Rentec Direct - Property Management Software

I was pleased to read about Wisconsin proposing new rules which are actually in favor of landlords.  It's an increasing problem across the country where cities and counties are passing laws which could harm the very fabric that landlords rely upon to run their business.

Some examples of laws some localities have passed or plan to pass:

1. Prohibits or limits the landlord from obtaining or using various types of information about a tenant or prospective tenant, such as household income, occupation, court records, rental history, and credit information;
2. Limits how far back in time a prospective tenant’s credit information, conviction record, or previous housing may be considered by the landlord; or
3. Prohibits the landlord from showing a rental property to a prospective tenant, or from entering into a rental agreement for a rental property with a prospective tenant, while the current tenant is living there.

These laws proposed in Wisconsin prevents cities, towns, villages and counties within the state from passing their own local ordinances which restrict landlords in the above manners.

Obviously the local governments are attempting to protect tenants; however, it's entirely at the cost of landlords being able to run a business.  Somewhat akin to taking away the ability of a car buyer to be allowed to read reviews on the car before purchasing it.  Requiring them to purchase the car sight unseen, thereby just guessing if it's going to work well for them.

Taking away the very necessary screening tools that landlords need to rely on is a very very bad idea IMHO.  I hope these pro-landlord laws are a trend that continues and is adopted by more states.  I'm not thrilled about my city changing the rules mid-stream on me or my clients which prevent them from being able to run their business effectively.

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Nathan is a member of Rentec Direct who provides rental software, tenant ach payment processing, and tenant screening for property managers and landlords nationwide.

I posted a recent blog, and while it didn't get a lot of comments I did receive one about how property management is so crazy difficult.  Frankly it surprised me because, while there weren't many comments on this post, the one comment explaining how difficult property management was was a large percentage of overall comments.  It makes me think, there must be a lot of people out there with the same opinion.

So that leads me to wonder why.  We all know the general pitfalls of property management.

• Dealing with poor tenants
• Maintenance & repairs
• Anything "legal"
• Showing the property when it's vacant
• The possibility of negative cash-flow
• Taxes

Now that those are out in the open, are there any more - anyone?  These factors above can be significantly minimized if not eliminated, well except taxes, that's a fact of reality. 

Addressing the items:

Poor Tenants - This boils down to being choosy in the first place.  If you rent to that single mother who really really needs a place to live because she got evicted from her last place you're asking for trouble.  Granted it might be really nice of you to let her rent from you even though we know she can't afford it, but in the end it doesn't do her any favors.  Eliminate poor tenants by thoroughly screening, verifying references, and doing an analysis on the tenant to see if they can afford your property.  No more than 50% of their paycheck should be going towards rent as a rule of thumb.

Maintenance & Repairs - I've heard this a lot, and yes older properties require a lot of maintenance and repairs regardless if they are rented or not.  Newer properties (which there are a lot of on the market really cheap right now) don't have so much maintenance problems.  Repairs are going to be there whether somebody is renting or not, and if the tenant caused the problem, the tenant pays for it typically.  The hassle is eliminated if you have a reliable handy-man, which is very easy to find on craigslist these days.

Legal Stuff - I agree here, if anything legal comes up it puts a dent in the pocketbook.  Stay far away from lawyers.  Their job is to create conflict to keep themselves in business.  If you can spend $2000, even if it doesn't seem fair, to stay out of court, by all means do it becuase it'll amount to a substantial savings in both dollars and time.  But the point is to avoid legal issues in the first place, and that all begins with tenant screening.  Be sure to run a comprehensive criminal as well as bankruptsy, lien, judgements, and eviction reports on anyone you place.  This information will help you select a tenant who isn't litigious or a general troublemaker.

Showing the Property - This is a necessary evil.  I typically show our properties 5-10 times before I find a renter I'm OK with and who likes the property.  It's about 30 minutes a pop and happens on average about every 18 months.  While it's a big deal when it's going on, it ends up being an actual 2-3 hours per year total per property which all in all isn't that bad.  This process alone can be hired out to a property management company for about $150 also if the 2-3 hours are trouble finding.  I believe it's a far better option to meet the prospective tenants in person than sub it out to a property management company though.

Negative Cash-flow - This all begins with the purchase.  You are deciding whether your going to have positive cash-flow on a rental at the time of purchase.  You don't have the option later.  So choose wisely.  I have an excellent formula for picking investment properties I would be happy to share to anyone who wants.

Taxes - We all hate them, we all have to pay them, and they will never get any cheaper.  The good news is, you have to make money to pay taxes.  So if you're complaining about your tax bill it means you are making money which is better than a lot of property owners these days!  If you are using a good property management software application to track the ins and outs, taxes take a matter of minutes for each property instead of hours.  In general, accounting is quite simple for rentals given the proper tools.

That covers the uglies of property management.  Perhaps my experiences are different than others, but property management in itself is actually pretty easy.  A well chosen single-family property can bring in around $4800/yr profit (just from rent) at a cost of 2-3 hours of your time.  That is $1600/hr.

I would love to hear about your experience/opinions on property management.  Please comment.

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Rentec Direct provides landlord software free to property managers and property owners. Because of the importance of thorough screening for prospective tenants, we have integrated tenant background screening directly into the software so in just a few clicks a complete and comprehensive background check including previous evictions can be done on any new tenants.