Having a system that deals with the 5 P’s will do that for you.